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2015 (3) TMI 1148 - ITAT PUNE

2015 (3) TMI 1148 - ITAT PUNE - TMI - Revision under section 263 - nominal membership fees received by the assessee from such persons, who were not the members of the cooperative society, but were associated with it on account of certain transactions - Held that:- The assessee had not declared the said receipts on the premise that the same were capital receipts. However, the said receipts were in the nature of nominal membership fees or entrance fees charged by the assessee from such nonexisting .....

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the non-assessability of such income on accrual basis i.e. interest on NPAs, by the Assessing Officer cannot be said to be prejudicial to the interest of Revenue. However, the said principle is to be applied only in respect of non-recognition of income on accrual basis relatable to NPAs and not on the said income received by the assessee on receipt basis during the captioned assessment year. The Assessing Officer in the first round of proceedings had already made an addition of ₹ 1,62,42, .....

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initiation of proceedings under section 263 of the Act. Accordingly, we hold that the exercise of jurisdiction by the Commissioner under section 263 of the Act in respect of interest income relatable to NPAs is invalid as the assessment order passed by the Assessing Officer is not prejudicial to the interest of Revenue and such order even if erroneous, cannot give power to the Commissioner to initiate proceedings under section 263 of the Act. - Decided in favour of assessee

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e direct the Assessing Officer to delete the addition - Decided in favour of assessee

Addition on account of the transfer of creditors balance to Reserve Fund - claim of the assessee before us was that the provisions of section 41(1) of the Act were not applicable - Held that:- No merit in the plea of the assessee in this regard in view of the fact that the assessee itself had transferred the credit balance of unclaimed creditors to the Reserve Accounts and the provisions of section 4 .....

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or profession. In the facts of present case also, the assessee on its own motion had transferred the credit balance due from creditors against expenses to its Reserve Fund and the provisions of section 41(1) of the Act were clearly applicable. - Decided against assessee

Claim of expenditure on amortization of premium of HTM securities entitled to assessee

Disallowance of audit fees under section 43B - Held that:- Audit fees is not included under section 43B of the Act and .....

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of CIT(A) to examine the allowability of depreciation on intangible assets under section 32(1)(ii) of the Act, in the light of ratio laid down in The Cosmos Co-op Bank Ltd. Vs. DCIT (2014 (1) TMI 1696 - ITAT PUNE ) wherein held difference paid by the assessee in excess of liabilities over the realizable values of the assets taken over represent payment for any business or commercial rights of similar nature and are liable to be construed as intangible asset, contemplated under section 32(1)(ii) .....

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CHOWLA, JM: Three appeals filed by the assessee are against separate orders of CIT(A), Aurangabad, dated 28.10.2013, 30.06.2011 and 22.11.2012 relating to assessment years 2010-11, 2009-10 and 2008-09, respectively against respective orders passed under section 143(3) of the Income Tax Act, 1961. Another appeal filed by the assessee is against order of CIT, Aurangabad, dated 29.01.2014 relating to assessment year 2009-10 against order passed under section 263 of the Income Tax Act, 1961. 2. All .....

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- alleging being accrued Interest on NPA. Same may please be deleted. 3. Without prejudice to above grounds, if it is held against the Assessee, then Interest credited to Profit & Loss A/c on realization Basis relating to period prior to 31/03/2008 may please be excluded from Income. 4. Without prejudice to Ground No. 1 above, Honourable Commissioner of Income tax has erred in making addition of ₹ 52,960/- in respect of 'Nominal Membership Fee', Appellant prays for deletion of .....

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ssessing Officer completed the assessment under section 143(3) of the Act on a total income of ₹ 3,26,89,030/-. The Commissioner on the verification of the assessment record was of the view that the order passed by the Assessing Officer was both erroneous and prejudicial to the interest of Revenue on account of nominal membership fees of ₹ 52,960/- not being offered as revenue receipt and further, the interest on Non Performing Assets (NPA) was though accounted for on receipt basis, .....

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submissions of the assessee were accepted after verification and it was held that no interference was warranted on the said issue. 6. The assessee is in appeal against the order of Commissioner. 7. It was pointed out by the learned Authorized Representative for the assessee that the nominal membership fees were received by the cooperative society and such receipts were capital receipts and it was admitted by the learned Authorized Representative for the assessee that the nominal fess / entrance .....

