ORIENTAL BANK OF COMMERCE,NEW DELHI vs. ACIT, NEW DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: ‘E’: NEW DELHI BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA No. 21/Del/2011 Assessment Year: 2005-06 Oriental Bank of Commerce Vs. ACIT, Circle-13(1), F-14, IVth Floor, Competent New Delhi House, Connaught Place, New Delhi (PAN: AAACO0191M) (Appellant) (Respondent) Appellant by : Sh. K.V.S.R. Krishna, CA Respondent by : Sh. P. DAM Kanunjna, Sr. DR Date of hearing: 17.09.2015 Date of pronouncement: 30.10.2015 ORDER PER INTURI RAMA RAO, A.M.: The appeal filed by the assessee-bank is directed against the order of ld. CIT(A), dated 20.10.2010 passed for the assessment year 2005-06. The assessee-bank raised the following grounds of appeal: i. The Hon’ble CIT(A) has erred in law and on facts in upholding the rectification order passed by the AO u/s 154 dt. 30.11.2007. There is no mistake apparent from record, which is sought to be rectified. The additions sought to be made by the Assessing Officer under the garb of rectification do not constitute mistake apparent from record. Therefore, the rectification order upheld by the CIT(A) should be cancelled. ii. Whether the assessee would be allowed depreciation on temporary wooden structures @ 15% or 100% is a debatable issue and cannot be called as a apparent mistake made in the assessment order. Therefore, also the CIT(A) order is vitiated in law. iii. Without prejudice to the above, that there is no rectification possible u/s 154 of the Income Tax Act, 1961, the CIT(A) has erred in upholding the

2 ITA No. 21/Del/2011 AY: 2005-06 denial of the claim of depreciation on temporary wooden structures at 100%, which is the rate prescribed under the Income Tax Rules-I, building (4) and restricting it to 15% only merely on the ground that the assessee has classified the same as “furniture and fixtures” in earlier years. The disallowance of depreciation of Rs. 12,14,26,196/- should be deleted. iv. 3(a) Even if the assessee bank has classified these under the head “furniture and fixtures” it is the duty of the Assessing Officer to examine the nature of the addition and then allow depreciation under the proper head, which as per the facts given by the assessee are temporary wooden structures and the depreciation @ 100% is according to Appendix I of the Income Tax Rules, 1962. The assessee’s claim of depreciation @ 100% should be accepted. v. The CIT(A) has erred in not allowing the business losses of Rs. 111,45,95,050/- of Erstwhile Global Trust Bank as declared in the return for the Asstt. Year 2005-06. The appellant claims that the Erstwhile Global Trust Bank Ltd. is no longer existing and has been amalgamated w.e.f. 14.08.2004 and the loss of Erstwhile Global Trust Bank Ltd. as returned and existing as on the date of amalgamate shall be deemed to be the loss of Oriental Bank of Commerce because of the amalgamation and should be accepted as such i.e., the returned loss of Rs. 111,45,95,050/- should not be disturbed but allowed to the assessee bank. vi. The above grounds (including part thereof) are independent and without prejudice to one another. vii. The appellant prays that he may be allowed to add, amend, alter, modify or forego any of the grounds at the time of hearing. 2. The brief facts of the case are that the appellant is a public sector undertaking bank. The return of income for the assessment year 2005-06 was filed on 29th October, 2005, disclosing total income of Rs. 174,45,44,140/-. Against the said return of income, the assessment was completed under Section 143(3) of the Income-tax Act, 1961 (for short “the Act”) vide order dated 20th March, 2006 at a total income of Rs. 664,17,56,342/- after making several disallowances. Being aggrieved by this disallowances, the appellant preferred an appeal before the learned CIT(A). While the matter stood thus, the Assessing

