State Bank Of Bikaner & Jaipur, Jaipur vs Assessee

Jh vkj-ih-rksykuh] U;kf;d lnL; ,oa Jh Vh-vkj-ehuk] ys[kk lnL; ds le{k BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM

M.A. Nos. 33 & 34/JP/2014 (Arising out of I.T.A. Nos. 700 & 701/JP/2003) Asstt. Years-2001-02, 2002-03

State Bank of Bikaner & Jaipur cuke The A.C.I.T. Tilak Marg, C-Scheme, Jaipur. Vs. Circle-6, Jaipur.

LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AADCS 4750 R vihykFkhZ@Appellant izR;FkhZ@Respondent

M.A. No. 35/JP/2014 (Arising out of I.T.A. No. 437/JP/2009) Asstt. Year-2005-06

State Bank of Bikaner & Jaipur cuke The D.C.I.T. Tilak Marg, C-Scheme, Jaipur. Vs. Circle-6, Jaipur.

LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AADCS 4750 R vihykFkhZ@Appellant izR;FkhZ@Respondent

fu/kZkfjrh dh vksj ls@ Assessee by : Shri P.C. Parwal. jktLo dh vksj ls@ Revenue by : Mrs. Neena Jeph

lquokbZ dh rkjh[k@ Date of Hearing : 09/01/2015 ?kks"k.kk dh rkjh[k@ Date of Pronouncement : 19/02/2015 2 M.A. No. 33, 34 and 35/JP/2014_ ACIT Vs. SBBJ

vkns'k@ ORDER

PER: T.R. MEENA, A.M.

The assessee has filed three Miscellaneous Applications against the

order of this Bench of ITAT, Jaipur in ITA Nos. 700/JP/2013, 701/JP/2003 and

ITA No. 437/JP/2009, which was passed on 12/09/2014.

2. The assessee has filed these M.As for A.Y. 2001-02, 2002-03 and 2005-

06 and challenging the finding given by the ITAT on issue of disallowance U/s

14A in A.Y. 2001-02 and 2002-03 as well as challenging the finding given on

broken period interest on security purchase in A.Y. 2001-02, 2002-03 and

2005-06.

3. The appellant submitted as under:-

1. That the ground No. 1 of Revenue's appeal for A.Y. 2001-02 and 2002-03 was against reducing the disallowance of expenditure in relation to exempt income made u/s 14A of the IT Act and ground No. 1 of assessee's appeal for A.Y. 2005-06 was against upholding the disallowance of expenditure in relation to exempt income made u/s 14A of the It Act. Hon'ble Bench has given a common finding for all the three years vide para 2 to 5 of the order.

1.1 Hon'ble Bench has set aside the issue of disallowance u/s 14A to the Assessing Officer for all the three years giving following finding at para 5 of the order:

3 M.A. No. 33, 34 and 35/JP/2014_ ACIT Vs. SBBJ

"We have heard the rival contentions and perused the material available on the record. The Coordinate Bench has decided the assessee's appeal in ITA No. 329/JP/2005 for A.Y. 2003-04 on the basis of Rule 8D of the Rules but as discussed in our order in ITA No. 278/JP/2009 for A.Y. 2004-05, the Rule 8D is applicable from A.Y. 2008-09 as held by the Hon'ble Bombay High Court in the case of Godrej and Boyce Mfg. Co. Ltd. Vs. Deputy Commissioner of Income Tax (supra). Thus, in this year also, we direct the Assessing Officer to recompute the disallowance u/s 14A of the Act on the basis of decision given by this Bench in A.Y. 2004-05. This ground of appeal is set aside to the Assessing Officer."

1.2 It is submitted that so far as the assessment year 2001-02 and 2002-03 are concerned, the issue has been decided by the Hon'ble Bench in assessee's appeal in ITA No. 578/JP/2003 and 577/JP/2003 dated 30/10/2009 where the disallowance made by the Assessing Officer and partly confirmed by the CIT(A) was reduced by the Hon'ble ITAT as under:-

Assessment year Disallowance by Disallowance Disallowance A.O. confirmed by confirmed by CIT(A) ITAT in assessee's appeal.