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he assessee and the assessee was not pressing the said ground of appeal filed against the order passed by the Assessing Officer under section 143(3) of the Act to the extent of ₹ 1,62,42,236/-. However, in respect of the balance interest accruing on NPAs, it was pointed out that the issue is squarely covered in favour of the assessee by Pune Bench of the Tribunal in ACIT Vs. Osmanabad Janta Sah. Bank Ltd., in ITA No.795/PN/2011, relating to assessment year 2007-08, order dated 31.08.2012. .....

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tive society, but were associated with it on account of certain transactions. The assessee had not declared the said receipts on the premise that the same were capital receipts. However, the said receipts were in the nature of nominal membership fees or entrance fees charged by the assessee from such nonexisting members of the cooperative society who had transacted with the assessee society and hence, the said receipts were to be charged as revenue receipts in the hands of the assessee. In view .....

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n it has been held that the treatment given by the assessee was on account of guidelines of RBI is not includable as income of the assessee. However, the interest, which has been received on such NPAs by the assessee is taxable in the hands of the assessee. The learned Authorized Representative for the assessee fairly pointed out that the Assessing Officer had taxed sum of ₹ 1.62 crores as interest on such advances, as income of the assessee for the captioned assessment year and though the .....

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d. (supra). We find no merit in the exercise of jurisdiction by the Commissioner under section 263 of the Act in respect of interest on NPAs, which had though accrued to the assessee, but were not to be included in the income of the assessee on account of guidelines of RBI and the ratio laid down in ACIT Vs. Osmanabad Janta Sah. Bank Ltd. (supra). However, the interest received by the assessee on such NPAs during the captioned assessment year is includable in the hands of the assessee to the ext .....

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find that the said issue with regard to accrual of income on NPAs is no longer res integra but the same has already been adjudicated in favour of the assessee by the decision of the Pune Bench of the Tribunal in the case of ACIT Vs. Osmanabad Janta Sah. Bank Ltd. (supra) and in ACIT vs. The Omerga Janta Sahakari Bank Ltd. vide order in ITA No.350/PN/2013 dated 31.10.2013. The Tribunal considered the judgement of the Hon ble Delhi High Court in the case of M/s Vasisth Chay Vyapar Ltd., 330 ITR 44 .....

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ew of the reasoning laid down by the Hon ble Supreme Court in the case of CIT vs. Vegetable Products Ltd., (1973) 88 ITR 192 (SC) and, thus the Tribunal decided the issue in favour of the assessee. The relevant discussion in the order of the Tribunal dated 31.10.2013 (supra) is reproduced as under :- 8. We have carefully considered the rival submissions. In so far as the applicability of section 43D of the Act to the assessee is concerned, there is a convergence of opinion between the assessee a .....

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h such interest income is credited by the assessee in the Profit and Loss account or in the year of actual receipt, whichever is earlier. Since assessee is not an entity covered within the scope of section 43D of the Act, the present controversy cannot be adjudicated in the light of section 43D of the Act, and it is liable to be decided on general principles as to whether the impugned income has accrued to the assessee during the year under consideration. 9. In this connection, we find that the .....

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accounting adopted by the assessee therein. The assessee, on the other hand, contended that having regard to the guidelines issued by RBI regarding accounting of interest on NPAs, no interest income accrued in respect of NPAs and that the same was to be taxed only on receipt basis. The Tribunal observed that the question of taxability of interest on NPAs classified by RBI, was considered by the Hon ble Delhi High Court in the case of M/s Vasisth Chay Vyapar Ltd. (supra) wherein after considerin .....

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nterest on NPAs has been considered by the Hon'ble Delhi High Court in the case of M/s Vasisth Chay Vyapar Ltd (Supra); wherein the Hon'ble Delhi High Court took into account the decision rendered by the Hon'ble Supreme Court in the case of Southern Technologies Ltd (Supra). In the case of M/s Vasisth Chay Vyapar Ltd, the assessee therein was a non banking financial company and it was also bound by the Prudential norms directions issued by the Reserve Bank of India for Income recogni .....

