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Bombay Mercantile Co-Operative Bank ... vs Jcit, Spl. Rg. 19, Mumbai on 13 December, 2017

ITA Nos.1555,1619,1620 & 1621/Mum/2015 & 829 & 210/Mum/2016 Bombay Mercantile Co-Operative Bank Limited आयकर अपीलीय अिधकरण "बी"

ायपीठ मुं बई म ।

IN THE INCOME TAX APPELLATE TRIBUNAL "B" BENCH, MUMBAI ी डी.टी. गरािसया, ाियक सद एवं ी मनोज कुमार अ वाल, लेखा सद के सम ।

BEFORE SHRI D.T. GARASIA, JM AND SHRI MANOJ KUMAR AGGARWAL, AM आयकर अपील सं ./I.T.A. No.1555/Mum/2015 (िनधा रण वष / Assessment Year: 2011-12) Bombay Mercantile Co- Deputy Commissioner Of Operative Bank Limited Income Tax (OSD)-1 बनाम/ Zain Rangoonwala Building Aaykar Bhavan, M.K.Road 78,Mohamm ed Ali Road Vs. Mumbai-400 020 Mumbai-400 003 थायी ले खा सं ./जीआइआर सं ./PAN/GIR No. AAAAB-2359-J (अ पीलाथ# /Appellant) : ($%थ# / Respondent) & आयकर अ पील सं ./I.T.A. No.829 &210/Mum/2016 (िनधा रण वष / Assessment Year: 2010-11 & 2008-09) Bombay Mercantile Co- Deputy Commissioner Of Operative Bank Limited Income Tax 1 (1) बनाम/ Zain Rangoonwala Building Aaykar Bhavan, M.K.Road 78,Mohamm ed Ali Road Vs. Mumbai-400 020 Mumbai-400 003 थायी ले खा सं ./जीआइआर सं ./PAN/GIR No. AAAAB-2359-J (अ पीलाथ# /Appellant) : ($%थ# / Respondent) & आयकर अ पील सं ./I.T.A. No.1619/Mum/2015 (िनधा रण वष / Assessment Year: 1986-87) Bombay Mercantile Co- Assistant Commissioner Of Operative Bank Limited Income Tax Central Circle-17 बनाम/ Zain Rangoonwala Building Aaykar Bhavan, M.K.Road 78,Mohamm ed Ali Road Vs. Mumbai-400 020 Mumbai-400 003 थायी ले खा सं ./जीआइआर सं ./PAN/GIR No. AAAAB-2359-J (अ पीलाथ# /Appellant) : ($%थ# / Respondent) & आयकर अ पील सं ./I.T.A. No.1620/Mum/2015 (िनधा रण वष / Assessment Year: 1997-98) 2 ITA.No.1555,1619,1620 & 1621//Mum/2015 829 & 210/Mum/2016 Bombay Mercantile Co-Operative Bank Limited Bombay Mercantile Co- Joint Commissioner Of Income Operative Bank Limited Tax Special Range-19 बनाम/ Zain Rangoonwala Building Aaykar Bhavan, M.K.Road 78,Mohamm ed Ali Road Vs. Mumbai-400 020 Mumbai-400 003 थायी ले खा सं ./जीआइआर सं ./PAN/GIR No. AAAAB-2359-J (अ पीलाथ# /Appellant) : ($%थ# / Respondent) & आयकर अ पील सं ./I.T.A. No.1621/Mum/2015 (िनधा रण वष / Assessment Year: 2009-10) Bombay Mercantile Co- Assistant Commissioner Of Operative Bank Limited Income Tax 1(1) बनाम/ Zain Rangoonwala Building Aaykar Bhavan, M.K.Road 78,Mohamm ed Ali Road Vs. Mumbai-400 020 Mumbai-400 003 थायी ले खा सं ./जीआइआर सं ./PAN/GIR No. AAAAB-2359-J (अ पीलाथ# /Appellant) : ($%थ# / Respondent) Assessee by : W.Hasan, Ld.AR Revenue by : Suman Kumar, Ld. DR सु नवाई की तारीख / : 02/11/2017 Date of Hearing घोषणा की तारीख / : 13/12 /2017 Date of Pronouncem ent आदे श / O R D E R Per Manoj Kumar Aggarwal (Accountant Member)

1. The captioned appeals, all by assessee, for different assessment years contest separate orders of first appellate authority. Since common issues are involved, we dispose-off the same by way of this common order for the sake of convenience & brevity. First we take up ITA No. 210/Mum/2016 for Assessment Year [AY] 2008-09 which contest the order of Ld. Commissioner of Income Tax (Appeals)-2 [CIT(A)], Mumbai dated 26/11/2015 by raising the following grounds of appeal:-

1.On the facts and in the circumstances of the case and in law the learned CIT(A) erred in confirming the addition of Rs. 4,02,00,000/- on account of Amortization of 3 ITA.No.1555,1619,1620 & 1621//Mum/2015 829 & 210/Mum/2016 Bombay Mercantile Co-Operative Bank Limited Depreciation (March 2005) totally ignoring the decision of the Hon'ble Bombay High Court in the case of Commissioner of Income Tax-2, Mumbai V/s HDFC Bank Ltd. in the Income Tax Appeal No. 250 of 2012 which was relied upon by the appellant.