2001-02 11,87,68,152/- 7,76,47,631/- 2,83,00,000/- 2002-03 15,81,27,285/- 12,47,28,784/- 6,83,00,000/-

1.3 Thus the issue of disallowance u/s 14A for A.Y. 2001-02 and 2002-03 was already decided by the Bench in assessee's appeal against which appeal filed by assessee is admitted in the High 4 M.A. No. 33, 34 and 35/JP/2014_ ACIT Vs. SBBJ

Court. In course of hearing also the bench has observed that in these facts departmental appeal; is to be dismissed. Setting aside the issue for these years to the Assessing Officer would lead to anomaly, inasmuch as, the Assessing Officer would not be in a position to give effect to the direction of ITAT and therefore para 5 of the order needs to be suitably modified."

Similar objections were made by the Assessing Officer in A.Y. 2002-03.

4. We have heard both the parties and it is a fact that the assessee's

appeals in ITA No. 578/JP/2003 for A.Y. 2001-02 and 577/JP/2003 for A.Y.

2001-02 and 2002-03, the assessee's appeal decided by this Bench without

considering the revenue's appeal in these years on this issue. As claimed by

the appellant, the issue is pending before the Hon'ble Rajasthan High Court

against the decision given by this Bench in case of assessee's appeal for A.Y.

2001-02 and 2002-03. Therefore, it is apparent mistake on our order dated

12/09/2014 in ITA No. 700/JP/2003 for A.Y. 2001-02 and 701/JP/2003 for A.Y.

2002-03, accordingly we recall our order to the extent of finding given on

Section 14A in both the assessment years. The assessee's M.As on Section

14A of the Act are allowed.

5. The second ground of M.A. is as under:-

"2. That the ground no. 2 of Departmental appeal relates to disallowance of broken period interest. In deciding this issue Hon'ble Bench has not considered certain decisions cited by the 5 M.A. No. 33, 34 and 35/JP/2014_ ACIT Vs. SBBJ

assessee and has given contradictory finding which goes to the root of the matter. These are as under:-

2.1 Decision of Mumbai ITAT in case of KBC Bank Nv Vs. Department of Income Tax ITA No. 2785/Mum/2004 dated 28/09/2012 relied by the assessee is not considered in which the judgments of Vijaya Bank 187 ITR 541 (SC), Bank of Rajasthan Ltd. 316 ITR 391 (Raj.) and CIT Bank NA Civil Appeal No. 1549/2006, 12th August, 2008 (SC) was considered and after discussing all the three judgments it was held that the decision of Bank of Rajasthan Ltd. is not applicable in view of the subsequent decision of Hon'ble Supreme Court in the case of CIT Bank NA.

2.2 At para 11 page 21, Hon'ble Bench has held that the interest cost for the broken period on securities at the time of purchase and sale is to be included in purchase cost and sales receipts respectively. And the case referred by the leaned AR of the assessee i.e. the decision of Hon'b1e Supreme Court in the case of Citibank (Supra) are squarely applicable, but it is evident from the decision that (it) has been rendered on peculiar facts of the case as tax effect will be neutral and the method of accounting was accepted by the department. In assessee's case, the tax effect is substantial and department has not accepted accounting method followed by the assessee.

These findings are contradictory in itself. Firstly, once it is held that interest cost for broken period at the time of purchase and 6 M.A. No. 33, 34 and 35/JP/2014_ ACIT Vs. SBBJ

at the time of sale is to be included in purchase cost and in sales receipts respectively, the purchase cost has to be allowed as deduction when sale receipt has been taxed and therefore the broken period interest included in purchase cost cannot be disallowed. Secondly, the decision of Supreme Court in case of Citi Bank NA in civil appeal no. 154912006 dated 12.08.2008 is nowhere referred in the order. What is considered is only the decision of Bombay High Court in CIT vs. Citi Bank NA 264 ITR

18. Thirdly, once it is held that the decision of Supreme Court in case of Citi Bank NA is squarely applicable broken period interest cannot be disallowed as the Supreme Court in this case has allowed the claim of broken period interest. Fourthly, there is no discussion as to how in the assessee's case the tax effect is substantial and the department has not accepted the accounting method followed by the assessee more particularly when the Supreme Court in Citi Bank Case has only observed that disallowance of broken period interest is tax neutral and the department has accepted the method of accounting followed by the assessee. Hon'ble bench has failed to consider that even if tax effect is substantial, the same is tax neutral as if it is disallowed in one year it has to be allowed in the subsequent year. Further the method of accounting followed by the assessee in respect of the securities has been accepted by the department in as much as, depreciation of securities has been consistently allowed by the department.