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the Hon'ble Delhi High Court. 8.1 After hearing the rival submissions, the Hon'ble Delhi High Court took note of sec.45Q of Reserve Bank of India Act which reads as under: Chapter IIIB to override other laws. 45Q. The provisions of this Chapter shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law . The High Court took note of the fact that the provision of 45Q of .....

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to assess the ultimate collection with reasonable certainty is lacking at the time of raising any claim, e.g., for escalation of price, export incentives, interest etc., revenue recognition is postponed to the extent of uncertainty involved. In such cases, it may be appropriate to recognize revenue only when it is reasonably certain that the ultimate collection will be made. Where there is no uncertainty as to ultimate collection, revenue is recognized at the time of sale or rendering of servic .....

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resources is reasonably determinable. When such consideration is not determinable within reasonable limits, the recognition of revenue is postponed. 9.5 When recognition of revenue is postponed due to the effect of uncertainties, it is considered as revenue of the period in which it is properly recognized . 8.2 The Delhi High Court also considered the decision rendered in the following cases: i) CIT vs. Elgi Finance Ltd., 293 ITR 357 (Mad) ii) CIT vs. KKM Investments (Cal) - SLP dismissed by Sup .....

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ance cannot be treated as accrued to the assessee. 8.4 Before the Delhi High Court, the revenue took support of the decision of the Hon'ble Supreme Court in the case of Southern Technologies Ltd (Supra). The Delhi High Court considered the said decision of Hon'ble Apex Court and explained the same as under: We have already held that even under the Income Tax Act, interest income had not accrued. Moreover, this submission of Mr. Sabharwal is based entirely on the judgment of the Supreme C .....

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In the case before the Supreme Court, the assessee a NBFC debited ₹ 81,68,516 as provision against NPA in the profit and loss account, which was claimed as deduction in terms of Section 36(1) (vii) of the Act. The Assessing Officer did not allow the deduction claimed as aforesaid on the ground that the provision of NPA was not in the nature of expenditure or loss but more in the nature of a reserve, and thus not deductible under section 36(i)(vii) of the Act. The Assessing Officer, howeve .....

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ted therefore under the Act. To that extent, it was observed that the Prudential Norms do not override the provisions of the Act. However, the Apex Court made a distinction with regard to Income Recognition and held that income had to be recognized in terms of the Prudential Norms, even though the same deviated from mercantile system of accounting and/or section 45 (sic. 145) of the Income Tax Act. It can be said, therefore, that the Apex Court approved the real income theory which is engrained .....

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e by virtue of 45Q of the Reserve Bank of India Act, an overriding effect is given to the directions of Reserve Bank of India visà- vis income recognition principles in the Companies Act 1956. In so far as computation of income under the Income Tax Act is concerned, (which involves deduction of permissible deductions and exclusions) the admissibility of such deductions shall be governed by the provisions of the Income Tax Act. The relevant observations of the Hon'ble Supreme Court are .....

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ecognition principles in the Companies Act, 1956. These Directions constitute a code by itself. However, these Directions 1998 and the IT Act operate in different areas. These Directions 1998 have nothing to do with computation of taxable income. These Directions cannot overrule the permissible deductions or their exclusion under the IT Act. The inconsistency between these Directions and Companies Act is only in the matter of Income Recognition and presentation of Financial Statements. The Accou .....

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y in the present dispute . 10. Turning to the facts of the case before us, the assessee herein is a cooperative bank and it is not in dispute that it is also governed by the Reserve Bank of India. Hence the directions with regard to the prudential norms issued by the Reserve Bank of India are equally applicable to the assessee as it is applicable to the companies registered under the Companies Act. The Hon'ble Supreme Court has held in the case of Southern Technologies Ltd (Supra), that the .....

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A advances in its total income. The Hon'ble Delhi High Court in the case of Vasisth Chay Vyapar Ltd (Supra) has held that the interest on NPA assets cannot be said to have accrued to the assessee. In this regard, the following observations of Hon'ble Delhi High Court in the above cited case are relevant: What to talk of interest, even the principle amount itself had become doubtful to recover. In this scenario it was legitimate move to infer that interest income thereupon has not accrued .....

