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Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN
Before: Shri Abraham P.George, AM & Shri George George K, JM
Per George George K, JM
These appeals at the instance of the Revenue are directed against two orders of the CIT(A) dated 07.11.2016 and 26.10.2016, for assessment years 2010-2011 and 2011- 2012, respectively.
Since common issue is raised in these appeals, they were heard together and are being disposed off by this consolidated order.
Identical grounds are raised in both the appeals, except for the variance in figures. Hence, grounds pertaining to ITA No.503/Coch/2016 concerning assessment year 2010-2011 is reproduced below:-
ITA Nos.503 & 504/Coch/2016. 2 The South Indian Bank Limited. 1. The order of the learned Commissioner of Income Tax (Appeals) in ITA No.25/2013-14 dated 07.11.2016 for the Assessment year 2010-11 is erroneous in law, facts and circumstances of the case.
The learned Commissioner of Income Tax (Appeals) erred in deleting the addition of Rs.84,31,34,267/- on account of depreciation claimed on HTM category investments.
The learned Commissioner of Income Tax (Appeals) ought to have noticed that the Assessing Officer has correctly disallowed the claim of the assessee for depreciation on investments categorized as 'Held To Maturity' securities stating that the RBI guidelines do not allow depreciation to HTM category of investments.
The learned Commissioner of Income Tax (Appeals) ought to have considered the CBDT circular No.665 dated 05-10-1993 and Instruction 17/2008 dated 26.11.2008 read with guidelines issued by Reserve Bank of India relied on by the Assessing Officer.
For these and other grounds that may be urged at the time of hearing, the order of the CIT (A) may be set aside and that of the Assessing Officer be restored.
The appellant craves leave to add or amend any ground of appeal before it is finally disposed off.
Brief facts of the case are as follow:-
4.1 The assessee is a company engaged in banking business. For the assessment year 2010-2011 assessment u/s 143(3) was completed vide order dated 28.03.2013. In the assessment completed, the Assessing Officer had disallowed depreciation on “Held to Maturity” (HTM) categories of investments amounting to Rs.84,31,34,267.
ITA Nos.503 & 504/Coch/2016. 3 The South Indian Bank Limited.
4.2 For assessment year 2011-2012, assessment was completed u/s 143(3) vide order dated 31.01.2014. In assessment year 2011-2012 also depreciation on HTM investments was disallowed to the tune of Rs.79,89,78,823.
4.3 Aggrieved by the assessment orders completed for assessment years 2010-2011 and 2011-2012, the assessee preferred appeals to the first appellate authority. The CIT(A), following the Tribunal orders in assessee’s own case for assessment years 2005-2006, 2006-2007 and 2007-2008, decided the issue in favour of the assessee. The relevant finding of the CIT(A) in allowing the appeal of the assessee for assessment year 2010-2011 reads as follow:-
“8. The next issue is regarding the depreciation on Held to Maturity (HTM) category of investments. It is seen that the Hon'ble Income Tax Appellate Tribunal, Kochi Bench has decided this issue in favour of the appellant in their own case for the assessment year 2005-06 vide ITA NO.1003/COCH/2008 dated 31/5/2011, for assessment year 2006-07 vide ITA NO.65/COCH/2009 dated 30/6/2011 and for assessment year 2007-08 vide ITA NO.208/COCH/2014 dated 24/12/2014. The relevant portion of the said order is reproduced below:-
"29. The next ground (#2(ii) and 4)of the Revenue's appeal relates to the disallowance in the sum of Rs. 7306.49 lakhs, of depreciation claimed in respect of HTM (hold to maturity) or permanent category investments held by the bank. The basis of the disallowance was that the same represents an investment, as against stock-in-trade, so that there is no requirement to mark it to market. The same are
ITA Nos.503 & 504/Coch/2016. 4 The South Indian Bank Limited. required to be stated at acquisition cost, except where it is in excess of the face value, in which case the excess is to be written off over the term of the security. The AO invoked a circular by the CBDT as well as the relevant instruction by the RBI (Circular No.DBOD PB.BC.32/21.04.048/2000-01 dated 16/10/2000) for the purpose. In appeal, the assessee was able to secure a favourable Verdict in view of the like decision by the tribunal in the assessee's own case for AY 2000-01 (in ITA No.1031/Coch/2004 dated 28/9/2006). Aggrieved, the Revenue is in appeal.