7 M.A. No. 33, 34 and 35/JP/2014_ ACIT Vs. SBBJ

2.3 Hon'ble Bench has given a finding that securities are shown in the Balance Sheet as investment but the assessee is claiming them as stock in trade to get benefit in taxation. In giving such finding the decision of Karnatka High Court relied by the assessee in case of Karnatka Bank Ltd.94 DTR 448 wherein it was held that only because in the Balance Sheet the securities are shown under the head "Investments" would not make it a capital asset in as much as, making entry in books of accounts is not decisive or conclusive. Further in assessee's case itself Hon'ble ITAT in ITA No. 617 & 6l8lJPl2003 dated 07.11.2006 has held that investment in securities is part of banking business and therefore the profit arising on redemption/ sale of securities is taxable as business income and not as capital gains. This decision referred by the assessee is not considered. Besides the CBDT in instruction No. 17/2008 dated 26.11.2008 has also clarified that investment portfolio of the bank is required to be classified under three categories i.e. held to maturity (HTM), held for trading (HFT) and Available for Sale (AFS) and the premium paid on HTM Securities should be amortized over the period of maturity and the depreciation of HFT and AFS securities provided in the accounts should be allowed as deduction. These instructions are also not considered. Therefore the observation of the Hon'ble Bench that the treatment of securities as stock in trade is to get benefit from taxation is without basis and against the decision of the Karnataka High Court, decision of ITAT in assessee's own case and the CBDT instruction.

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2.4 The Hon'ble bench on the one hand held that the securities are investment and thus capital assets but at the same time has not given any direction to` work out the capital gain on sale of the securities after allowing the indexation benefit. This has resulted into taxation of the profit on sale of securities as business income and not as capital gain which has resulted into tax at higher rate as against lower rate prescribed for tax on capital gain.

3. In view of above the applicant humbly prays that the order passed by the Hon'ble Bench be suitably modified considering the above facts by passing an order u/s 254(2)."

6. Similar objections have been made for A.Y. 2002-03 and 2005-06.

7. We have heard the parties, perused the material available on record &

the above decisions in assesses own case. In our considered view the issues

raised by the assessee cannot be termed as apparent mistakes. While taking

this view we have relied on jurisdictional high court judgment. Besides we

have taken a considered view that Citi Bank judgment was decided on the

peculiar facts. Thus the decision in question has been taken after considering

all the relevant aspects on merits. We are of the view that the present

applications filed by the assessee u/s 254(2) amount to review of our orders;

the alleged mistakes cannot be held as mistakes apparent from the record.

Therefore, the ground in this behalf in these three M.As. of the assessee are 9 M.A. No. 33, 34 and 35/JP/2014_ ACIT Vs. SBBJ

dismissed as they are for review of our own orders which is not permissible

u/s 254(2).

8. In the result, the Misc. Applications of the assessee are partly allowed.

Order pronounced in the open court on 19/02/2015.

Sd/- Sd/- ¼vkj-ih-rksykuh½ ¼Vh-vkj-ehuk½ (R.P.Tolani) (T.R. Meena) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member

Tk;iqj@Jaipur fnukad@Dated:- 19th February, 2015 *Ranjan

vkns'k dh izfrfyfi vxzsf'kr@Copy of the order forwarded to:

1. vihykFkhZ@The Appellant- State Bank of Bikaner & Jaipur, Jaipur.

2. izR;FkhZ@ The Respondent- The ACIT/DCIT, Circle-6, Jaipur.

3. vk;dj vk;qDr@ CIT

4. vk;dj vk;qDr¼vihy½@The CIT(A)

5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur

6. xkMZ QkbZy@ Guard File (M.A. 33,34 & 35/JP/2014)

vkns'kkuqlkj@ By order,

lgk;d iathdkj@Asst. Registrar