Income Tax Appellate Tribunal - Mumbai
Centurion Bank Ltd , Mumbai vs Department Of Income Tax on 28 December, 2011
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH "C", MUMBAI
BEFORE SHRI B. RAMAKOTAIAH, A.M. AND SHRI V. DURGA RAO, J.M.
ITA No. 4879/Mum/2009
Assessment Year: 2002-03
Dy. Commissioner of Income-tax-2(3), ... Appellant
R.No. 556, Aayakar Bhavan,
Mumbai.
Vs.
M/s HDFC Bank Ltd., ...Respondent
(Consequent to merger of Centurian Bank Ltd.)
1 s t Floor, HDFC Bank House,
Senapati Bapat Marg, Lower Parel,
Mumbai - 400 013.
(PAN - AAACC2272R)
Appellant by : Mr. A.C. Tejpal
Respondent by : Mr. Yogesh R. Thar
Date of Hearing : 28/12/2011
Date of Pronouncement : 30/12/2011
ORDER
PER B. RAMAKOTAIAH, A.M.:
This appeal filed by the Revenue is directed against the order of CIT(A)-4, Mumbai passed on 11/03/2010 for assessment year 2002-
03.
2. Ground No. 1 is general in nature. Ground No. 2 pertains to issue of allowing the diminution value of investments amounting to Rs. 9,45,50,267/- on the reason that the such securities were held by the assessee bank as stock-in-trade. The revenue has contested that the securities held by the assessee as investment, hence, they are not allowable.
2 ITA NO. 4879/Mum/10HDFC Bank Ltd.
3. In the assessment order, the AO noted that the assessee had claimed diminution in value of investments to the extent of Rs. 9,45,50,267/- as deduction. The AO, therefore, held that the said claim was not allowable on the reason that the securities held by the bank as investment. The CIT(A) following the finding in the Settlement Commission's order, and following the decision of CIT Vs. Bank of Baroda, 262 ITR 334(Bom) allowed the said claim of the assessee. Aggrieved, the revenue is in appeal before us.
4. At the outset, the learned counsel for the assessee submitted that this issue was covered by the judgment of the Hon'ble Jurisdictional High Court in the case of CIT Vs. Bank of Baroda (supra) and DCIT Vs. Nedungadi Bank Ltd., 264 ITR 545 (ker.) and further by the co-ordinate benches of ITAT in earlier years. The learned DR, on the other hand, not controverted the facts available on record.
5. After considering the submissions and examining the record, we are of the view that there is no reason to differ from the finding of the CIT(A) and there is no dispute that the loss due to diminution in value of current investments is allowable as held by the Settlement Commission. Legally also this issue is covered by the decision of ITAT, Mumbai "H", Mumbai in the case of HDFC Bank Ltd. vide order dated 29/06/11 in ITA No. 4529/Mum/05 and others, wherein the Tribunal has held as under:-
"11. We have heard the Id DR as wefl as the Id AR of the assessee and considered the relevant material on record. The Id AR has pointed out that this issue has been considered and decided by the Tribunal in the case of M/s Lord Krishna Bank Ltd in ITA No.118/Coch/2007 for AY 1999-00 vide order dated 27.4.2011. The CIT(A) has decided the issue in para 10 as under:
10. Respectfully following the Hon 'bi Bombay High Court decision in the case of CIT vs Bank of Baroda (262 ITR 334) wherein the Hon 'ble Court held that loss 3 ITA NO. 4879/Mum/10 HDFC Bank Ltd.
debited to Profit & Loss account due to decrease in value of securities is allowable as deduct/on and the Hon 'ble Supreme Court in the case of United Commercial Bank vs VIT 240 ITR 355 where the Hon 'ble Court reversing the decision of the High Court held that Nationalised bank governed by Banking Regulation Act. Bank is following mercantile system of accounting both for book keeping as well as tax purposes. Bank is valuing stock in trade (in vestments) 'at cost' in balance sheet in accordance with Banking Regulation Act and valuing very same in vestments 'at cost' or 'market value' whichever was lower for Income tax purposes. Method followed consistently was valid and could not be rejected. In the present case the facts being similar to the facts reported in UCO Bank, the Assessing Officer is directed to allow the revaluation of securities. However, for the computation of depreciation allowable, the Assessing Officer is a/so directed to revalue the securities in the same manner in the beginning of the year a/so."