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T(A) in deleting the impugned addition relating to interest income in respect of NPAs. 11. So, however, the learned Departmental Representative has submitted that the Hon ble Madras High Court in the case of CIT vs. Sakthi Finance Ltd., (2013) 31 taxmann.com 305 (Madras) has differed with the judgement of the Hon ble Delhi High Court in the case of M/s Vasisth Chay Vyapar Ltd. (supra) on a similar issue, i.e. relating to interest income on NPAs. The learned Departmental Representative further po .....

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interest income on NPAs by the assessee following the RBI guidelines. The Hon ble Madras High Court took the view that the judgement of the Hon ble Supreme Court in the case of Southern Technologies Ltd. (supra) also applied to the Income Recognition Norms provided by RBI and therefore it held the interest income on NPAs is liable to be taxed on accrual basis and not in terms of RBI s guidelines. But the Hon ble Delhi High Court in the case of M/s Vasisth Chay Vyapar Ltd. (supra) has taken a vie .....

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prefer a view which is favourable of the assessee following the judgement of the Hon ble Supreme Court in the case of CIT vs. Vegetable Products Ltd. (1973) 88 ITR 192 (SC). 13. Therefore, in view of the aforesaid discussion, we are inclined to follow the decision of our co-ordinate Bench in the case of The Durga Cooperative Urban Bank Ltd. (supra) and accordingly the order of the CIT(A) is liable to the affirmed. We hold so. 14. In the result, the appeal of the Revenue is dismissed. 13. Since t .....

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dy made an addition of ₹ 1,62,42,236/-. in the hands of the assessee, which has been upheld by the CIT(A) and though the ground of appeal has been raised by the assessee in this regard in ITA No.237/PN/2013, but the contention of the learned Authorized Representative for the assessee before us was that the said ground of appeal is not being pressed. Once a particular addition has been made in the hands of the assessee by the Assessing Officer in the assessment order, then no further additi .....

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of, the order of the Commissioner under section 263 of the Act is upheld on the first issue, but is held to be invalid on the second issue on non-recognition of interest income on NPAs. Thus, the grounds of appeal raised by the assessee are partly allowed. ITA No.1154/PN/2011 :: Assessment Year 2008-09 14. The assessee has raised the following grounds of appeal:- 1) Commissioner (Appeals) has erred in confirming the addition of ₹ 17,40,000/- on account of interest on NPA not recognised as .....

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77; 6,12,119/- 5) CIT (A) has erred in disallowing loss of ₹ 16,16,187/- on merger of Sinhagad Urban Co-operative Bank Ltd. Same may please be allowed. 6) CIT (A) has erred in confirming addition of ₹ 1,88,877/- invoking Section 41(1) on Bank transferring Creditors Balances to Reserve Fund. Same is neither Cessation nor Liability, nor Income of the Appellant Bank. Addition is prayed to be deleted. 7) CIT (A) has erred in not allowing deduction/making addition of ₹ 17,32,500/- t .....

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peal as the occasion may demand. 15. The grounds of appeal Nos.1, 3 and 7 are not pressed and hence, the same are dismissed as not pressed. 16. The assessee has also raised additional grounds of appeal, which read as under:- Additional Grounds 1) "Loss on merger of Sinhagad Urban Co Op Bank Ltd, Pathari Dist. Parbhani, of ₹ 80,80,935/- may please be allowed as Revenue / Business Expenditure" 2) Without Prejudice to above Ground and if appellant fails, Difference in Asset and Liab .....

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the assessee and had credited the same to General Reserve Fund. The Assessing Officer was of the view that the said forfeiture of dividend payable was income of the assessee under section 2(24)(ii) of the Act and is to be included as income from other sources in the hands of the assessee. The contention of the assessee that dividend was as good as appropriation of profit and imposing tax while transferring the unclaimed dividend to Reserve Account was nothing but double taxation, was not accept .....

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that similar addition made in assessment year 2009-10 by the Assessing Officer has been deleted by the CIT(A), against which the Revenue is not in appeal and following the same parity of reasoning, the addition made in the captioned assessment year should be deleted. 21. We have heard the rival contentions and perused the record. The addition made in the hands of the assessee is in respect of the unclaimed dividend, which had been transferred to the Reserve Fund Account by the assessee. The case .....

