ACIT COMPANY CIRCLE II(3), CHENNAI vs. INDIAN BANK LTD., CHENNAI

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ITA 2368/CHNY/2004Status: DisposedITAT Chennai21 December 2022AY 1995-967 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal, following its earlier order and considering the assessee's concession that the amalgamated bank ceased to exist, held that Explanation-7 to Section 43(1) applies. Therefore, depreciation should be allowed only on the written down value of the assets.

What were the facts?

The assessee claimed depreciation on assets taken over from an amalgamated bank. The Assessing Officer allowed depreciation based on the written down value as per Explanation-7 to Section 43(1), disallowing excess claims. The CIT(A) allowed the assessee's claim, holding Explanation-7 inapplicable.

What were the issues?

The applicability of Explanation-7 to Section 43(1) for calculating depreciation on assets taken over during an amalgamation, and whether the value determined by the government for the takeover is relevant.

Which sections of the Income-tax Act were involved?

Section 43(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘A’ BENCH: CHENNAI

Before: SHRI V. DURGA RAO, HON’BLE & SHRI G. MANJUNATHA, HON’BLE

Hearing: 13.12.2022Pronounced: 21.12.2022

आदेश / O R D E R PER BENCH:

1.

These ‘12’ appeals filed by the Revenue are directed against separate, but identical orders of the Commissioner of Income Tax

ITA Nos.1224 & 1225/Chny/2003 ITA No.983/Chny/2003 ITA Nos.2368 & 2369/Chny/2004 ITA Nos.1226 & 1227/Chny/2003 ITA Nos.882-885/Chny/2006 :: 2 ::

(Appeals)-11, Chennai, dated 13.03.2003, 17.03.2003, 05.07.2004, 28.02.2003, 05.07.2004, 10.03.2003, 11.03.2003, 28.12.2005, and pertains to assessment years 1991-92 to 2002-03 respectively. Since, facts are identical and issues are common, for the sake of convenience, these appeals were heard together and are being disposed off, by this consolidated order.

2.

The brief facts of the case are that in all these assessment years, the assessee has claimed depreciation on assets taken over from Bank of Thanjavur Ltd., in pursuant to amalgamation of Bank of Thanjavur Ltd., with assessee’s bank approved by Reserve Bank of India. The assessee’s bank has claimed depreciation on assets taken over from Bank of Thanjavur Ltd., on the basis of value fixed in pursuant to arrangement between the assessee’s bank and amalgamated bank on the ground that the value of assets has been determined by the Government of India for the purpose of taking over the banking business. The AO has allowed depreciation on assets taken over from Bank of Thanjavur Ltd., in pursuant to amalgamation in accordance with provisions of Explanation-7 to Sec.43(1) of the Act, and disallowed excess depreciation claimed by the assessee. The Ld.CIT(A) allowed depreciation claimed by the assessee on the ground that the value of ITA Nos.1224 & 1225/Chny/2003 ITA No.983/Chny/2003 ITA Nos.2368 & 2369/Chny/2004 ITA Nos.1226 & 1227/Chny/2003 ITA Nos.882-885/Chny/2006 :: 3 ::

asset has been fixed by the Government of India in pursuant to agreement between the assessee’s bank and Bank of Thanjavur Ltd., and thus, Explanation-7 to Sec.43(1) of the Act, has no application. The Revenue filed further appeals against the order of the Ld.CIT(A) before the Tribunal and the Tribunal vide its order dated 25.10.2007 has allowed appeals filed by the Revenue and reversed the findings of the Ld.CIT(A) on the issue of depreciation on assets taken over in pursuant to amalgamation of assessee’s bank with Bank of Thanjavur Ltd., in light of Explanation-7 to Sec.43(1) of the Act. The assessee carried the matter in further appeals before the Hon’ble High Court of Madras, and the Hon’ble High Court of Judicature at Madras in their order dated 25.08.2022 in Tax Case (Appeal) Nos.441, 442, 443, 444, 445, 446, 448,449, 450, 451, 452 & 453 of 2018, has set aside the order of the Tribunal on the issue of depreciation on assets taken over in pursuant to amalgamation of Bank of Thanjavur Ltd., with assessee’s bank in light of arguments of the Ld.Counsel for the assessee that Explanation- 7 to Sec.43(1) of the Act, does not apply, because, even after amalgamation, the Bank of Thanjavur Ltd., is still functioning and only part of the business of the said bank was transferred with the assessee’s bank. Therefore, present appeals were fixed for hearing in pursuant to directions of the Hon’ble High Court of Madras.

ITA Nos.1224 & 1225/Chny/2003 ITA No.983/Chny/2003 ITA Nos.2368 & 2369/Chny/2004 ITA Nos.1226 & 1227/Chny/2003 ITA Nos.882-885/Chny/2006 :: 4 ::

3.

