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Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD
Before: SHRI PRADIP KUMAR KEDIA & SHRI MAHAVIR PRASAD
आदेश/O R D E R
PER PRADIP KUMAR KEDIA - AM:
The captioned appeal has been filed at the instance of the Revenue against the order of the Commissioner of Income Tax (Appeals)-3, Ahmedabad (CIT(A)’ in short), dated 18.12.2017 arising in the assessment order dated 16.03.2016 passed by the Assessing Officer (AO) under s. 143(3) of the Income Tax Act, 1961 (the Act) concerning AY 2013-14.
[DCIT vs. M/s. The Janta Commercial Co Op Bank Ltd.] A.Y. 2013-14 - 2 - 2. The ground of appeal filed by the Revenue reads as under:
“1. The Ld. CIT(A) has erred in law and on facts in deleting the disallowance of carry forward of losses on account of unrealized amount of advances amounting to Rs.(-)18,14,14,727/-, ignoring the provisions of section 139(3) of the IT Act, 1961.”
None appeared for the assessee. The appeal of the Revenue is accordingly heard ex parte in the absence of the assessee.
When the matter was called for hearing, the learned DR for the Revenue relied upon the assessment order.
We have perused the order of the AO as well as the appellate order of the CIT(A).
On perusal, it is noticed that the assessee, a cooperative bank, was directed to be wound up as on 02.06.2003 vide order of Government of Gujarat under Cooperative Society Act, 1961. Consequently, the Board of Director of Bank was superseded and official liquidator being an official of cooperative department of Government of Gujarat was appointed to administer realization of assets and repayment of liabilities. Bank under liquidation was also authorized to approach Deposit Insurance and Credit Guarantee Corporation Ltd. (DICGCI) being subsidiary of Reserve Bank of India for the purposes of reimbursement of insurance claim of deposit with bank under liquidation within the limit of Rs.1 Lakh or less and accordingly DICGCI has paid bank under liquidation Rs.3,65,71,875/- which was utilized for the purpose of repayment of depositors to the extent of Rs.1 Lakh. However, according to DICGCI Act, bank was authorized to realize its assets and advances coercively and whatever proceeds are realized, bank could utilize such proceeds for repayment of liabilities of depositors and other liabilities. In view of the aforesaid mandate available by virtue of DICGCI Act, a deficit of Rs.1,05,461/- arose in the hands of the assessee in the process of recovery and repayment. Under the circumstances, it was the case of the assessee before the CIT(A) that bank under liquidation shall not have [DCIT vs. M/s. The Janta Commercial Co Op Bank Ltd.] A.Y. 2013-14 - 3 - any taxable income till the liability of DICGCI is fully paid off due to diversion of income at source.
The CIT(A) has examined the issue threadbare and has recorded a finding in favour of the assessee for non-applicability of Section 139(3) of the Act in the circumstances which reads as under:
“4. DECISIONS: I have considered the facts of the case and the argument of the appellant carefully. All three grounds are taken together for adjudication. The factual matrix as per para-3 above have been kept in mind while deciding the issue. It is undisputed fact that Bank is under liquidation with effect from 28/03/2003 and administration of bank is in hands of official of cooperative department of Govt. Of Gujarat for the purpose of realising advances under various legal methods provided in Gujarat Cooperative Societies act. 1962. Bank retains part of the staff when bank was in operation as identity and history of advances can be known from such staff only. Bank has also availed insurance from DICGCI and an amount of Rs. 3,65,71,875/- is payable to DICGCI as of deposit insurance claim as at 31/03/2014. After the above judgement of Ragupathi Ragavan(Supra) bank has repaid Rs.3,65,71,875/- to DICGCI and present liability to DICGCI is Rs. Nill. During the year appellant bank has earned interest of Rs. 40,75,681 /- and share dividend of Rs. 69,245/- after meeting all expenses including depreciation of Rs. 2,39,180/- there is surplus of Rs. 29,31,478/- however appellant has disallowed aforesaid depreciation of Rs. 2,39,18G/- and has claimed depreciation Rs. 32,882/- and its computation is provided in statement of total income which has been allowed by DOT. Now the dispute remains as to allowance of loss of unrealised amount of Rs. 18,14,14,727/- against income of current year and as claimed said interest and dividend are taxable under Income from other sources and not part of business income and such setoff has to be allowed u/s. 71 of the IT. act, 1961 being intra head setoff of losses. DCIT has justified such disallowance u/s. 139(3) being precondition of filing of return of income within due date. However plain reading of sec. 139(3) of the IT.act, 1961, such precondition is only for carry forward of business losses u/s. 72(1) of the IT.act,1961 and such legal situation has been upheld in the case of PEERLESS GENERAL FINANCE AND INVESTMENT CO. LTD. V/S. CIT (2015 378 ITR 718 (CAL) as well as CIT V/S. BRITISH INSULATED CALENDER'S LIMITED 202 ITR 354 (BOMBAY) AND ACIT V/S. SANJAY BASRATHI GEMS LTD 84 TAXMANN.COM 138 (JAIPUR). Under the circumstances, we agree with the submission of assessee for setoff of loss against current year income and assessee shall not have right of carry forward of business loss u/s. 72(1) of the I.T.act, 1961. While considering alternative plea of diversion of income at source, I have gone through judgement of Supreme Court as well as judgement of Gujarat High Court in the case of Visnagar Nagarik Sahakari Bank Ltd. (Supra) as jurisdictional High Court has upheld statutory obligation upon banks under liquidation availing insurance claim for deposits and in fact such liability has been fully paid off to [DCIT vs. M/s. The Janta Commercial Co Op Bank Ltd.] A.Y. 2013-14 - 4 - DICGCI and therefore till such obligation all funds realised by bank under liquidation are diverted at source entire income of assessee based on observation in the case of Moti Lal Chhadami Jain v/s CIT 190 ITR 1 (SC) r.w judgement in the case of Smt Sarla Devi K. v/s. CIT 222 ITR 211 (Kerala) and associated. Power Company Ltd. 218 I T R 195 (SC.) therefore entire interest income and share dividend income is diverted at source and bank under liquidation has no discretion or authority to apply such funds as it wishes and hence such funds are not available to appellant as income and therefore such income is not taxable in the hands of appellant. In view of facts and ratio laid down in the case laws (supra), ground No.1 & 2 are allowed. As appellant has not made any submissions on capital nature of receipts subsequent to liquidation as per contention raised in ground No.3. In view of lack of factual submissions as regards capital nature of receipts in the event of liquidation, I am unable to deal with such ground, therefore, ground No.3 is hereby dismissed.”
The order of CIT(A) is self explanatory.
We are in complete agreement with the findings of the CIT(A) noted above in the light of various decisions noted above. We thus decline to interfere.
In the result, the appeal filed by the Revenue is dismissed.
This Order pronounced in Open Court on 17/01/2020
Sd/- Sd/- (MAHAVIR PRASAD) (PRADIP KUMAR KEDIA) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad: Dated 17/01/2020 True Copy S. K. SINHA आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. राज�व / Revenue 2. आवेदक / Assessee 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त- अपील / CIT (A) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाइल / Guard file. By order/आदेश से,
उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद ।