TMI Blog2015 (5) TMI 1029X X X X Extracts X X X X X X X X Extracts X X X X ..... ons. - Decided in favour of assessee Partial addition on account of the balance shown in the suspense account - Held that:- Reliance on the ratio laid down by the Chennai Bench of the Tribunal in ACIT vs. Karur Vysya Bank Ltd., (2013 (11) TMI 923 - ITAT CHENNAI) wherein it was held that the unclaimed balance and surplus of jewellery auction could not be added to the income of the assessee - Decided in favour of assessee Addition made on account of premium paid on investment in Government securities - CIT(A) deleted addition - Held that:- This issue is covered in favour of assessee by the order in the case of Nagar Urban Co-operative Bank Ltd [2015 (6) TMI 553 - ITAT PUNE] as held Law is well settled that the Securities held by the Bank are in the nature of Stock-in-Trade Both the authorities below have merely gone on the nomenclature of the head under which the Securities are held. In our considered view, nomenclature cannot be decisive for the assessee Bank. We, therefore, hold that Addition made on account of premium paid on investment in Government securities is to be deleted - Decided in favour of assessee Addition made on account of payment of broken period interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nfirmed by CIT(A)IT/TP Pune may be deleted. 2. That the learned CIT(A)IT/TP Pune has erred on the facts and in law in not allowing full relief for total addition of ₹ 68,24,624/- made by AO on account of amount credited to Reserve fund, allowed only partial relief of ₹ 34,534/- and confirmed the addition made of ₹ 51,43,594/- on account of unclaimed dividend. That the addition made by A.O on account of unclaimed dividend and confirmed by CIT(A)IT/TP Pune may be deleted. 3. That the learned CIT(Appeals) IT/TP Pune has erred on the facts and in law in not allowing full relief for total addition made of ₹ 32,03,254/- under the head balances in suspense account shown in balance sheet, allowed only partial relief of ₹ 12,31,141/- and confirmed the addition of ₹ 19,72,113/-. That the addition of ₹ 19,72,113/- made by AO and confirmed by CIT(Appeals) IT/TP Pune may be deleted. 4. That your appellant prays that he may be allowed to add, to alter, to amend or to delete any of the above grounds of appeal. 4. The Revenue in ITA No.1982/PN/2013 has raised the following grounds of appeal:- 1. The order of the learned Commissioner of Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld to Maturity securities. 8. The learned Commissioner of Income-tax (Appeals) grossly erred in failing to appreciate that as the HTM securities are in the nature of investments, and not stock-in-trade, the same partake the nature of capital assets and, in the circumstances, any liability incurred or payment made for acquiring such investments could only be treated as capital expenditure not admissible as deduction. 9. The learned Commissioner of Income-tax (Appeals) grossly erred in deleting the above addition by relying on the decision of the Hon'ble Bombay High Court in the case of American Express International Banking Corporation Vs. CIT, 177 CTR (Mum) 442, without appreciating that the issue relating to Held to Maturity securities was not discussed in the above case. 10. The learned Commissioner of Income-tax (Appeals) grossly erred in presuming the correctness of the assessee's claim that interest on the impugned securities had been offered to tax as business income u/s.28 of the Income-tax Act, without calling for any details or evidences in support of the above claim. 11. The learned Commissioner of Income-tax (Appeals) grossly erred in not taking c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mand Draft (DD) purchased by the customers but not presented for clearing for more than six months. After considering the reply of the assessee in this regard, the Assessing Officer was of the view that the amounts of unclaimed liability had become barred by time and hence income on that account had to be recognized in the hands of the assessee. The addition of ₹ 29,58,672/- was made on this account. Further, addition of ₹ 32,03,254/- was made on similar ground on account of amounts lying in the suspense account. Another addition made in the hands of the assessee was on account of credits in the Reserve Fund Account of ₹ 68,42,624/-. The assessee had credited its general reserve with the above receipts during the year under consideration. The breakup of the receipts is tabulated under para 5 of the assessment order. The Assessing Officer noted that where the assessee had certain liabilities which had accumulated over the period of time, the said liabilities got extinguished with the passage of time and become amounts available with the assessee for free use. The assessee while transferring the said amount to the General Reserve account, as per the Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount of ₹ 32,03,254/-, the CIT(A) deleted the addition of ₹ 12,31,141/- being the Bank s liability towards M/s Milan Traders, but upheld the balance addition of ₹ 19,72,113/-. 