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he case. The CIT(A) while deciding similar issue in assessment year 2009-10 had observed as under:- 8.3 It is undisputed fact that the appellant bank has made provision for distribution of dividend to its members out of profit, which has been already assessed as income of the appellant. The unclaimed dividend, therefore, amounts to excess provision for dividend which has been reversed by the appellant in the year under appeal and transferred to reserve account. If the appellant bank would have m .....

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/s 41(1) of the Act as held by the Hon'ble ITAT, Delhi in ITA No.4981/Del/2010 dated 29/04/2011 for A.Y.2007-08 in the case of Gulshan Mercantile Urban Coop.Bank Ltd., in para-5 of the order as under - "5. We have heard both the parties and gone through the material available on record as well as the order of ld. CIT(A). The Assessing Officer had made addition on the ground that the amount of unpaid dividend was to be deposited in the Government account after certain period. In this cas .....

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allowed by the CIT(A) in assessment year 2009-10 and in view of the ratio laid down by Delhi Bench of the Tribunal in Gulshan Mercantile Urban Coop. Bank Ltd. in ITA No.4981/Del/2010 relating to assessment year 2007-08, order dated 29.04.2011 and also in view of the fact that such reversal of unclaimed dividend and credit to the Reserve Account cannot be treated as income of the assessee under section 28 of the Act, we direct the Assessing Officer to delete the addition of ₹ 40,02,265/-. T .....

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aim of the assessee before us was that the provisions of section 41(1) of the Act were not applicable. We find no merit in the plea of the assessee in this regard in view of the fact that the assessee itself had transferred the credit balance of unclaimed creditors to the Reserve Accounts and the provisions of section 41(1) of the Act are clearly attracted, wherein it is provided that where any allowance of deduction has been made in the assessment for any year in respect of any loss, expenditur .....

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e provisions of section 41(1) of the Act were clearly applicable. 26. The issue in ground of appeal No.9, as per the learned Authorized Representative for the assessee is linked to the ground of appeal No.6. The assessee had transferred to Reserve Account excess cash of ₹ 20,547/-. Following same line of reasoning as in ground of appeal No.6, we hold that the provisions of section 41(1) of the Act are attracted and we confirm the addition of ₹ 20,547/-. Consequently, the grounds of a .....

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g to assessment year 2007-08, order dated 31.07.2013 and also the Hon ble Bombay High Court in CIT Vs. HDFC Bank Ltd. (2014) 366 ITR 505 (Bom). 28. In the facts of the present ground of appeal, the assessee had debited sum of ₹ 6,12,119/- on account of amortization of premium of investment in government securities in the category of Held to Maturity. The premium represented the excess of acquisition cost over the face value of Held to Maturity securities, which were amortized by the bank o .....

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herein it was held as under:- 11. We have heard the rival contentions and perused the record. The issue arising in the present appeal is in relation to the provision made on account of Amortization of Securities known Held To Maturity. The case of the Revenue was that the said securities were held as investments and consequently, the purchase cost was to be adopted and there was no basis for adopting the market value of the said assets and booking the loss in the value of securities at the close .....

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N/2013, relating to assessment year 2009-10 and vide order dated 28th November 2014, it was held as under:- 10. …… We find that a similar issue of allowability or deduction on account of amortization of premium expenditure for HTM securities arose before Pune Bench of the Tribunal in assessee s own case in ITA No.1795/PN/2013 relating to assessment year 2008-09 vide order dated 22.09.2014 wherein, it was held as under:- 2.1 The only issue remains is with regard to disallowance made .....

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s concerned, we find that an identical question of law was framed and answered in favour of the assessee by this court in its judgment dated July 4, 2014, in Income Tax Appeal No.1079 of 2012, CIT v. Lord Krishna Bank Ltd. (now merged with HDFC Bank Ltd.) (2014) 366 ITR 416 (Bom). Mr. Suresh Kumar fairly stated that question (C) reproduced above is covered by the said order. In view thereof, we are of the view that even question (C) does not arise any substantial question of law that requires an .....