The Ld.Counsel for the assessee, at the time of hearing, fairly agreed that the assessee does not want to continue the litigation on the issue of depreciation on assets taken over in pursuant to take over of banking business of Bank of Thanjavur Ltd., because, the sole premise on which the Hon’ble Madras High Court set aside the appeals to the file of the Tribunal is that the Bank of Thanjavur Ltd. is still functioning even after amalgamation and only part of its business of the said bank was merged with the assessee’s bank. However, facts remain that after amalgamation, the Bank of Thanjavur Ltd., cease to exist. Therefore, as per the provisions of Explanation-7 to Sec.43(1) of the Act, the assessee can claim depreciation on written down value of assets taken over from the amalgamating bank. Therefore, appeals may be decided in accordance with law.

4.

The Ld.DR, on the other hand, submitted that the Tribunal has rightly decided the issue in light of provisions of Explanation-7 to Sec.43(1) of the Act. However, the Hon’ble Madras High Court has set aside the issue on the basis of submissions of the Ld.Counsel for the assessee that the Bank of Thanjavur Ltd., is still continuing its banking business even after transfer of part of business to assessee’s bank. But, as admitted by the Ld.Counsel for the assessee, after amalgamation, the ITA Nos.1224 & 1225/Chny/2003 ITA No.983/Chny/2003 ITA Nos.2368 & 2369/Chny/2004 ITA Nos.1226 & 1227/Chny/2003 ITA Nos.882-885/Chny/2006 :: 5 ::

Bank of Thanjavur Ltd., cease to exist and thus, the Tribunal has rightly held that the assessee cannot claim depreciation on value assigned in terms of agreement between the parties, but can only claim depreciation as per provisions of Explanation-7 to Sec.43(1) of the Act, and thus, there is no reason to take a different view on the issue.

5.

We have heard both the parties, perused the materials available on record and gone through orders of the authorities below. The sole dispute arise from these appeals is with regard to depreciation on assets taken over in pursuant to amalgamation of Bank of Thanjavur Ltd., with assessee’s bank. As we have already stated in our earlier part of this order, the Bank of Thanjavur Ltd., is amalgamated with assessee’s bank in pursuant to amalgamation sanctioned by a Court of law. The assessee had claimed depreciation on assets taken over from Bank of Thanjavur Ltd., on the basis of value assigned in terms of agreement between parties on the ground that said value has been determined by the Government of India. The AO has allowed depreciation on assets taken over from the Bank of Thanjavur Ltd., on written down value of assets taken over from said Bank in light of provisions of Explanation-7 to Sec.43(1) of the Act. The matter reached to the Tribunal and the Tribunal has concurred with the findings of the AO and held that the ITA Nos.1224 & 1225/Chny/2003 ITA No.983/Chny/2003 ITA Nos.2368 & 2369/Chny/2004 ITA Nos.1226 & 1227/Chny/2003 ITA Nos.882-885/Chny/2006 :: 6 ::

transferor bank i.e. Bank of Thanjavur Ltd. consequent upon the amalgamation cease to exist and as such the case of the assessee clearly comes within the scope of Explanation-7 to Sec.43(1) of the Act, and thus, the AO has rightly allowed depreciation on written down value of assets taken over in pursuant to amalgamation. The assessee challenged the order of the Tribunal before the Hon’ble Madras High Court and contended that even after amalgamation, the Bank of Thanjavur Ltd., continue to carry on the banking business and thus, provisions of Explanation-7 to Sec.43(1) of the Act, does not apply to the present cases and on this premise, the Hon’ble Madras High Court has set aside the issue to the file of the Tribunal to reconsider the issue in light of arguments of the Ld.Counsel for the assessee. The Ld.Counsel for the assessee, during the course of hearing fairly agreed that the Bank of Thanjavur Ltd., cease to exist consequent upon amalgamation and thus, the findings recorded by the Tribunal in light of provisions of Explanation-7 to Sec.43(1) of the Act, is in accordance with law and the Bank does not want to continue the litigation. In this view of the matter and also considering the facts and circumstances of the cases, we are of the considered view that there is no error in the findings given by the Tribunal in upholding the action of the AO in allowing depreciation on assets taken over in pursuant to amalgamation of Bank of Thanjavur

ITA Nos.1224 & 1225/Chny/2003 ITA No.983/Chny/2003 ITA Nos.2368 & 2369/Chny/2004 ITA Nos.1226 & 1227/Chny/2003 ITA Nos.882-885/Chny/2006 :: 7 ::

Ltd., with assessee’s bank and thus, we are of the considered view that the decision rendered by the Tribunal in their order dated 25.08.2022 does not call for any interference and thus, we reverse the findings of the Ld.CIT(A) and restore the order of the AO on the issue of depreciation on assets taken over from the Bank of Thanjavur Ltd. in pursuant to amalgamation.

6.

In the result, appeals filed by the Revenue in all assessment years are allowed in terms of our observations given hereinabove.

Order pronounced on the 21st day of December, 2022, in Chennai.

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