3 ITA No. 21/Del/2011 AY: 2005-06 Officer sought to rectify the assessment order on the following two issues by issuing notice dated 23.11.2011: i. Wrong claim of depreciation @ 100% of furniture and fixture amounting to Rs. 12,14,26,196/-, as discussed in the assessment order u/s 143(3) passed on 15.11.2007 in the case of OBC (Erstwhile Global Trust Bank), is proposes to be added back. ii. Claim of business loss of Rs. 111,45,95,050/- in Erstwhile Global Trust Bank (GTB) has been assessed at a loss of Rs. 54,38,96,252/- in the Asstt. Year 2005-06 dated 15.11.2007. Since GTB has merged in the Oriental Bank of Commerce, the difference of Rs. 57,06,98,798/- is proposed to be added back. The assessee bank objected the rectification proceedings vide his letter dated 30.11.2007 on the ground that there was no mistake apparent from record arising out of the order sought to be rectified and placed reliance on the decision of the Hon’ble Apex Court in the case of T.S. Balaram, ITO Vs. Volkart Bros and Others, 82 ITR 50. The assessee company contended that the claim of 100% depreciation on the furniture and fixtures is a debatable issue and in exercise of the power vested under Section 154 of the Act, the depreciation allocated at 100% cannot be withdrawn. He further submitted that the claim of 100% depreciation on furniture and fixtures is in accordance with law and the issue was examined by the Assessing Officer during the course of original assessment proceedings. He further submitted that merely in the books of account, the impugned expenditure was shown as furniture and fixture does not act as estoppel from claiming the deprecation @ 100%. The Assessing Officer brushing aside the explanation of the assessee bank passed an order dated

4 ITA No. 21/Del/2011 AY: 2005-06 30.11.2007 under Section 154 of the Act withdrawing the excess depreciation of Rs. 12,14,26,196/-. Being aggrieved by this order, an appeal was filed before the CIT(A) who vide para 5.2 of his order dated 20th October, 2010 rejected the claim of the assessee, which reads as under: “I have carefully considered the assessment order and the submission made by the ld. AR on the above issue. As mentioned by the AO in the rectification order, the above claim of depreciation relates to assets taken over by the appellant company from GTB on amalgamation of GTB with the appellant company vide Government of India Notification dated 14.08.2004. It is found that the said assets had been consistently shown by GTB under the block “Furniture & Fixtures” on which depreciation had been claimed @ 15%. On amalgamation of GTB with the appellant company, the appellant company has reclassified the above assets as “temporary wooden structure” claiming depreciation @100%. It is observed by the AO that the appellant had not furnished any explanation or documentary evidence to justify its claim. Further, the above classification as “Furniture & Fixture” and the claim of depreciation @ 15% in the hands of GTB were also duly supported by the Auditor’s Report. Before me also, the Ld. AR has not furnished any basis for charging the classification to “temporary wooden structure” and no documentary proof in this regard has been furnished. Depreciation in the case of GTB for A.Y. 2005-06 has also been restricted to 15% in the assessment order u/2 143(3). In view of the above, I do not find any justification to interfere with the action of the AO in this regard. This ground of appeal is, accordingly, rejected and the disallowance of Rs. 12,14,26,196/- is confirmed. Being aggrieved, the assessee is before us with the present appeal. 2. The assessee bank raised six grounds of appeal. Ground nos. 1 to 3 relates to the claim of depreciation @ 100% on the temporary structures and ground no. 4 was not pressed by the learned counsel for the assessee. Accordingly, ground no. 4 is dismissed as such. Ground nos. 5 and 6 are general in nature which do not require any adjudication.

