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TMI Blog2016 (12) TMI 1760X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer in disallowing the amortization of premium on Government Securities amounting to Rs. 28,91,278/-. 3. The learned Commissioner of Income Tax (Appeals) is not justified in upholding the action of the Assessing Officer in disallowing the amortization of loss on account of merger of Bobbili Cooperative Urban Bank and Ramachandrapuram Cooperative Urban Bank amounting to Rs. 2,33,00,693/- 4. Without prejudice to the above, the learned Commissioner of Income Tax (Appeals) ought to have allowed depreciation by treating the transaction of merger as one of goodwill acquired by the appellant.. 5. The learned Commissioner of Income Tax (Appeals) is not justified in confirming the action of the Assessing Officer in levying interest under provision of section 234A and 234B of the Income Tax Act, 1961. 6. For any other ground that may be urged at the time of appeal hearing." 3. The first ground of appeal is general in nature, hence, no adjudication is required. Ground No. 2 of the appeal relates to disallowance of amortization of premium on Government Securities amounting to Rs. 28,91,278/-. In the assessment order, the Assessing Officer has noted that the assessee has claimed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s already been considered by the Coordinate Bench of this Tribunal in assessee's own case for the Assessment Year 2008-09 and decided the issue in favour of the department. 11. On the other hand, learned counsel for the assessee fairly accepted that this issue is decided against the assessee. 12. We have heard both the parties, perused the material available on record and gone through the orders of the authorities below. 13. The issue involved in this appeal i.e. loss on account of merger has been considered by the Coordinate Bench of this Tribunal in assessee's own case for the Assessment Year 2008-09 and held that the assessee is not eligible for claim. The relevant portion of the order is extracted as under:- "9. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. The first argument raised by the assessee in respect of claim made by the assessee of Rs. 1,56,70,500/- as amortized loss on account of the merger of Bobbili branch with the assessee. In the course of the assessment proceedings, the A.O. has asked the assessee what is the basis for the claim. Before the A.O., the assessee is not able to ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orbed depreciation of amalgamating co-operative bank i.e. Bobbili Co-operative bank can be set off against the income of successor co-operative bank i.e. amalgamated co-operative bank (assessee) if the amalgamation is within the meaning of section 72AB of the Act. In the present case, the amalgamating company i.e. Bobbili Co-operative bank not filed return of income as required u/s 72AB of the Act. Therefore, the claim of the assessee cannot be allowed. We find that the Ld. CIT(A) has correctly decided the issue and disallowed the claim of the assessee. 10. So far as alternative ground raised by the assessee is concerned, according to the Ld. Counsel for the assessee, the excess of liabilities over the assets of Bobbili bank should be treated as the price paid for acquisition of a commercial/business asset which is a depreciable asset and it has to be treated as a goodwill. We find there is no merit in the argument of Ld. Counsel for the assessee. Goodwill means it is an intangible asset that arises as a result of acquisition of one company by another for a premium value. In this case, the assessee has not paid any amount to amalgamating company. The assessee has only taken losse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al in Assessment Year 2008-09 in ITA No.449/Vizag/2012 dated 30/09/2016 and decided in favour of the assessee. The relevant portion of the order is extracted as under:- "22. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. In this case, the assessee has debited an amount of Rs. 1,57,53,620/- towards interest on share capital. It was submitted that as per the section 16 of the A.P. Mutually Aided Cooperative Societies Act, 1995, it is an allowable expenditure. The A.O. has not accepted the explanation of the assessee and he has observed that the assessee has to allocate the interest on share capital only upon determination of the surplus arising from the business i.e. net profit. This is nothing but appropriation of profits but not an expenditure incurred for carrying on the business. The Ld. CIT(A) by following the decision of the coordinate bench of the Tribunal in assessee‟s own case for the assessment year 2007-08 in ITA No.5/Vizag/2011 & 19/Vizag/2011 for A.Y. 2007-08 vide order dated 29.8.2011 has directed the A.O. to delete the addition made by him. It is submitted across the bar that the