10. Both the assessee and the Revenue are in appeal against the respective findings of the CIT(A) and have raised separate grounds of appeal. 11. The first issue raised by the assessee is against the addition confirmed by the CIT(A) on account of unclaimed liability of ₹ 29,58,672/-. As pointed out by us in paras hereinabove, the said liability was on account of unclaimed DDs issued by the Bank, which were not presented in the Bank. 12. We find that similar issue of recognition of unclaimed liability and its nontaxability arose before the Pune Bench of the Tribunal in The Ahmednagar Merchants Co-operative Bank Ltd. vs. JCIT vide ITA No.1863/PN/2013 and Other relating to assessment year 2010-11, order dated 29.04.2015, it was held as under :- 11. We have heard the rival contentions and perused the record. The assessee bank in the Balance Sheet filed for the year under consideration had shown unclaimed liability of ₹ 27,57,051/-. The explanation with regard to the na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,39,605/-. The grounds of appeal raised by the assessee are thus, allowed. 13. The issue arising in ground of appeal No.1 is identical to the issue before the Pune Bench of the Tribunal and following the same parity of reasoning, we direct the Assessing Officer to delete the addition of ₹ 29,58,672/-. The ground of appeal No.1 raised by the assessee is, thus allowed. 14. The second issue in ground of appeal No.2 raised by the assessee is against the addition of ₹ 51,43,594/- on account of unclaimed dividend. The Ld. Authorized Representative for the assessee pointed out that similar issue had arisen before the Pune Bench of the Tribunal in Ahmednagar Shahar Sahakari Bank Ltd. vs. ACIT vide ITA No.1862/PN/2013 and Other relating to assessment year 2010-11, order dated 20.02.2015, and Tribunal had allowed the claim of the assessee. We find that similar issue/addition made on account of unpaid dividend arose before the Tribunal and it was held as under :- 5. We have carefully considered the rival stands and find no merit in the stand of the Revenue. Quite clearly, the dividend is paid by the bank out of tax paid profits. Dividends are declared out of such profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue in ground of appeal No.3 raised by the assessee is against the partial addition of ₹ 19,72,113/- on account of the balance shown in the suspense account. 17. We take-up the brief facts relating to the issue with regard to the outstanding balance in the suspense account of ₹ 32,03,254/-. The explanation of the assessee was that many borrowers of loan were against gold and when the loan was not cleared within the time, the gold pledged with the bank was auctioned. On many occasions, the realization amounts were much more than the loan amounts. The excess amount so received was kept in the suspense account. The plea of the assessee before the lower authorities was that the excess so received was not the income of the assessee bank but the same were in the nature of deposit and had to be returned to the person whose gold was pledged to the bank. Apart from the amount in the suspense account also consisted of amount of tender deposited by the contractors and also security deposits. The Assessing Officer had made an addition of the entire loan of ₹ 32,03,254/-. 18. The CIT(A) had accepted the plea of the assessee vis- -vis the bank s liability towards the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee was allowed holding as under :- 18. We have heard the rival contentions and perused the record. The first issue arising in the present appeal filed by the Revenue is with regard to the allowability of amortization premium paid on HTM securities at ₹ 22,69,144/-. The Pune Bench of the Tribunal in assessee s own case in ITA No.712/PN/2013, relating to assessment year 2009-10 vide order dated 27.11.2013 had allowed the claim of assessee, in turn relying on the order of Tribunal in Nagar Urban Cooperative Bank Ltd. in ITA No.306/PN/2012, observing as under:- 2. The only issue is with regard to addition made by Assessing Officer who has disallowed the amortization premium paid on Govt. Securities of ₹ 23,13,525/-. At the outset of hearing, learned Authorized Representative pointed out that this issue is covered in favour of assessee by the order in the case of Nagar Urban Co-operative Bank Ltd., in ITA No.306/PN/2012, wherein the Tribunal has decided the issue in favour of the assessee by observing as under: 4. We have heard the parties. We find that the issue before us is clearly covered in favour of the assessee by the decision of ITAT Pune Bench in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re in the nature of Stock-in-Trade. We may like to quote here the decision of the Hon ble High Court of Kerala in the case of CIT Vs. Nedungadi Bank Ltd., 264 ITR 545. In the said case, the Hon ble High Court has held that the securities held by the Bank are in the nature of stock-in-trade. Both the authorities below have merely gone on the nomenclature of the head under which the Securities are held. In our considered view, nomenclature cannot be decisive for the assessee Bank. We, therefore, hold that the loss on the sale of the Securities is revenue in nature and same is allowable. Accordingly, Ground No. 2 is allowed . 