The Commercial Co.Op. Bank Ltd.,, ... vs Assessee

The Commercial Co-operative Bank Ltd., 615, E Ward, Shahupuri, 1st Lane, Kolhapur. PAN : AAAAT0945J .... Appellant

Vs.

Dy. Commissioner of Income Tax, Circle- 2, Kolhapur. .... Respondent

Assessee by : Mr. C. V. Deshpande Department by : Mr. Y. K. Bhaskar Date of hearing : 23-03-2015 Date of pronouncement : 31-03-2015

ORDER

PER G. S. PANNU, AM

The captioned appeal by the assessee is directed against the order of

the Commissioner of Income Tax (Appeals), Kolhapur dated 09.12.2013

which, in turn, has arisen from an order dated 05.11.2012 passed by the

Assessing Officer u/s 143(3) of the Income-tax Act, 1961 (in short "the Act")

pertaining to the assessment year 2010-11.

2. In this appeal, assessee has raised the following Grounds of Appeal :-

"1) On the facts and in the circumstances of the case and in law the Ld. C.I.T. (A) was not justified in confirming the decision of the A.O. of adding the sum of Rs.3,21,437/- being the unclaimed dividend transferred to Reserve Fund by the appellant bank during the year.

The appellant bank submits as under:

a. The unclaimed dividend transferred to Reserve Fund being out of post tax profit there cannot be any addition in this respect. b. The transfer to Reserve Fund having been made as per the requirements of Maharashtra State Co-operative Societies Act, 1960 the amount of unclaimed does not result in any taxable income for the appellant.

2 ITA No.265/PN/2014 c. The impugned sum not being a trading liability the provisions of section 41(1) are not applicable in this respect. The appellant prays that the A.O. be directed to delete the addition.

2) The appellant craves to leave, add/amend or alter any of the above grounds of appeal."

3. In this appeal, issue relates to an addition of Rs.3,21,437/- made by the

lower authorities on account of unclaimed dividend transferred to Reserve

Fund by the assessee. The Assessing Officer as well as the CIT(A) were of

the view that the transfer of unclaimed dividend to the General Reserve Fund

showed that such liability ceased to exist and therefore, the same was liable to

be taxed.

4. At the time of hearing, it was a common point between the parties that

an identical issue has been decided in the favour of the assessee by the

decision of the Pune Bench of the Tribunal in the case of Bhingar Urban Co-

op. Bank Ltd. vs. ITO vide ITA No.2027/PN/2013 & others dated 20.10.2014.

The relevant portion of the order of the Tribunal dated 20.10.2014 (supra),

reads as under :-

"5. In our considered opinion, the lower authorities have mis-directed themselves in taxing the unclaimed dividend as an income. Ostensibly, dividend distribution by the assessee bank is an apportioned from its tax paid profits and does not a charge against the profits for the purposes of computing taxable income. Once dividend declared by the assessee bank is not a charge against the profits in order to compute taxable income, any unclaimed dividend thereof, cannot be charged as an income under the Act. Therefore, we set-aside the order of the CIT(A) and direct the Assessing Officer to delete the impugned addition. Thus, on Ground of Appeal No.2, the assessee succeeds."

5. Following the aforesaid precedent, we hereby set-aside the order of

the CIT(A) and direct the Assessing Officer to delete the impugned addition of

Rs. 3,21,437/- made on account of unclaimed dividend transferred to Reserve

Fund. Thus, on this Ground assessee succeeds.

3 ITA No.265/PN/2014

6. In the result, the appeal of the assessee is allowed, as above.

Order pronounced on 31 st March, 2015.

Sd/- Sd/- (SUSHMA CHOWLA) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER

Pune, Dated: 31 st March, 2015. Sujeet

Copy of the order is forwarded to: - 1) The Assessee; 2) The Department; 3) The CIT(A), Kolhapur; 4) The CIT, Kolhapur; 5) The DR "A" Bench, I.T.A.T., Pune; 6) Guard File. By Order //True Copy// Assistant Registrar I.T.A.T., Pune