v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this Tribunal, he decided the issue in favour of the assessee. The relevant portion of the order is extracted as under:- "6.3 I have considered the submissions made. I have carefully perused the assessment order and also the order of the Hon'ble ITAT for A.Y. 2007-08 in the assessee‟s case on this issue. I find that the Hon'ble ITAT has examined the issue in detail and held that no TDS needs to be deducted on interest paid by any cooperative society too members. In this regard, the Bench observed that the provisions of section 2(19) or section 194A(3) of the I.T. Act do not make any distinction between the cooperative societies carrying on banking business or other cooperative societies. Respectfully following the decision of Hon'ble ITAT in assessee‟s case for Assessment Year 2007-08, the Assessing Officer is directed to delete the impugned disallowance of Rs. 13,18,88,189/-." 27. In view of the decision of the Coordinate Bench of this Tribunal in assessee's own case (supra), this ground of appeal raised by the Revenue is dismissed. C.O.No. 17/VIZ/2016 28. The Cross Objection filed by the assessee is in support of the order of the Commissioner of Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lf for the Assessment Years 2008-09, 2009-10 & 2010-11, confirmed the order of the Assessing Officer. 33. On being aggrieved, the assessee carried the matter in appeal before this Tribunal. Learned counsel for the assessee fairly submitted that the issue involved in this appeal is squarely covered against the assessee in assessee's own case for the Assessment Year 2008-09 in ITA No. 444/Vizag/2012 by order dated 30/09/2016. 34. On the other hand, Departmental Representative strongly supported the orders of the authorities below and also relied on the order of the ITAT in assessee's own case. 35. We have heard both the parties, perused the material available on record and gone through the orders of the authorities below. 36. The issue involved in this appeal i.e. loss on account of merger has been considered by the Coordinate Bench of this Tribunal in assessee's own case for the Assessment Year 2008-09 and held that the assessee is not eligible for claim. The relevant portion of the order is extracted as under:- "9. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. The first argument raised by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed the claim made by the assessee. So far as RBI guidelines with regard to the amortization of losses is concerned, in view of the specific provision provided by section 72AB of the Act, in our opinion, RBI guidelines cannot prevail over the Income Tax Act. We further observed that business losses and unabsorbed depreciation of amalgamating co-operative bank i.e. Bobbili Co-operative bank can be set off against the income of successor co-operative bank i.e. amalgamated co-operative bank (assessee) if the amalgamation is within the meaning of section 72AB of the Act. In the present case, the amalgamating company i.e. Bobbili Co-operative bank not filed return of income as required u/s 72AB of the Act. Therefore, the claim of the assessee cannot be allowed. We find that the Ld. CIT(A) has correctly decided the issue and disallowed the claim of the assessee. 10. So far as alternative ground raised by the assessee is concerned, according to the Ld. Counsel for the assessee, the excess of liabilities over the assets of Bobbili bank should be treated as the price paid for acquisition of a commercial/business asset which is a depreciable asset and it has to be treated as a goodwill. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner of Income Tax (Appeals), it was submitted that the provision made towards reduction in value of Government securities, which represents depreciation in the value of Government securities held by the assessee under the category 'Available for Sale'. The book value of these securities is compared with the market price at the end of each year. Depreciation/appreciation is calculated for each scrip and the same is aggregated. If the net result is depreciation, the same is provided in the books in the form of a provision without distorting the book value of individual scrip's. This provision made is also in accordance with RBI instructions. After considering the submissions made by the assessee, the Commissioner of Income Tax (Appeals) confirmed the order of the Assessing Officer. The relevant portion of the order is extracted as under:- "9.3 I have carefully considered the above submissions of the AR. At the outset, it is to be noted that the above amount was a provision made towards reduction in value of Government securities. It is also seen that such provision was made for the accounting purpose as per the guidelines issued by the RBI. It is also not disputed that the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 16(1) of A.P. Mutually Aided Cooperative Societies Act, 1995. The Assessing Officer after considering the explanation of the assessee noted that the interest on share capital paid to its members amount to appropriation of profits and not allowable expenditure. 