2022 (9) TMI 400 - AT - Income Tax

Tribunal Upholds Condonation of Delay & Disallowances: Amortization, Deposits, Impact Fee, Investment

The DCIT, Circle 1 (3), Ahmedabad Versus The Kalupur Commercial Co-op. Bank Ltd.

The Tribunal dismissed the Revenue's appeal, upholding the condonation of delay in filing the appeal and the decisions regarding disallowances of ... Disallowance on account of amortization of premium - addition deleted by CIT(A) - HELD THAT:- As the issue involved in the year under consideration as well as all the material facts relevant thereto are similar to that of AYs 2013-14 [2019 (10) TMI 1068 - ITAT AHMEDABAD] and 2014-15 [2019 (6) TMI 1425 - ITAT AHMEDABAD] instructions clearly provide for amortization of premium paid on securities when the same are acquired at the rate higher than the face value. Such amortization would have to be for the remaining period of maturity. In view of the above stated facts and legal finding, we do not find any infirmity in the decision of the Learned CIT(A) - we respectfully follow the orders of the Co-ordinate Bench of this Tribunal and uphold the impugned order of the learned CIT(A) deleting the disallowance made by the Assessing Officer on account of amortization of premium. Ground No.1 of the Revenue’s appeal is accordingly dismissed. Disallowance of deposits written off with Madhavpura Mercantile Co-op. Bank - addition deleted by CIT(A) - HELD THAT:-CIT(A) thus allowed relief to the assessee on this issue by relying on the order of his learned predecessor passed in assessee’s own case for AY 2013-14 [2019 (10) TMI 1068 - ITAT AHMEDABAD] - As agreed by the learned representatives of both the sides, this issue is thus squarely covered in favour of the assessee by the order of the Co-ordinate Bench of this Tribunal passed in assessee’s own case for AY 2013-14 and respectfully following the same, we uphold the impugned order of the learned CIT(A) deleting the addition made by the Assessing Officer on account of deposits written off with Madhavpura Mercantile Co-op. Bank . Ground No.2 of the Revenue’s appeal is accordingly dismissed. Disallowance of Impact Fee - CIT-A deleted the addition - HELD THAT:- CIT(A) thus allowed relief to the assessee on this issue by relying on the decision of Yadunandan Corporation Surat [2011 (11) TMI 868 - ITAT AHMEDABAD], Keerthi Estates P. (Ltd) [2017 (8) TMI 1672 - ITAT HYDERABAD] and Sanjay Bharatkumar Shah [2021 (12) TMI 814 - ITAT AHMEDABAD] wherein held that compounding fees paid to municipal corporation for regularizing a building plan is not in nature of offence nor prohibited by law therefore allowable as deduction. Ground No.3 of the Revenue’s appeal is accordingly dismissed. Disallowance of investment written off - CIT-A deleted the addition - Assessee has submitted that even though a Civil Suit was filed by the assessee before the Civil Judge at Surat for recovery of the amount in question, name of the concerned company having been struck off from the record of Registrar of Companies and the concerned individuals not being traceable, the amount has become irrecoverable - HELD THAT:- If the facts of the present case are considered in the light of the decision of Hon’ble jurisdictional High Court in the case of Rao Construction (P) Ltd [2013 (8) TMI 240 - GUJARAT HIGH COURT] cited by the learned Counsel for the assessee, we find ourselves in agreement with learned CIT(A) that the loss suffered by the assessee as a result of the amount in question having become irrecoverable from M/s. Home Trade Ltd is incidental to the assessee’s business and the same is allowable as deduction. Even the learned DR has not been able to raise any material contention to dispute this position. We, therefore, uphold the impugned order of the learned CIT(A) giving relief to the assessee on this issue and dismiss Ground 4 of the Revenue’s appeal. Issues Involved:1. Condonation of delay in filing the appeal.2. Disallowance of amortization of premium expenses.3. Disallowance of deposits written off by merged banks.4. Disallowance of Impact Fee.5. Disallowance of investment written off.Detailed Analysis:1. Condonation of Delay in Filing the Appeal:The Tribunal noted a delay of 58 days in filing the appeal by the Revenue. The Revenue provided reasons for the delay, which were accepted by the Tribunal as constituting a 'sufficient cause.' Consequently, the delay was condoned, allowing the appeal to be disposed of on its merits.2. Disallowance of Amortization of Premium Expenses:The Assessing Officer (AO) disallowed Rs. 3,15,80,885/- on account of amortization of premium expenses. The CIT(A) deleted this disallowance, referencing prior decisions in the assessee's own case for AYs 2013-14 and 2014-15, as well as a Tribunal decision for AY 2013-14, which allowed amortization of premium on government securities. The CIT(A) and the Tribunal relied on the guidelines laid down by the RBI and CBDT Instruction No. 17 of 2008, which permit amortization of premium paid on securities over their remaining period of maturity. The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal on this ground.3. Disallowance of Deposits Written Off by Merged Banks:The AO disallowed Rs. 2,99,07,611/- related to deposits written off with Madhavpura Mercantile Co-op. Bank. The CIT(A) deleted this disallowance, noting that the issue had been previously decided in favor of the assessee for AY 2013-14. The Tribunal upheld this decision, citing the RBI's findings that the bank's net worth was significantly negative, with no recoverable assets. The Tribunal confirmed that the write-off was justified and dismissed the Revenue's appeal on this issue.4. Disallowance of Impact Fee:The AO disallowed Rs. 10,43,353/- paid as Impact Fee to the Ahmedabad Municipal Corporation for regularizing illegal construction, treating it as a penalty. The CIT(A) deleted the disallowance, referencing decisions from the ITAT Ahmedabad and Hyderabad, which held that such fees are compensatory rather than penal. The Tribunal upheld the CIT(A)'s decision, noting that the fee was paid to regularize construction under a government scheme, and dismissed the Revenue's appeal on this ground.5. Disallowance of Investment Written Off:The AO disallowed Rs. 3,19,89,000/- related to an investment written off due to a failed transaction with Home Trade Ltd. The CIT(A) allowed the write-off, noting that the company was no longer traceable and the loss was incidental to the assessee's business. The Tribunal upheld this decision, referencing a Gujarat High Court ruling that similar losses are allowable as business expenses. The Tribunal dismissed the Revenue's appeal on this issue.Conclusion:The Tribunal dismissed the Revenue's appeal on all grounds, upholding the CIT(A)'s decisions regarding the condonation of delay, and the disallowances related to amortization of premium expenses, deposits written off, Impact Fee, and investment written off. The judgments were based on precedents and established guidelines, confirming that the assessee's claims were justified and allowable under the law.