TMI Blog2015 (4) TMI 583X X X X Extracts X X X X X X X X Extracts X X X X ..... und No.3 of Revenue’s appeal. - Decided against the revenue. - ITA No. 1742/Hyd/2014 - - - Dated:- 25-3-2015 - Shri P.M. Jagtap And Smt.Asha Vijayaraghavan JJ. For the Appellant : Smt. G. Aparna Rao, DR For the Respondent : Shri T. Umakanth ORDER Per Smt. Asha Vijayaraghavan, J.M. This is an appeal filed by the Revenue against the order of the ld CIT (A)-VI Hyderabad dated 29.08.2014 passed for A.Y 2010-11. 2. The assessee, a regional rural bank, deemed to be a cooperative society, for the purpose of Income-tax Act, 1961, has been into the business of banking and filed the return of income for the year under reference, declaring a total income of ₹ 52,85,83,150/-. While completing the assessment order, the total income was determined at ₹ 65,12,31,956/, on account of the following additions: 1. Disallowance of Depreciation on securities held as stock in trade ₹ 976,74,332/- 2. Addition on account of disallowance of broken period interest on purchase of securities held as stock in trade ₹ 3,73,12,444/- 3. Addition on account of disallowance of deduction claimed u/s. 36(1)(viia) of IT Act ₹ 4,44,52,560. 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts according to the CIT (A) and the revised return filed by the assessee is held to be in order. The CIT (A) directed the AO to adopt the revised returned income, while computing the total income on the issue of allowability of depreciation on securities, which is dealt separately, in this order. 5. Aggrieved, the Department has raised ground No.2 (part). We find no infirmity with the order of the CIT (A). For the AY 2010-11 the assessee has filed its return on 9.10.2010 by declaring a net taxable income of ₹ 52,85,83,150. After filing original return, the assessee found that there is an omission of claim of depreciation on investment of ₹ 9,76,74,332 held as stock-in-trade. To offset the omission, the assessee has filed revised on 31.03.2012 which is with the statutory period allowed under the I.T. Act, 1961. 6. A revised return can be filed at any time before the expiry of one year from the end of relevant ay or before the completion of the assessment, whichever is earlier. In the case of F.C. Agarwal vs. CIT (1976) (102 ITR 408 (Gau.) it was held that section 139(5) has brought on the statute to correct some bonafide omission or bonafide wrong statement which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt in the case of CIT Vs. Nedungadi Bank Ltd. (264 ITR 545), to support their claim. 9. The CIT (A) perused the submissions of the assessee and the observations of the AO. The CIT (A) held as follows: As could be seen from the facts, the AO failed to appreciate that the appellant bank invested in certain government securities, as per the SLR requirement and claimed depreciation on the variation in value of such securities between the opening balance and closing balance. Such claim was omitted to be claimed in original return of income, as indicated; and filed revised return while claiming the depreciation. In this regard, it may be reasonable to hold that it is not the case of the AO to treat such investments in securities as non existing or treated as securities held to maturity. It is also relevant to hold, that even if the securities are classified as held to maturity (HTM), the courts have held that even if the securities which are held in permanent category, are supposed to be dealt in market, with the very nature of these investments is to trade in securities and as such treated as stock in trade for the assessee banks. It was also held that where there is no distinc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s upheld such claims by bank . 14. Respectfully following the order of the Hon'ble ITAT, in the case of AP Grameena Vikas Bank, the ld CIT (A) was of the considered opinion that the broken period interest on acquisition of securities held as stock in trade, is much allowable expense and as such the disallowance of ₹ 373,12,444/- made by the AO was held to be unsustainable by the CIT (A). This ground of appeal is treated as allowed by the CIT (A). Addition on account of disallowance of deduction claimed u/s. 36(l)(viia) of IT Act ₹ 4.44,52,560/- 15. While computing the total income for the year under reference the AO has disallowed the claim of ₹ 4,44,52,560/-, made by the assessee in the computation furnished along with the return of income. Such claim was made as per the provisions of Sec. 36(1)(viia) of the Income-tax Act, calculated at the rate of 7.5% of the total income. The AO has observed that the deduction was claimed based on statutory provision, without there being any claim in books of account. It was further opined by the AO that any provision created should have a purpose and in the case of assessee provision was created without any ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te Bank of Hyderabad vs. DCIT dated 28.11.2008 in ITA No.1232/Hyd/2006 wherein the Tribunal held that deduction u/s 36(1)(viia) of the Income Tax Act, not exceeding 7.5% of the total income computed, is to be allowed for provision of bad and doubtful debts. Considering the facts of the case that the deduction claimed by the assessee to the extent of ₹ 4,44,52,560 was claimed as per the provisions of section 36(1)(viia) and without claiming any deduction towards bad debts written off as per the provisions of section 36(1)(vii) and also respectfully following the decision of ITAT in the case of SBH vs. DCIT (Supra), The CIT (A) was of the opinion that there is no infirmity in the claim of the assessee. Accordingly the addition of ₹ 4,44,52,560 was held to be unsustainable and this ground of appeal was treated as allowed by the CIT (A). 19. Aggrieved, the Department is in appeal before us and raised the following grounds: 1. The order of ld CIT (A) is against facts of the case. 2. Whether the ld CIT (A) is correct in considering the contents of revised return and allowing the depreciation on securities held as stock in trade ₹ 9,76,74,332 3. Whether the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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