11.1 We find the Tribun& in the case of Lord Krishna Bank Ltd (supra) has considered and adjudicated the issue in para 3 & 4 as under:
"3. We have heard the rival submissions and perused the relevant material on record. The learned A.R. has reiled on Circular DBOD.No.BP.BC.29/21. 04.048/98 dated 11th April, .1998 issued by the Reserve Bank of/nd/a prescribing the method to be followed for valuation of Government and other securities. The learned A.R. invited our attention towards page 4 of the paper book, which is the method suggested by the RB? to be adopted by the banks in respect of Permanent investments. Clause (ii) of Point No.1 of this, being valuation of permanent in vestments, which has been pressed into service by the Id. AR, reads as under:
"Permanent' investments should be valued at cost and in case cost price is higher than the face value, the premium should be amortised over the remaining period of maturity of the security. On the other hand, where the cost price is less than the face value, the difference should be ignored and should not be amortised or taken to income account since the amount represents unrealized gain."
4. When we view the above method of valuation, it comes to notice that the permanent investment should be valued at cost and where such cost price is higher than the face value, "the premium should be amortized for the remaining period of maturity of the security" From the above it is dear that the premium has to be amortized for the remaining period of maturity of the security. The learned A. R. fairly conceded that details of such premium splitting over the remaining period of the maturity was not readily available and hence the matter be remitted to the file of A.O. for deciding It as per the above part of the Circular. No serious objection was taken by the learned Departmental Representative. In view of these 4 ITA NO. 4879/Mum/10 HDFC Bank Ltd.
facts we set aside the impugned order and restore the matter to the file of A. 0. for deciding this point in accordance with the above noted method."
11.2 Therefore, respectfully following the order of the Tribunal we decide the issue in favour of the assessee and against the revenue and confirm the order of the CIT(A) on this issue."
6. Respectfully following the said decisions, we confirm the order of CIT(A) on this count and dismiss the ground raised by the revenue.
7. Ground No. 3 is with reference to the disallowance of bad debts amounting to Rs. 12,80,24,103/- on the reason that the bad debts were not bona-fide.
8. The CIT(A) allowed the claim of the assessee not only on the basis of directions of Settlement Commission order for AY 1999-00 and 2001-02 but also by the principles laid down by the Special Bench decision of ITAT in the case of Oman International, 100 ITD 285(Mum SB). The CIT(A) also followed the decision of the Hon'ble Supreme Court in the case of TRF Limited V. CIT, 323 ITR 397 (SC) and directed the AO to allow the claim bad debts claim of the assessee.
9. After hearing both the parties and perusing the record as well as the orders of the authorities below, it is observed that since the Assessee has written off the bad debts in its books of account, the claim of bad debt is required to be allowed as held by the Apex Court in the case of TRF Ltd. (supra) that , "it is enough if the bad debt is written off as irrecoverable in the accounts of the assessee". Therefore, there is no need to disturb the findings of the CIT(A) both on facts and in law and the order of the CIT(A) is hereby upheld. Accordingly, the ground raised by the revenue is dismissed.
5 ITA NO. 4879/Mum/10HDFC Bank Ltd.
10. In the result, appeal of the revenue is dismissed.
Pronounced in the open court on this 30 t h day of
December, 2011.
Sd/- Sd/-
(V. DURGA RAO) (B. RAMAKOTAIAH)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai, Dated: 30 t h December, 2011.
kv
Copy to:-
1) The Appellant.
2) The Respondent.
3) The CIT (A) concerned.
4) The CIT concerned.
5) The Departmental Representative, "C" Bench, I.T.A.T.,
Mumbai.
By Order
//true copy//
Asst. Registrar,
I.T.A.T., Mumbai.