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Income Tax Appellate Tribunal, “A” BENCH : KOLKATA
Before: Hon’ble Shri M.Balaganesh, AM & Shri S.S.Viswanethra Ravi, JM]
ORDER Per M.Balaganesh, AM
This appeal of the assessee arise out of the order of the Learned Commissioner of Income Tax (Appeals) – VI, Kolkata (hereinafter referred to as ld CITA) in Appeal No. 1014/CIT(A)/VI/2009-10/Cir-6/Kol dated 15.11.2010 for Asst Year 2007-08 against the order passed by the Learned Deputy Commissioner of Income Tax, Circle – 6, Kolkata (hereinafter referred to as ld AO) u/s 143(3) of the Income Tax Act , 1961 (hereinafter referred to as the ‘Act’) dated 31.12.2009.
1.1. This Tribunal had already passed an order in for Asst Year 2007-08 dated 27.4.2016. Against this order, the assessee preferred a Miscellaneous Application and the same was disposed off by this tribunal in M.A. No. 160/Kol/2017 dated 15.9.2017 wherein the order passed by this tribunal on 27.4.2016 was recalled for the limited purpose of adjudication of additional ground raised by the assessee for the Asst Year 2007-08. – Asst Year 2007-08 – Assessee Appeal
The additional ground raised by the assessee is as under:- “That the Learned Assessing Officer may be directed to allow deduction of Rs 77,90,374/- and Rs 21,41,903/- in respect of interest and rent respectively after verification of all necessary documents in support of claim of the appellant bank”.
The brief facts of this issue is that the ld AO disallowed a sum of Rs 3,17,32,734/- u/s 40(a)(ia) of the Act for non-deduction of tax at source based on tax audit report u/s 44AB of the Act. Since this disallowance was made voluntarily by the assessee in the original return of income, it was not contested by the assessee in appeal before the ld CITA. In the assessment for the Asst Year 2008-09, the deduction was claimed in the return and the same was disallowed by the ld AO. This disallowance was contested in appeal before the ld CITA, who vide his order dated 13.6.2012 allowed deduction to the extent of RS 96,38,366/- after examination of copies of challans and other documents. Subsequent to passing of order dated 13.6.2012 by the ld CITA, the assessee bank observed that in respect of disallowance amounting to Rs 99,32,277/- ( 77,90,374 + 21,41,903) , the provisions of TDS u/s 194A and 194I of the Act respectively are not applicable at all, in the opinion of the assessee. The 3 Allahabad Bank A.Yrs. 2007-08 & 2009-10 assessee paid interest to depositors to the tune of Rs 77,90,374/- without deduction of tax at source and the same represents - a) Interest paid to savings deposit holders b) Interest paid to recurring deposit holders c) Form 15G filed by the deposit holders d) Interest paid to agricultural sector Hence in the opinion of the assessee, the interest paid in the sum of Rs 77,90,374/- does not require deduction of tax at source u/s 194A of the Act and consequential disallowance u/s 40(a)(ia) of the Act ought not to have been made by the assessee at the first instance and confirmed by the ld AO in his assessment order.
3.1. In respect of disallowance of rent for generator amounting to Rs 21,41,903/- , tax deduction was not necessary as the payment made / credited to the payee did not exceed the threshold limit prescribed u/s 194I of the Act. Hence in the opinion of the assessee, the interest paid in the sum of Rs 21,41,903/- does not require deduction of tax at source u/s 194I of the Act and consequential disallowance u/s 40(a)(ia) of the Act ought not to have been made by the assessee at the first instance and confirmed by the ld AO in his assessment order.