2.On the facts and in the circumstances of the case and in law the learned CIT(A) erred in confirming the addition of Rs. 1,60,07,715/- on account of Amortization of Depreciation (March 2006) totally ignoring the decision of the Hon'ble Bombay High Court in the case of Commissioner of Income Tax-2, Mumbai V/s HDFC Bank Ltd. in the Income Tax Appeal No. 250 of 2012 which was relied upon by the appellant.

The assessment for impugned AY was framed by Ld. Deputy Commissioner of Income Tax-1(1) u/s 143(3) on 20/12/2010. 2.1 Briefly stated, the assessee being resident corporate assessee engaged in the business of cooperative banking was assessed u/s 143(3) on 20/12/2010 at loss of Rs.13.20 Crores after certain adjustments / disallowances as against returned loss of Rs.19.15 Crores filed by the assessee on 29/09/2008. The sole subject matter of this appeal is amortization of depreciation on certain investments. 2.2 During assessment proceedings, it was noted that the assessee claimed amortization of depreciation in value of investments. The assessee pointed out that the investments were held mainly in three categories viz. Held to maturity [HTM], Available for sale [AFS] & Available for trading [AFT] and whenever the investments were shifted from AFS/AFT to HTM category, the same were done at least of the acquisition cost / book value / market value on the date of transfer and resultant reduction in value was provided for in the books by way of amortization charges. The transfer was permissible once in a year as per RBI guidelines and accordingly the assessee on 11/02/2005 shifted bonds having book value of Rs.218.96 crores to HTM category. However, the assessee did not provided the depreciation since it had approached RBI for amortizing losses incurred on their bond portfolios.

ITA.No.1555,1619,1620 & 1621//Mum/2015 829 & 210/Mum/2016 Bombay Mercantile Co-Operative Bank Limited Pursuant to same, the assessee started amortizing the same to the extent of 20% of the losses of Rs.20.09 Crores from AY 2005-06 and accordingly, amortized the same for Rs.4.02 Crores in the impugned AY. Similar amortization amounting to Rs.1.60 Crores was claimed against certain other investments. However, not convinced Ld. AO, disallowed the assessee's claim which was upheld by the Ld. CIT(A) by following the order of this Tribunal. Aggrieved, the assessee is in further appeal before us.

3. The Ld. Counsel for the assessee [AR], at the outset, drew our attention to the fact that assessee suffered similar disallowance in AY 2006-07 & 2007-08 which was contested without any success up-to the level of this Tribunal vide ITA Nos. 4907 & 4908/Mum/2011 order dated 09/01/2013. Subsequently, the assessee preferred appeal against the same before Hon'ble Bombay High Court vide ITA Nos.1162 of 2013 & 1183 of 2013 where the appeal of the assessee has been admitted vide order dated 17/03/2015 and the same is pending for decision. The copies of the relevant orders have been placed before us. In view of the factual matrix, Ld. AR pleaded to allow the assessee to take recourse to the provisions of Section 158A. The Ld. Departmental Representative [DR] fairly conceded the same.

4. Heard and perused relevant material on record. Upon perusal, we concur with the submissions that identical matter is sub-judice before Hon'ble Bombay High Court. Hence, the provisions of Section 158A titled as 'procedure when assessee claims identical question of law is pending before High Court or Supreme Court' squarely apply to the facts of the case. The Ld. AR, vide letter dated 10/11/2017 has placed on record 5 ITA.No.1555,1619,1620 & 1621//Mum/2015 829 & 210/Mum/2016 Bombay Mercantile Co-Operative Bank Limited application in Form No. 8 read with Rule 16 of Income Tax Rules pursuant to Section 158A. Hence, without delving much deeper into the matter, we restore the matter to the file of Ld. AO for completion of all formalities as envisaged by Section 158A. Needless to say that the matter on merits shall be kept in abeyance till the outcome of the decision of Hon'ble Court in the cited appeals. Resultantly, the assessee's appeals stands allowed for statistical purposes.

