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The West Bengal State Co-operative Bank Ltd. Versus DCIT, Circle-56, Kolkata

2017 (12) TMI 303 - ITAT KOLKATA

Disallowance of expenditure of an amount paid as Tips & Baksis by the bank to casual workers on festive occasion - AO as well as the Ld. CIT (A) did not allow this expenditure on the ground that there was no commercial expediency behind incurring this expenditure and that the explanation is not satisfactory - as per assessee the disallowance is bad in law the assessee has produced sufficient evidence in the form of vouchers and receipts in evidence of any payment of Tips & Baksis - Held that:- P .....

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ction no 17/2008 dated 26.11.2008 and case of Catholic Syrian Bank Ltd. vs ACIT (2009 (8) TMI 858 - ITAT COCHIN) allowing amortisation of the premium paid on acquisition of HTM bonds. - Provision made for fraudulent withdrawals - Held that:- Fraudulent withdrawals were committed by one of the employees of the bank in the earlier years. There was no debit to the profit and loss account during the year on this issue. The provision was made in the books of account in the earlier assessment year .....

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the said addition - Addition for provision for gratuity - Held that:- As there is no provision in the account, Section 40A(7) of the Act has no application. Hence this addition is hereby deleted. - Disallowance of interest payable on deposits borrowings etc. - Held that:- Central Board of direct taxes in circular no 559 dated 24.04.1999 has clarified that securities held by bank must be regarded as stock in trade and that interest payments and receipts from broken period on purchase of .....

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case, we are of considered opinion that all these issues have to be examined in details by the A.O. and a fresh decision taken denovo, in accordance with law. Hence we set aside this issue to the file of the A.O. - I.T.A. No. 746/Kol/2013 - Dated:- 30-11-2017 - Shri J. Sudhakar Reddy, AM And Shri S.S. Viswanethra Ravi, JM For The Assessee : Shri N. C. Mondal, FCA For The Revenue : Shri David Z. Chowngthu, Alld. CIT ORDER Per J. Sudhakar Reddy, AM This is an appeal filed by the assessee directed .....

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0/- inter alia making additions on account of Bakshis & Tips, fraudulent withdrawals, provisions for gratuity, disallowance of interest paid on securities purchased as investments etc. Dismiss the appeal of the assessee. Aggrieved, the assessee is before us on the following grounds: 1. For that on the facts of the case, the order passed by the Ld. CIT(A) is completely arbitrary, unjustified and illegal. 2. For that on the facts of the case, the Ld. CIT(A) was wrong in not considering the fac .....

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nue in nature of the assessee bank, therefore, the order passed by the Ld. CIT(A) is completely arbitrary, unjustified and illegal. 4. For that on the facts of the case, the Ld. CIT(A) was wrong in dittoing the order of the A.O. and confirming the disallowance of ₹ 3,35,526/- as provision for adjustment of amortisation which is an ascertained liability, therefore, the order passed by the Ld. CIT(A) is completely arbitrary, unjustified and illegal. 5. For that on the facts of the case, the .....

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order passed by the Ld. CIT(A) is completely arbitrary, unjustified and illegal. 7. For that on the facts of the case, the Ld. CIT(A) was wrong in confirming the addition of the A.O. ₹ 22,00,000/- shown as liability created in assessment year 2007-08 and it has no impact in the present year s profit & loss a/c, therefore, the order passed by the Ld. CIT(A) is completely arbitrary, unjustified and illegal. 8. For that on the facts of the case, the Ld. CIT(A) was wrong in dittoing the or .....

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rary, unjustified and illegal. 10. For that on the facts of the case, the Ld. CIT(A) was wrong in dittoing the order of the A.O. and confirming the disallowance of interest on purchases of securities amounting to ₹ 3,57,66,893/-, although in all earlier years the interest on purchases of securities have been allowed in assessment completed u/s 143(3), therefore, the order passed by the Ld. CIT(A) is completely arbitrary, unjustified and illegal. 11. For that on the facts of the case, the L .....

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which is completely arbitrary, unjustified and illegal. 3. We have heard Shri N.C. Mondal, learned counsel for the assessee and Shri D.Z. Chowngthu, Ld. CIT DR on behalf of the revenue. 4. On a careful consideration of the facts and circumstances of the case and a perusal of the paper on record and the orders of the authorities below as well as the case law cited, we hold as follows. 5. Ground no 1 is general in nature. 6. Ground no 2 and 3 is against the disallowance of expenditure of an amount .....

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The Assessing officer as well as the Ld. CIT (A) did not allow this expenditure on the ground that there was no commercial expediency behind incurring this expenditure and that the explanation is not satisfactory. The ld. Counsel for the assessee the disallowance is bad in law the assessee has produced sufficient evidence in the form of vouchers and receipts in evidence of any payment of Tips & Baksis. Payments were made by the Head Office, Regional Offices as well as 44 branches situated in .....

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rore at a total price of ₹ 5,63,75,000/- @ ₹ 112.75 per script of face value of ₹ 100/- each. 9. The excess amount of ₹ 63,75,000/- paid by the assessee over and above the face value included, ₹ 16,48,000/- pre-acquisition interest for broken period. The balance amount of ₹ 42,27,000/- was paid as premium. 10. The pre-acquisition broken period interest of ₹ 16,48,000/- was charged to profit & loss account during the year. The assessee submits that th .....

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Ld. CIT(A) as well as the A.O. could not understand the facts of this issue and nature of the claim of the assessee. 12. On a careful consideration of the arguments, we find that the CBDT vide its instruction no 17/2008 dated 26.11.2008 has stated as follows: As per RBI guidelines dated 16th October 2000, the investment portfolio of the banks is required to be classified under three categories viz Held to Maturity (HTM), Held for Trading (HFT) and Available for Sale (AFS). Investments classified .....

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y such claims. 13. Applying this circular of the CBDT, a similar claim was allowed by Cochin Bench of the Tribunal in the case of Catholic Syrian Bank Ltd. vs ACIT (2010) 38 SOT 553. Similar order passed by Panaji Bench of the Tribunal in the case of The Khanapur Co-op Bank Ltd. vs. ITO, ITA No. 141/PNJ/2011, dated 08.09.2011allowing amortisation of the premium paid on acquisition of HTM bonds. 14. Respectfully following the same, we allow this claim of the assessee and delete the disallowance. .....

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made during the year. The A.O. on the one hand observes that the said amount is debited to the profit and loss account in the impugned assessment year 2009-10 and on the other hand makes an addition of a provision made for fraudulent withdrawals in the earlier year without any change in the facts and circumstances of the case. Such addition cannot be sustained. Hence we delete the said addition and allow ground no 5, 6 and 7 of the assessee. 17. Ground no 8 is against the disallowance of ₹ .....

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f interest payable on deposits borrowings etc. amounting to ₹ 3,57,66,893/-. 20. The facts relating to this ground are as follows: The assessee had entered into transactions of borrowing in Govt. Securities. The Govt. securities are fixed interest securities and interest accrues on a day to day basis and is not subject to market fluctuation. The assessee submits that securities were purchased cum interest i.e. interest accrued during the period between the date of purchase and the last due .....

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e Assessing Officer was of the view that purchase of Govt. Securities is not the business of this bank and that surplus fund are parked in Govt. Securities as investments. He was of the view that the interest in question should be capitalised and the purchase and sale of these securities would result in short term and long term capital gains. In other words, the pre acquisition interest as per the Ld. A.O. is cost effect position of the security and cannot be allowed as revenue expenditure. 21. .....

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