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the Tribunal in the case of Nahsik Merchant Cooperative Bank Ltd. (Supra). We find the Tribunal has discussed the issue and dismissed the grounds raised by the Revenue by holding as under : 4. After going through rival submissions and material on record we find that with the advent of section 80P(4) w.e.f. A.Y, 2007-08 has closed the doors for cooperative banks for claiming the benefit of deduction u/s.80P(2)(a)(i) from this total income. However, the cooperative society should now be entitled t .....

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evelopment bank". 5. The intention of the provision may be derived more precisely from relevant Para 166 of the budget speech which stated that : "Co-operative banks, like any other bank, are lending institutions and should pay tax on their profits, Primary Agricultural Credit Societies (PACS) and Primary Cooperative Agricultural and Rural Development Bank (PCARDB) stand on a special footing and will continue to be exempt under section 80P of the Income Tax Act. However, I propose to e .....

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subjected to dual control from both RBI as well as from state cooperative department. The accounting treatment for a cooperative bank is therefore a result of guidelines from both the controlling authorities. Ordinarily a deduction is not available to an assessee unless specifically provided under the Act. This is irrespective of accounting treatment provided by the assessee in its books of accounts. But at the same time it was well settled that deduction expressly mentioned under the Act are no .....

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nstruction No.17 of 2008 dated 26.11.2008, on 'Assessment of Bank - check list for deduction, states as under: "As per RBI guidelines….." 8. The ITAT, Mumbai Bench, in the case of ACIT vs. The Bank of Rajasthan Ltd. (2011) TIOL-35-ITATMumbai, has held that in case of banks, the premium paid in excess of face value of investments classified under HTM category which has been amortised over the period till maturity is allowable as revenue expenditure since the claim is as per R .....

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ordingly addition of ₹ 17,91,659/- made by the Assessing Officer by disallowing amount towards amortization of Government Securities (HMT) was deleted. This reasoned factual and legal finding of the CIT(A) needs no interference from our side. We uphold the same. 9. As a result, the appeal filed by the Revenue is dismissed . 10.1 Respectfully following the decision of the Coordinate Bench of the Tribunal and in absence of any contrary material brought to our notice against the above cited d .....

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ble as revenue expenditure since the claim is as per RBI Guidelines and CBDT also has directed to allow such premium. In view of above, the assessee is justified in contending that the amortization of premium in excess of face value securities as HTM, period remaining difference was found reasonable. Accordingly, the disallowance of ₹ 2,20,68,302/- made by the Assessing Officer claimed as amortization of premium expenditure for HTM securities by payment of premium over and above the face v .....

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Hon ble Bombay High Court in CIT Vs. HDFC Bank (supra). We hold that amortization of premium expenditure for securities Held To Maturity in view of RBI guidelines are allowable business expenditure in the case of assessee. The grounds of appeal No.1 and 2 raised by the assessee are thus, allowed. 13. We further find that the Hon ble Bombay High Court in CIT Vs. HDFC Bank Ltd., in Income Tax Appeal No.330 of 2012, vide order dated 23.07.2014, on a similar issue on account of deduction with respe .....

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ibunal (supra) and Hon ble Bombay High Court (supra), and following the same parity of reasoning, we hold that the assessee is entitled to the deduction of ₹ 58,41,016/- being the Premium on Amortization of Securities. Accordingly, we direct the Assessing Officer to allow the claim of the assessee and delete the addition of ₹ 58,41,016/-. The ground of appeal No.1 raised by the assessee is thus, allowed. 30. Following the same parity of reasoning, we hold that the assessee is entitle .....

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ble, the provisions of section 43B of the Act are not attracted. The authorities below had disallowed the expenditure of audit fees of ₹ 1,19,277/- by invoking the provisions of section 43B of the Act since the said amount was payable at the close of the year. Under the provisions of section 43B of the Act, it is provided that notwithstanding anything contained in other provisions of the Act, a deduction which is otherwise allowable under the Act, shall be allowed as a deduction while comp .....

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m payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees, [or] [(c) any sum referred to in clause (ii) of sub-section (1) of section 36,] [or] [(d) any sum payable by the assessee as interest on any loan or borrowing from any public financial institution [or a State financial corporation or a State industrial investment corporation], in accordance with the terms and conditions of t .....