5. We find that the identical ground is sole ground in ITA No.1621/Mum/2015 for AY 2009-10 & ITA No. 829/Mum/2016 for AY 2010-11. The Ld. AR has pleaded on similar lines to apply the provisions of Section 158A to the same. Hence, the matter is restored back to Ld. AO with similar directions including completion of necessary formalities in this regard. Resultantly, these two appeals also stands allowed for statistical purposes.

6. The assessee has raised five grounds in all. Ground No.1 & 2 are identical grounds i.e. amortization of depreciation in investments. The Ld. AR had pleaded to take recourse to the provisions of Section 158A. Hence, the matter is restored back to Ld. AO with similar directions, which results into these two grounds being allowed for statistical purposes.

7. Ground Nos. 3 & 5 are not pressed by Ld. AO before us and hence, the same stands dismissed in limine. The only effective ground is Ground No. 4 which reads as under:-

ITA.No.1555,1619,1620 & 1621//Mum/2015 829 & 210/Mum/2016 Bombay Mercantile Co-Operative Bank Limited

4.On the facts and in the circumstances of the case and in law the learned CIT(A) erred in holding that ground No. 4 relating to not allowing the carry forward of losses of years earlier than A.Y.'s 2007-08 that this issue can be remedied u/s 154 of the I.T.Act. Therefore, under these circumstances the appellant can approach the A.O. on this issue who is directed to verify and give effect to the rectification, if required.

The Learned CIT(A) ought to have decided this ground himself as he has no power to set aside the matter back to AO.

8. Facts qua the issue are that Ld. AO has adjusted carried forward losses of AY 2007-08 & 2008-09 against income determined u/s 143(3). However, before appellate authority, the assessee pointed out that the assessee had losses of earlier years prior to AY 2007-08 which were first required to be adjusted. However, Ld. CIT(A) opined that the same could be considered by Ld. AO u/s 154. Aggrieved, the assessee is in further appeal before us.

9. We find that matter to be factual one and hence, deem it fit to restore the matter back to the file of Ld. AO with a direction to the assessee to file the requisite details including assessment orders & appellate orders for the relevant years etc. to substantiate his claim in this regard. The Ld. AO is directed to re-consider the assessee's claim as per law after providing adequate opportunity of being heard to the assessee. Resultantly, this ground of assessee's appeal stands allowed for statistical purposes.

10. Finally, the assessee's appeal stands allowed for statistical purposes.

11. The assessee has raised the following grounds of appeal:-

ITA.No.1555,1619,1620 & 1621//Mum/2015 829 & 210/Mum/2016 Bombay Mercantile Co-Operative Bank Limited

1.On the facts and in the circumstances of the case and in law the learned CIT(A) erred in disallowing the claim of the assessee to grant interest on interest ingoring the inordinate delay in granting the refund to the assessee without any falut on its part which is similar to the case of Sandvik Asia Limited Vs Commissioner of Income Tax and others 280 ITR 643 (SC).

2.On the facts and in the circumstances of the case and in law the learned CIT(A) erred in disallowing the claim of the assessee to grant interest on interest / compensation for inordinate delay in granting the refund relying on the decision of the Hon'ble Supreme Court in the case of CIT vs Gujarat Fluoro Chemicals [2014] 43 taxmann.com 350 (SC) which in fact supports the claim of the assessee.

12. The facts as emanating from records are that the assessee was assessed u/s 143(3) on 27/03/1989 where the assessee's claim of deduction u/s 80P amounting to Rs.189.12 Lacs was denied. The Ld. CIT(A), upon appeal, granted partial relief to the assessee vide order dated 28/10/1989 and the Ld. AO giving effect to the same on 16/07/1990 re-worked demand against the assessee at Rs.30.20 Lacs. The revenue as well as the assessee agitated various issues before this Tribunal vide final order dated 06/09/2000. The Ld. AO gave effect to the order of the Tribunal on 29/08/2004 determining refund of Rs.13.15 Lacs to the assessee. Finally, the refund and interest thereupon aggregating in all to Rs.21.02 Lacs was granted to the assessee on 10/05/2012. By way of this appeal, the assessee is seeking compensatory interest on interest component on the premise that inordinate delay took place in granting refund to the assessee by placing reliance on Apex Court judgment in Sandvik Asia Limited Vs Commissioner of Income Tax and others 280 ITR 643 (SC). Per contra, revenue has placed reliance on subsequent judgment of Apex Court rendered in CIT vs Gujarat Fluoro Chemicals [2014] 43 taxmann.com 350 (SC).