The Revenue before us has not been able to point out any infirmity in the order of the tribunal relied upon by the Id. CIT(A). The tribunal, in passing the said order, has relied on the decision by the hon'ble high court in the case of CIT Vs. Nedungadi Bank Ltd. (supra). It is not the Revenue's case kthat the tribunal has not properly appreciated the said decision by the hon'ble court, or that the same is not applicable to the facts of the case. We state so as, where applicable, as found by the tribunal in the assessee's case for AY 2000-01, the same is binding on the tribunal, so that it was incumbent for the Revenue to exhibit the inapplicability of the said decision if it were to secure a favourable from, or any modification/ variation from its earlier decision by, the tribunal. The same, in fact, and for the same reasons, represents the consistent view of the tribunal (refer: Dy. CIT v. Federal Bank Ltd. v. CIT, in ITA No. 718/ Coch/2008 dated 17/9/2010 for AY 2006-07). We decide accordingly dismissing the Revenue's ground."
Respectfully following the above orders of the ITAT, Kochi Bench in assessee’s own case, I hereby delete the addition made on depreciation on HTM investments of Rs.84,31,34,267/-.”
ITA Nos.503 & 504/Coch/2016. 5 The South Indian Bank Limited. 4.4 Aggrieved by the orders of CIT(A) for assessment years 2010-2011 and 2011-2012, Revenue has preferred the present appeals before the Tribunal.
4.5 The learned Departmental Representative strongly relied on the orders of the Assessing Officer, wherein he had ralied on the judgment of the Hon’ble Karnataka High Court in the case of CIT v. ING Vysya Bank Ltd. [(2013) 356 ITR 532 (Kar.).
4.6 The learned AR, on the other hand, submitted that the issue in question is squarely covered in favour of the assessee by the various orders of the Tribunal, which are cateloged in the impugned orders of the CIT(A). It was further submitted by the learned AR that the order of the Tribunal in assessee’s own case for assessment years 2005-2006, 2006-2007 and 2007-2008 (supra) has not been reversed by the judgment of the Hon’ble jurisdictional High Court.
We have heard the rival submission and perused the relevant material on record. The assessee-bank had treated securities which are HTM as current assets / stock-in-trade. The value of the current assets / stock-in-trade was calculated at the end of the each financial year on cost or market price whichever is lower. By adopting such valuation of security, the depreciation / appreciation was duly offered for taxation under the Income-tax Act. The bank was consistently adopting the above method of valuation of security as per the RBI Guideline. The Income-tax Appellate
ITA Nos.503 & 504/Coch/2016. 6 The South Indian Bank Limited. Tribunal in assessee’s own case for assessment years 2005- 2006 to 2007-2008 (supra) by following the judgment of the Hon’ble jurisdictional High Court in the case of CIT v. Nedungadi Bank Ltd. Reported in 264 ITR 545 (Kar) had held that the depreciation on investment which are `Held to Maturity’ and forming part of stock-in-trade is entitled to claim the same as a deduction. The CIT(A) had followed the orders of the Tribunal in assessee’s own case, for Asst.Years 2005-2006 to 2007-2008 (supra). No judgment of the Hon’ble High Court has been brought to our notice reversing the orders of ITAT in assessee’s own case for Asst.Years 2005- 2006 to 2007-2008 (supra). Hence, we see no reason to deviate from the findings of the co-ordinate Bench orders of the Tribunal in assessee’s own case for assessment years 2005-2006 to 2007-2008 (supra). Therefore, we uphold the order of the CIT(A) as correct and in accordance law. It is ordered accordingly.
In the result, the appeals filed by the Revenue stand dismissed.
Order pronounced on this 01st day of December, 2017.
Sd/- Sd/- (Abraham P.George) (George George K.) JUDICIAL MEMBER ACCOUNTANT MEMBER
Cochin ; Dated : 01st December, 2017. Devdas*
ITA Nos.503 & 504/Coch/2016. 7 The South Indian Bank Limited. Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. The CIT, Thrissur. 4. CIT(A), Thrissur. 5. DR, ITAT, Cochin 6. Guard file. True copy
BY ORDER,
(Asstt. Registrar) ITAT, Cochin