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ssing Officer, in this regard. Accordingly, we direct the Assessing Officer to allow the expenditure of ₹ 1,19,277/- booked on account of audit fees payable. The ground of appeal No.8 raised by the assessee is thus, allowed. 34. Vide ground of appeal No.10, the grievance of the assessee is against correct deduction to be allowed under section 36(1)(viia) of the Act. 35. The learned Authorized Representative for the assessee pointed out that the Assessing Officer may be directed for allowin .....

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. of ₹ 80,80,935/- or in the alternative depreciation on difference in asset and liability of bank merged. The learned Authorized Representative for the assessee fairly pointed out that as against the ground of appeal No.5, an additional ground of appeal is being raised which is being pressed and ground of appeal No.5 is not pressed. In view thereof, ground of appeal No.5 is dismissed as not pressed. The additional ground of appeal being legal in nature, is admitted for adjudication. 37. T .....

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iture under section 37 of the Act i.e. the expenditure incurred for earning more profit and its scope and/or the depreciation thereon. It was fairly pointed out by the learned Authorized Representative for the assessee that no such issue was raised before the CIT(A) and in the interest of justice, the same may be set aside to the file of CIT(A). Further, the learned Authorized Representative for the assessee pointed out that the issue is similar to the issue considered by the Pune Bench of the T .....

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ad Urban Co-operative Bank Ltd. and the expenditure incurred i.e. difference in deficit in assets over liabilities was for earning more profit and the said expenditure should be allowed as revenue expenditure / loss. The assessee while finalizing its books of account had treated the said expenditure as deferred revenue expenditure to be allowed over the period of five years, which has been negated by the authorities below. However, the stand of the assessee now before us is that the said expendi .....

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for any business or commercial rights of similar nature and are liable to be construed as intangible asset, contemplated under section 32(1)(ii) of the Act. Accordingly, it was held that the assessee is entitled to the allowance of depreciation in terms of section 32(1)(ii) of the Act. The relevant findings of the Tribunal are as under:- 11. We have carefully considered the rival submissions. Section 32(1)(ii) prescribes that in respect of knowhow, patents, copyrights, trademarks, licences, fra .....

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o be eligible for depreciation under clause (ii) of sub-section (1) of section 32 of the Act. 12. Before proceeding further, it would be appropriate to refer to the scheme of merger of respective four banks, copies of which have been placed in the Paper Book. All the schemes of the merger are similar and have been approved by the Reserve Bank of India in terms of the respective statutory provisions. The scheme of merger provides that the entire undertaking, the entire business, all the propertie .....

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en taken-over by the assessee. The liabilities taken-over mean all debts, demand deposits, saving bank deposits, term deposits, Time and Demand liabilities, rupee borrowings, bills payable, interest accrued, capital reserves and surpluses, whether statutory or not and all other liabilities including contingent liabilities, duties, undertakings and obligations of the Transferor Banks have been taken by the assessee. In-fact, the scheme specifically provides that all the licenses/registrations of .....

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ce, assessee bank took over the entire business apparatus of the Transferor Bank, which included its client base, operational branches of the bank at different places and also their employees, besides the licenses and other statutory approvals enjoyed by the Transferor Bank. Now, the case set-up by the assessee is that the acquisition of huge client base, operational branches of the banks and the access to new money markets has resulted in a business advantage which is covered within the meaning .....

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e may refer to the judgment of the Hon ble Delhi High Court in the case of Areva T & D India Ltd. & Ors. (supra). In the case before the Hon ble High Court assessee company acquired the business of the transferor lock, stock and barrel under a slump sale agreement. The amount of consideration paid in excess of the net value of tangible assets transferred, was claimed as payment made by the assessee for acquisition of various business and commercial rights, which comprised of business cla .....

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ngly held eligible for depreciation. 14. In the aforesaid light, factually speaking, in the present case, it can be seen that the assessee by acquiring the four co-operative banks has acquired existing running banking businesses complete with the required statutory licenses, operational bank branches, customers base as also the employees, besides other assets. The plea of the Revenue is that the difference paid by the assessee in excess of liabilities over the realizable values of the assets tak .....

