TaxTMI 
TaxTMI 
TaxTMI 
2013 (7) TMI 987
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.... all under Income Tax Act." 3.1 Facts of the case in brief are that the assessee is a Co-operative Bank registered u/s.9(1) of Maharastra Cooperative Societies Act, 1960. During the course of assessment proceedings the Assessing Officer noted that the bank was established in 1995 and face value of each share was Rs. 25/- only. In 2003, the bank increased the f ace value of each share to Rs. 100/- and members were asked to posses minimum 10 shares instead of single share of Rs. 25/-. Some of the shareholders did not deposit the balance amount to complete the minimum shareholding. The incomplete share balance as on 31/03/2007 has been transferred to Reserve Fund. Relying on various decisions, the AO added the forfeited incomplete share money amounting to Rs. 5,70,700/-u/s. 41(1) of the Income Tax Act, 1961. 3.2 Before the CIT(A) the assessee submitted that the forfeiture of share capital is not a revenue receipt and the cases relied on by the AO are not applicable. The assessee relied on following decisions : (i) Mahindra & Mahindra Ltd. 261 ITR 501 (Bom.) (ii) Prism Cement Ltd. Vs. JCIT (2006) 101 ITD 103 ( Bom.) (iii) DCIT Vs. Brijlaxmi Leasing & Finance Ltd. 118 ITD 546 (Ahme....
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....nal in the case of Prism Cement Ltd. reported in 101 ITD 103 he submitted that forfeiture of share money is a capital receipt and not a revenue income. He accordingly submitted that the order of the Ld.CIT(A) be set-aside and the ground raised by the assessee be allowed. 3.7 The Ld. Departmental Representative on the other hand heavily relied on the order of the Ld.CIT(A). 4. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited by both the sides. The only issue to be decided in the impugned ground is regarding the taxability of the forfeiture of share application money. From the details furnished by the assessee, we find the bye-laws of the bank were amended in 2003 and face value of share was increased to Rs. 100/- per share from Rs. 10/- and minimum holding was to be 10 shares. For that payment was required to be made by the shareholders. In the AGM held on 13-08-2006, a resolution was passed according to which those shareholders who do not comply the condition by 31-03-2007, the unpaid/partly paid shares et....
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....the decision of the Hon'ble Supreme Court in the case of CIT Vs. T.V. Sundaram Iyenger and Sons Ltd. (1996) 222 ITR 344 for his contention that forfeited amount is taxable as revenue receipt. However, we find that the facts of the case that were before the Hon'ble Supreme Court are distinguishable from the facts before us. In the instant case no security deposit or advance received for performance of the contract was forfeited. In fact, the amount received was against issue of shares and issue of shares is not the business of the assessee. The same cannot be treated as a receipt in the normal course of the business of the assessee which is engaged in financing and leasing business. Further, the assessee has also not credited the forfeited amount in its profit and loss account but in contradistinction to that it has credited the same in capital reserve account. In the above facts, in our considered opinion of the Tribunal in the case of Prism Cement Ltd. V. Joint CIT[2006] 285 ITR (AT) 43 [2006] 103 TTJ (Mum) 63 is more applicable which was rendered by the Tribunal after duly considering the aforesaid decision of the Hon'ble Supreme Court in the case of CIT V. T.V. Sundaram Iyenger ....
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....oceedings observed that the assessee has passed resolution on 30/01/2006 for classification of securities according to which the bank may shift investment to/from Held to Maturity Category with the approval of the Board of Directors once in a year normally at the beginning of the accounting year and no further shifting to/from this category/ is allowed during the remaining part of the accounting year. The AO observed that the assessee has shifted the category of investment from 'Held to Maturity' to Available for Sale category which is not allowable as per the RBI guidelines. The assessee has not re-categorized or shifted category of investments at the beginning of accounting year. He observed that the same has been done through General Body Meeting held on 02-09-2006 which is not allowable as per the RBI guidelines. In view of this, the A.O held that loss incurred due to dispute of the investment is not an allowable expenditure. The AO therefore, disallowed Rs. 15,80,000/-. 5.2 Before the CIT(A) it was submitted that according to RBI guidelines shifting of category may be done 'normally' at the beginning of the accounting year. It was submitted that the word used ....
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....eavy reliance on the decision of the Hon'ble High Court of Bombay in the case of CIT Vs. Bank of Baroda and in the case of UCO Bank Vs. CIT, 240 ITR 355 (SC). In the case of Bank of Baroda (Supra), the issue before their Lordship was whether the assessee was entitled for deduction on account of depreciation in the value of investments. The method of valuation followed by the assessee Bank was to value investments at cost or market value whichever was lower. The assessee had claimed the depreciation to the tune of Rs. 11,82,35,007/- and the said depreciation was claimed as a deduction which was disallowed by the A.O, but the assessee Bank succeeded before the CIT(A). The Tribunal confirmed the order of the CIT(A). The Revenue carried the issue before the Hon'ble High Court. The core issue was the method of valuation adopted by the assessee Bank for valuing the stock of the Securities. The Hon'ble High Court followed the decision of Hon'ble Supreme Court in the case of United Commercial Bank (Supra). 15. In the case of United Commercial Bank (Supra), even the issue of valuation of the stock in trade of the investment was before the Hon'ble Supreme Court. In the case of the assessee....
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....me. The Assessing Officer accordingly disallowed Rs. 1,08,000/-. 7.2 Before the CIT(A) it was submitted that the bank has strictly followed the method laid down by the RBI and amortized premium paid on investments acquired over the remaining period upto maturity on yearly basis and hence the expenditure is part of banking business expenditure. 7.3 However, the Ld. CIT(A) was also not satisfied with the explanation given by the assessee and upheld the addition made by the AO holding that this amount is capital in nature and the same is not allowable under sub section (1) of section 37. 7.4 Aggrieved with such order of the CIT(A) the assessee is in appeal before us. 7.5 The Ld. Counsel for the assessee submitted that the issue is covered in favour of the assessee in view of CBDT Instruction No.17/2008 dated 26-11- 2008. Further, the Mumbai Bench of the Tribunal in the case of Bank of Rajasthan Ltd. vide ITA No.3228/Mum/2010 order dated 09-09-2011 and the Bangalore Bench of the Tribunal in the case of Sri Subramanyeswara Cooperative Bank Ltd. Vs. ACIT vide ITA No.488/Bang/2011 order dated 06-06-2012 for the A.Y. 2008-09 has decided identical issue in favour of the assessee. He acc....