46. On appeal, Commissioner of Income Tax (Appeals) by following the decision of Coordinate Bench of this Tribunal in assessee's own case for the Assessment Year 2007-08 in ITA No.5 & 19/Vizag/2011, allowed the claim made by the assessee and directed the Assessing Officer to delete the addition. 47. On being aggrieved, the Revenue carried the matter in appeal before the Tribunal. 48. On the other hand, Departmental Representative heavily relied on the order of the Assessing Officer. 49. Learned counsel for the assessee submitted that the issue involved in this appeal is squarely covered by the decision of the Coordinate Bench of this Tribunal in assessee's own case for the Assessment Year 2007-08, the same order has been followed by this Tribunal in the Assessment Year 2008-09 in ITA No.449 & 450/Vizag/2012, by order dated 30/09/2016 and submitted that the same may be followed. 50. We have heard both the parties, per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee explained before the Assessing Officer that the same disallowance was made for the Assessment Year 2007-08 and the Hon'ble ITAT vide its order dated 29/08/2011 in ITA No. 5 & 19/Vizag/2011, allowed the claim of the assessee. However, the Assessing Officer has not accepted the explanation given by the assessee and observed that the assessee being a cooperative bank ought to have been deducted TDS. Since assessee failed to deduct TDS, disallowance made under section 40(a)(ia) of the Act. 54. On appeal, Commissioner of Income Tax (Appeals) by following the decision of the Coordinate Bench of this Tribunal for the Assessment Year 2007-08 in ITA No. 5 & 19/Vizag/2011 dated 29/08/2011 and directed the Assessing Officer to deleted the disallowance made under section 40(a)(ia) of the Act. 55. On being aggrieved, Revenue carried the matter in appeal before the Tribunal. 56. Learned Departmental Representative relied on the order of the Assessing Officer, whereas learned counsel for the assessee relied on the order in assessee's own case for the Assessment Year 2007-08. 57. We have heard both the parties, perused the material available on record and gone through the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in the case of CIT v. Rajkot District Cooperative Bank (222 Taxmann 240). Commissioner of Income Tax (Appeals) keeping in view of the judgment of Hon'ble Gujarat High Court and also the circular issued by the CBDT, directed the Assessing Officer to consider the claim of the assessee. The relevant portion of the order is extracted as under:- "7.3 I have considered the submissions made. On this very same issue, the then C1T(A), Visakhapatnam in the assessee's own case for the Asst. Yr. 200809 in his order in [TA No.372/10-11/Addl.CIT, R-1/VSP/2012-13 dated 27.9.2012 has confirmed the disallowance made by the AO. However, the CBDT Instruction No.17/2008, dated 26.9.2008 provide that investment portfolio of the banks in the category of 'Held to Maturity (HTM)' need not be marked to market and are carried at acquisition cost unless these are more than the face value in which case the premium should be amortised over the period remaining to maturity. The relevant portion of the CBDT Instruction in para (vii) is extracted below: "As per RBI guidelines dated 16" October 2000, the investment portfolio of the banks is required to be classified under three categories ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er on the ground that it is a contingent liability. The Commissioner of Income Tax (Appeals) has confirmed the order of the Assessing Officer. On appeal, ITAT remanded the matter back to the Assessing Officer for fresh consideration. In the year under consideration, the Commissioner of Income Tax (Appeals) allowed the ground raised by the assessee by following the CBDT instruction No. 17/2008 dated 26/09/2008 and also the decision of the Hon'ble Gujarat High Court in the case of Rajkot District Co-operative Bank (supra) directed the Assessing Officer to allow this claim. In our opinion, to maintain a consistency, the issue has to be remitted back to the Assessing Officer to consider the factual matrix of the case and decide in accordance with law. We therefore, set aside the order passed by the Commissioner of Income Tax (Appeals) and direct the Assessing Officer to consider the issue afresh keeping in view of the directions given by the Commissioner of Income Tax (Appeals) for the year under consideration and also following the observations of the Tribunal for the Assessment Year 2008-09 after giving opportunity of hearing to the assessee. This ground of appeal raised by the R ..... 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