We have heard the rival submissions. We find that the assessee had raised an additional ground to address its grievance in this regard vide its petition dated 15.11.2012 filed in this office on 15.5.2013. The ld AR argued that the assessee never had any occasion to address this issue before the lower authorities and hence had no other option but to file it as an additional ground before this tribunal. However, the ld AR fairly stated that since this issue was never examined by the lower authorities to appreciate the aforesaid contentions of the assessee, it could be remanded to the file of the ld AO for adjudication on merits. The contentions of the 4 Allahabad Bank A.Yrs. 2007-08 & 2009-10 ld AR was accepted by the ld DR with a rider that it would result in assessment being framed at lesser than the returned income. In this regard, we would like to place reliance on the decision of the Hon’ble Jurisdictional High Court in the case of Maynak Poddar (HUF) vs WTO reported in (2003) 262 ITR 633 (Cal) . In this decision, the Court observed :
"....... An assessee is liable to pay tax only upon such income as can be in law included in his total income and which can he lawfully assessed under the Act. The law empowers the ITO to assess the income of an assessee according to law and determine the tax payable thereon. In doing so, he cannot assess an assessee on an amount, which is not taxable in law, even if the same, is shown by an assessee. There is no estoppel by conduct against law nor is there any waiver of the legal right as much as the legal liability to be assessed otherwise than according to the mandate of the law (sic). It is always open to an assessee to take the plea that the figure, though shown in his return of total income, is not taxable in law. ........" It is now well settled that there is no estoppel against the statute. The assessee is only pleading for claim of deduction which had been erroneously disallowed by it in the return of income and considered as such by the ld AO in the assessment. Though there was no occasion for the revenue to adjudicate this issue on merits, the revenue could not take advantage of the mistake committed by the assessee. The scheme of taxation is primarily governed by the principles laid down in the Constitution of India and as per Article 265 of the Constitution of India, no tax shall be levied or collected unless by an authority of law. When a particular item is not to be taxed as per the statute, then taxing the same would amount to violation of constitutional principles and revenue would be unjustly enriched by the same. Hence in the process of verification by the ld AO, if the stand of the assessee is found to be correct and if it results in income being assessed lower than the returned income, that would be the true and correct income of the assessee and it would be the duty of the revenue to assess the correct tax liability of the assessee . In view of these findings in the facts and circumstances of the case, we deem it fit and appropriate, in the interest of 4
5 Allahabad Bank A.Yrs. 2007-08 & 2009-10 justice and fairplay, to remand this issue to the file of the ld AO for adjudication on merits. Accordingly, the additional ground raised by the assessee is allowed for statistical purposes.
Asst Year 2009-10 – Assessee Appeal
This appeal of the revenue arise out of the order of the ld CITA in Appeal No. 15/CIT(A)-VI/Cir-6/11-12/Kol dated 12.12.2012 for Asst Year 2009-10 against the order passed by the ld AO u/s 143(3) of the Act on 29.12.2011. This tribunal had originally disposed off the appeal in Asst Year 2009-10 and miscellaneous application was preferred by the assessee pointing out certain mistakes that had crept in the original order. The said miscellaneous application was disposed off by this tribunal in M.A. No. 77/Kol/2011 dated 30.11.2017 by recalling the order for the limited purpose of adjudication of disallowance made by the ld AO on account of amortization of premium paid for purchase of securities.
The only issue to be decided in this appeal is as to whether the ld CITA was justified in deleting the addition of Rs 91,30,00,000/- being amortization of premium paid for purchase of securities in the facts and circumstances of the case.
We have heard the rival submissions. We find that this issue is covered in favour of the assessee by the order of this tribunal in assessee’s own case for the Asst Year 2008-09 in & 1282/Kol/2012 dated 1.6.2016, which was the basis for recalling of the order in the miscellaneous application proceedings. We find that this tribunal for the Asst Year 2008-09 in assessee’s own case had held as under:- “42. We have considered the rival submissions. The assessee while computing its total income claimed deduction under the head amortization of premium on purchase of securities held to maturity. The assessee in the course of its banking business, to meet the statutory liquidity ratio requirements prescribed by the 5
6 Allahabad Bank A.Yrs. 2007-08 & 2009-10 RBI, has to make investments in Central and State Government securities. As per RBI directions such investments are classified into three categories as under : i) Available for sale (AFS) ii) Available for trading (AFT) iii) Held to Maturity (HTM). The assessee pointed out that the investments which were made by the assessee and categorized as HTM were purchased at a price which was higher than its redeemable value. In other words, these securities were purchased at a premium. The difference between the actual cost of these investments and the face value of such investments were spread over to the life of the investments and proportionate deduction was claimed by the assessee under the head "Amortization of HTM". The further claim of the Assessee was that all the securities held by the Assessee were held as “stock-in-trade” by the Assessee. The face value of the securities held in HTM category is alone shown in the books as cost and the premium is not claimed as cost of the securities, as the premium is claimed by way of amortization of premium over the life of the security. The revenue can have grievance only where the cost price of the investment as recorded in the investment trading account includes premium paid at the time of acquisition and also the same premium is separately claimed in the profit and loss account again as a deduction. The plea of the Assessee that there is no such double claim for same cost has been found to correct by the CIT(A). The order of the AO is silent on this aspect. The Assessing Officer disallowed the claim of the assessee on the assumption that full purchase consideration of all the securities was included in the said investment trading account and amortization amount is charged separately in the Profit and Loss Account again and he therefore held that the claim of the Assessee cannot be allowed in computation of total income. This factual assumption of the AO is wrong as found by the CIT(A) which has not been disputed before us. In these circumstances, we are of the view that the order of the CIT(A) does not call for any interference. Consequently Gr.No.1 & 2 raised by the revenue is dismissed.”
Respectfully following the said judicial precedent , we find no infirmity in the order of the ld CITA in this regard. Accordingly, the Ground No. 1 raised by the revenue is dismissed.
In the result, the appeal of the assessee in for Asst Year 2007-08 with regard to the additional ground raised by the assessee is allowed for statistical purpose and the appeal of the revenue in for the Order pronounced in the Court on 07.02.2018