2.1 Moreover, the said issue is also decided in favour of the assessee by other co-ordinate Bench in the following cases: i) Decision of Bangalore Bench of the Tribunal in the case of Krishna Grameena Bank Vs. Addl. CIT (ITA No. 146/Bang/2011 and 224/Bang/2011 order dated 15-6-2012. ii) Decision of Bangalore Bench of the Tribunal in the case of National Co-op. Bank Ltd. Vs. Jt. CIT Range 3 Bangalore (ITA No. 1090/Bang/2010 and 7/Bang/2011, order dated 11-5-2012). We therefore set aside the order of the CIT(A) on this issue and allow the claim of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting period, the interest due on the said securities for the period when the said securities were held by the several banks were claimed as deduction as the said amount was due to the said holders of the securities. Consequently, the assessee made a claim of deduction on account of broken period interest, which was not allowed in the hands of the assessee. However, the Hon ble Bombay High Court in American Express International Banking Corporation Vs. CIT (supra) held as under:- 9. The Department has taxed broken period interest received as business income. But, they have denied deduction for payment made for broken period interest at the time of purchase of the security. Once the Department seeks to assess broken period interest under the head Business , then the Department could not have rejected the impugned adjustment in the method of accounting adopted by the bank unless the Department was in a position to prove that the method adopted by the bank did not disclose the true and proper income. Now, when the assessee bought 4-3/4 per cent GOI 1980, the purchase price was ₹ 4,92,000 and the interest on purchase was ₹ 5,871.53, which was debited to Interest Receiva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest payment at the time of purchase and this led to the dispute. Having assessed the amount received by the assessee under s. 28, the only limited dispute was-whether the impugned adjustments in the method of accounting adopted by the assessee-bank should be discarded. Therefore, the judgment in Vijaya Bank's case has no application to the facts of the present case. Contention that even if the securities were treated as part of the trading assets, the income therefrom had to be assessed under s. 18 the Act and not under s. 28 as income from securities can only come within s. 18 and not under s. 28 is not sustainable. Firstly, as statedabove, Vijaya Bank's case has no application to the facts of this case. Secondly, in the present case, the Tribunal has found that the securities were held as trading assets. Thirdly, it has been held by the Supreme Court in the subsequent decision that income from securities can also come under s.28 as income from business. Having assessed the income under s. 28, the Department ought to have taxed interest for broken period interest received and the Department ought to have allowed deduction for broken period interest paid. 21. Applyin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bank s negative net worth. Out of total deposit of ₹ 1,42,50,884/-, the assessee could only collect ₹ 11,57,884/-. After the auditors of the RBI carried out audit of the assessee bank, suggestion was made to make the provision of loss of investment as per the report dated 24.02.2010. Accordingly, the assessee made a provision for this NPA routing it through Profit Loss Account. Subsequently, the license of Madhavpura Mercantile Cooperative Bank Ltd. was also cancelled which resulted into actual loss of investment for the bank. The plea of the assessee before us was that the same was ascertained loss and it resulted into actual loss of investment for the assessee bank. The finding of the CIT(A) in this regard was that though the amount has nomenclature of investment but it was a revenue field. The loss of such investment as per the CIT(A) would be a revenue loss and not capital loss. The provision created on concrete basis which was equal to the investment made was held by the CIT(A) to be allowable in the hands of the assessee. Reliance in this regard was placed on the ratio laid down by the Hon ble Supreme Court in Bharat Earth Movers Ltd. vs. CIT, (2000) 245 ITR 42 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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