TaxTMI 
TaxTMI 
2015 (5) TMI 1029
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....ne has erred on the facts and in law in not allowing full relief for total addition of Rs. 68,24,624/- made by AO on account of amount credited to Reserve fund, allowed only partial relief of Rs. 34,534/- and confirmed the addition made of Rs. 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 Rs. 32,03,254/- under the head balances in suspense account shown in balance sheet, allowed only partial relief of Rs. 12,31,141/- and confirmed the addition of Rs. 19,72,113/-. That the addition of Rs. 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 Income-tax (Appeals) is contrary to law and to the facts and circumstances of the case. 2. The learned Commissioner....
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....s 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 cognizance of the fact that even in the Master Circular issued by the Reserve Bank of India on the subject "Prudential norms for clas....
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....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 Rs. 29,58,672/- was made on this account. Further, addition of Rs. 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 Rs. 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 Officer, had acknowledged the extinguishment of such liabilities and also acknowledged the income characteristic of the said amounts and the said credits were hel....
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..... 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 Rs. 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 Rs. 27,57,051/-. The explanation with regard to the nature of said liability by the assessee before the authorities below was that the same represented the unclaimed Demand Drafts purchased by the customers, which have not been presented for clearing for more tha....
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....reasoning, we direct the Assessing Officer to delete the addition of Rs. 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 Rs. 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 profits and is to be understood as an apportionment of income. If for any reason, the dividend so declared is not actually disbursed and were to be added back to the taxable income, it would mean a double taxation. Therefore, there is no ju....
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....ding balance in the suspense account of Rs. 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 Rs. 32,03,254/-. 18. The CIT(A) had accepted the plea of the assessee vis-à-vis the bank's liability towards the credit balance in the overdraft account of the customer M/s Milan traders to the extent of Rs. 12,31,141/-. However, the CIT(A) was of the view that though the amount represented bank's liability but since it had remained unpaid for a long time, it ceas....
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....-. 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 Rs. 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 the case of Latur Urban Co-op. Bank Ltd. in ITA No. 778 and 792/PN/2011, order dated 31-8-2012. The relevant discussion and finding of the Tribunal on the issue is as under. "13. So far as Ground No. 2 is concerned, it is in respect of the disallowances on the loss on sale of surplus ....
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....ities 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 assessee." 2.1 Facts being similar, so following the same reasoning, we hold that amortization premium paid on Govt. Securities of Rs. 23,13,525/- debited to Profit and Loss Account, as per RBI guidelines has to be allowed being expenses incurred during the course of business of banking, Assessing Officer is di....
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....owed 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 Rs. 4,92,000 and the interest on purchase was Rs. 5,871.53, which was debited to Interest Receivable Account. However, the security was purchased for Rs. 4,92,000, which was debited to Asset Account. The face value of the security receivable on redemption was Rs. 5 lakhs. This difference of Rs. 8,000 has been accounted for by the bank on a monthly basis. The date of purchase was 11th Aug., 1976. The date of redemption was 12th....
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....en 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. Applying the ratio laid down by the Hon'ble Bombay High Court in American Express International Banking Corporation Vs. CIT (supra), we find no merit in the order of Assessing Officer in this regard. Upholding the order of CIT(A), we dismiss the grounds of appeal Nos.9 to 11 raised by the Revenue." 26. The issue raised in the present appeal is identical to the issue before the Tribunal in The Ahmed....
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....avpura 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 428 (SC) and Rotork Control India (P) Ltd. vs. CIT, (2009) 314 ITR 62 (SC). 31. On the perusal of the copy of the Balance Sheet filed as on 31.03.2010 which along with the Annexures are placed at pages 46 to 52 of the Paper Book, it transpires that in the details of sundries (liabilities) as on 31.03.2010, the assessee had included the loss for investment amounting to Rs. 1,30,93,000/-. The total of the sundries (liabilities) ....