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parity of reasoning laid down by the Hon ble Delhi High Court in the case of Areva T & D India Ltd. & Ors. (supra). In the case of SKS Micro Finance Ltd. (supra), assessee acquired a running business under a slump sale agreement and the consideration paid included, sum paid for acquiring the client base of the transferor. The acquisition of rights over the assets of the transferor, inclusive of its customers base was held to be an intangible asset being business or commercial rights of .....

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r on facts. 15. The other objection of the CIT(A) to the effect that the amalgamation in question is not by way of purchase but is an amalgamation by merger, in our view, is no ground to deny the claim of the assessee, which is otherwise well-founded. Therefore, having regard to the aforesaid discussion, in our view, on facts and in law the assessee is entitled for depreciation on the impugned sum for acquisition of business of commercial rights contemplated in section 32(1)(ii) of the Act. Thus .....

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down in The Cosmos Co-op Bank Ltd. Vs. DCIT (supra) and after verifying the claim of the assessee. Reasonable opportunity of hearing to the assessee shall be afforded, in this regard. The additional ground of appeal No.1 is dismissed and alternate plea raised by the assessee is thus, allowed for statistical purposes. ITA No.237/PN/2013 :: Assessment Year 2009-10 42. The assessee has raised the following grounds of appeal:- 1. The learned CIT(A) has erred in confirming the action of Assessing Of .....

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expenditure allowable u/s 37 of income tax Act. 3. The learned CIT(A) has erred in confirming the action of Assessing Officer in making addition of ₹ 68,895/- u/s 41(1) in respect of forfeited entries credited to reserve fund ignoring fact that the same is not taxable at all u/s 41(1) of the IT Act. 4. The learned CIT(A) has erred in confirming the action of Assessing Officer in making addition of ₹ 13,760/- u/s 28 of Income Tax Act on account of excess cash found & untraced cash .....

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ing Officer's action in making addition of ₹ 3,37,350/- on account expenditure on investment fluctuation reserve and the same may please be deleted. 8. The learned CIT(A) has erred in confirming Assessing Officer's action of not allowing deduction of ₹ 1,62,42,236/- out of Interest on Advances relating to periods up to 31/03/2006 and additions may pleas be deleted as the said income does not pertain to previous year relevant to A.Y. 2009-10 and it is not taxable in Assessment .....

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nd Liability of Bank merged, being for 'Banking license'/ Goodwill, depreciation on the same may please be allowed. 44. The learned Authorized Representative for the assessee at the outset pointed out that the grounds of appeal Nos.1 and 2 are not pressed and in the alternate, additional ground of appeal is pressed. Further, the grounds of appeal Nos.5 to 8 are not pressed. The only issue which remains for adjudication is the ground of appeal No.3, which is same as the ground of appeal N .....

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at sum of ₹ 13,760/- i.e. excess cash transferred to Reserve Account is assessable as income in the hands of the assessee and the ground of appeal No.4 raised by the assessee is dismissed. 46. The additional ground of appeal raised by the assessee is identical to the issue raised in the additional ground of appeal raised in ITA No.1154/PN/2011. The assessee during the year under consideration had taken over another bank i.e. Sanjivani Urban Co Operative Bank Ltd. and claimed loss of ₹ .....

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64/PN/2014 :: Assessment Year 2010-11 47. The assessee has raised the following grounds of appeal:- 1. The learned CIT(A) has erred in confirming the action of Assessing Officer in disallowing Appellant's claim of ₹ 49,86,000/- i.e. 1/5th of deferred revenue expenditure i.e. difference in Assets and liabilities of Sanjivani Urban Co-operative Bank Ltd, taken over merged in Appellants Bank. Same may please be allowed. 2. Without prejudice to Ground No.1, since Appellant Bank has incurre .....

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over merged in Appellants bank. Same may please be allowed. 4. Without prejudice to Ground No.3, since Appellant Bank has incurred expenditure for acquiring license to carry on Banking Business and goodwill, customer line and infrastructure etc of Sinhgad Urban Bank, Appellant may please be allowed depreciation on the said cost u/s 32 (1)(ii) of the Act, 1961. 5. The learned CIT(A) has erred in confirming the action of Assessing Officer in making addition of ₹ 4,87,790/- in respect of nomi .....

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