13. Upon perusal of the same, we find that there is no provision in the Income Tax Act to grant interest on interest, whatsoever of any nature 8 ITA.No.1555,1619,1620 & 1621//Mum/2015 829 & 210/Mum/2016 Bombay Mercantile Co-Operative Bank Limited and whatsoever are the circumstances. We, as a quasi-judicial authority, could not go beyond realm of the provisions of law and are bound by the statutory provisions. Therefore, on factual matrix, we find ourselves in agreement with the subsequent judgment of larger bench of Hon'ble Apex Court rendered in CIT vs Gujarat Fluoro Chemicals 358 ITR 291 (SC) where the Hon'ble Court considering the judgment of Sandvik Asia Ltd. held as under:-

6. In our considered view, the aforesaid judgment has been misquoted and misinterpreted by the assessees and also by the Revenue. They are of the view that in Sandvik Asia Ltd.'s case (supra), this Court had directed the Revenue to pay interest on the statutory interest in case of delay in the payment. In other words, the interpretation placed is that the Revenue is obliged to pay an interest on interest in the event of its failure to refund the interest payable within the statutory period.

7. As we have already noticed, in Sandvik Asia Ltd.'s case (supra) this Court was considering the issue whether an assessee who is made to wait for refund of interest for decades be compensated for the great prejudice caused to it due to the delay in its payment after the lapse of statutory period. In the facts of that case, this Court had come to the conclusion that there was an inordinate delay on the part of the Revenue in refunding certain amount which included the statutory interest and therefore, directed the Revenue to pay compensation for the same not an interest on interest.

8. Further it is brought to our notice that the Legislature by the Act No. 4 of 1988 (w.e.f. 01.04.1989) has inserted Section 244A to the Act which provides for interest on refunds under various contingencies. We clarify that it is only that interest provided for under the statute which may be claimed by an assessee from the Revenue and no other interest on such statutory interest.

9. With the aforesaid clarification we now refer back all the matters before a Two Judge Bench of this Court to consider each case independently and take an appropriate decision one way or the other.

Therefore, respectfully following the same and in view of the statutory provisions as contained in Section 244A, we are of the considered opinion that the assessee could not be granted any interest whatsoever of any nature which was not authorized by the express provisions of law. Resultantly, the assessee's appeal stands dismissed.

ITA.No.1555,1619,1620 & 1621//Mum/2015 829 & 210/Mum/2016 Bombay Mercantile Co-Operative Bank Limited ITA No. 1620/Mum/2015 for AY 1997-98

14. The issue raised in the said appeal is identical to issue raised in AY 1986-87 i.e. assessee's claim of interest on interest due to inordinate delay in granting of refund. The assessment u/s 143(3) for the impugned AY was completed on 10/03/2000 where a demand of R.1.19 crores was raised against the assessee. There were multiple appeals to CIT(A) / ITAT. Finally, order was passed by Ld. CIT(A) on 03/02/2010 determining Nil income. The order giving effect to the same was passed by Ld. AO on 24/06/2010 determining refund of Rs.94.55 Lacs which was finally issued on 15/07/2011. By way of this appeal, the assessee is seeking compensatory interest on interest due to delay in grant of refund by the revenue.

15. Since the issue is identical, taking same stand, we dismiss revenue's appeal by placing reliance on the judgment of Hon'ble Apex Court rendered in CIT vs Gujarat Fluoro Chemicals 358 ITR 291 (SC). Resultantly, the assessee's appeal stands dismissed.

16. To sum up, ITA Nos. 210/Mum/2016, 1621/Mum/2015, 829/Mum/2016, 1555/Mum/2015 stands allowed for statistical purposes whereas ITA Nos. 1619-20/Mum/2015 stands dismissed.

Order pronounced in the open court on 13th December, 2017.

                       Sd/-                                   Sd/-
               (D.T. Garasia)                         (Manoj Kumar Aggarwal)
    ाियक सद  / Judicial Member                   लेखा सद  / Accountant Member

मुंबई Mumbai; िदनां क Dated : 13.12.2017
Sr.PS:- Thirumalesh
                                         10

                                                     ITA.No.1555,1619,1620 & 1621//Mum/2015
                                                                         829 & 210/Mum/2016

Bombay Mercantile Co-Operative Bank Limited आदे श की ितिलिप अ !े िषत/Copy of the Order forwarded to :

1. अपीलाथ# / The Appellant

2. $%थ# / The Respondent

3. आयकर आयु+(अपील) / The CIT(A)

4. आयकर आयु+ / CIT - concerned

5. िवभागीय $ितिनिध, आयकर अपीलीय अिधकरण, मुंबई / DR, ITAT, Mumbai

6. गाड. फाईल / Guard File आदे शानुसार/ BY ORDER, उप/सहायक पं जीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, मुंबई / ITAT, Mumbai