5 ITA No. 21/Del/2011 AY: 2005-06 3. Before us, the learned Authorized Representative contended that the Assessing Officer ought not have exercised the jurisdiction under the provisions of Section 154 of the Act, inasmuch as, the issue of claim for depreciation @ 100% requires a debate and examination of material and therefore the Assessing Officer ought not have resorted to the provisions of Section 154 of the Act. 4. On the other hand, the ld. CIT(DR) relied on the orders of the lower authorities. 5. We heard the rival submission and perused the material on record. In the present appeal, we are required to adjudicate whether the Assessing Officer was justified in exercising the jurisdiction under Section 154 of the Act or not. The Assessing Officer withdrawn the depreciation to the extent of Rs. 12,14,26,196/- on interior temporary wooden structures. The Assessing Officer at the time of original assessment after going through the details filed by the assessee bank allowed the depreciation @ 100%, whereas vide the impugned proceedings, the Assessing Officer allowed the depreciation only @ 15% treating as a furniture and fixtures and the balance of depreciation claim of Rs. 12,14,26,126/- was withdrawn by him vide order dated 30.11.2007 passed under Section 154 of the Act. The sole ground, on which the Assessing Officer exercised the power of rectification is that in the hands of Global Trust Banks Ltd. which had been amalgamated with the assessee bank on 14th August, 2004 vide Government of India notification dated 13th August, 2004, the depreciation was allowed @ 15

6 ITA No. 21/Del/2011 AY: 2005-06 till the date of amalgamation. In our considered opinion, this reasoning does not enable the Assessing Officer to exercise the jurisdiction under Section 154 of the Act. There is no specific provision under the provisions of Income Tax Act that the depreciation on the assets acquired pursuant to the scheme of amalgamation should be allowed at the same rate of depreciation which was allowed in the hands of the amalgamating company. There is nothing on record to show that the assessee bank is not entitled for depreciation @ 100% in respect of the interiors which was purely wooden structures and the full details in respect of this claim of the expenditure have been filed at the time of original assessment proceedings. The Assessing Officer after considering the details filed allowed the claim in the original assessment proceedings. In the circumstances, the claim for deduction of depreciation cannot be withdrawn by exercising power under Section 154 of the Act based on the change of opinion. The Hon’ble Supreme Court in the case of Mepco Industries Ltd. Vs. CIT, 319 ITR 208, held that the right to rectify the mistakes under Section 154 of the Act cannot be invoked in the case of change of opinion. A rectifiable mistake is a mistake which is obvious and patent and not something which has to be established by a long drawn process of reasoning or where two opinions are possible. Further, in our opinion, the issue at what rate a particular asset is eligible for depreciation per se is a debatable issue as it requires examination of materials, details, particulars and application of mind and therefore it cannot be a subject matter of

7 ITA No. 21/Del/2011 AY: 2005-06 rectification under Section 154 of the Act. The Hon’ble Madras High Court in the case of CIT Vs. New Woodlands Hotel (P.) Ltd., (2015) 228 Taxmann 360 (Mad.) held that in a case where 100% depreciation was allowed in the assessment proceedings on vapor absorption machine and the Assessing Officer by exercising the power under Section 154 of the Act sought to allow depreciation @ 25% on the ground that the said machine was a part of centralized air condition. The High Court held that such power cannot be exercised as it is a debatable issue which requires the examination of material details, particulars and application of mind. Similarly, the Hon’ble Supreme Court in the case of CIT Vs. Hero Cycle Pvt. Ltd., 228 ITR 463 held that the rectification under Section 154 can only be made when a glaring mistake of fact or law committed by the Officer passing the order as apparent from the record. Rectification is not possible when question is debatable. Moreover, a point which was not examined on the facts or in law cannot be dealt with as a mistake apparent from the record. Therefore, following the ratio laid down in the above case, we hold that the issue whether the deprecation @100% or 15% on interiors which are purely wooden structures is a debatable point as it requires examination of details and cannot be rectified by exercising the power vested under Section 154 of the Act. Therefore, we quash the order of the Assessing Officer dated 30th November, 2007 passed under section 154 of the Act and allow this ground of appeal.

8 ITA No. 21/Del/2011 AY: 2005-06 7. In the result, the appeal filed by the assessee is partly allowed for statistical purposes. The decision is pronounced in the open court on 30th October, 2015.

Sd/- Sd/- (KULDIP SINGH) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 30th October, 2015. RK/- Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi