The Karad Urban Co-op.Bank Ltd., V. Addl.CIT, Satara Range, Satara, Satara

ITA 103/PUN/2012

• Counselvise Citation: 10324514 RSA 2012
• Duration Of Justice: 2 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 14-10-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 19-01-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K MODI
• Keywords: Depreciation; Question of law; Cost of acquisition; Revenue expenditure; Capital expenditure
• Section: 143(3); 234B; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NOS.103, 1454 & 2432/PN/2012 (A.YS. 2007-08, 2008-09, 2009-10) THE KARAD URBAN CO.OP. BANK LTD., 516/2, SHANIWAR PETH, KARAD, DIST. SATARA PAN: AAAAT3981A APPELLANT VS. ADDL. CIT, SATARA RANGE, SATARA RESPONDENT ITA NOS.1515 & 2194/PN/2012 (A.YS.2008-09, 2009-10) THE KARAD JANATA SAHAKARI BANK LTD., TAL. KARAD, DIST. SATARA PAN: AAAAT7863R APPELLANT VS. ITO, WARD-1, SATARA RESPONDENT ASSESSEE BY : SHRI M.K. KU LKARNI DEPARTMENT BY : SHRI A.K. MODI DATE OF HEARING : 08.01.2014 DATE OF ORDER : 31.01.2014 ORDER PER SHAILENDRA KUMAR YADAV, J.M: ALL THESE APPEALS ARE ARISING OUT OF RESPECTIVE OR DERS OF CIT(A)- III, PUNE PERTAINING TO THE ABOVE COOPERATIVE BANK OF SAME GROUP ON 2 SIMILAR ISSUES. SO THESE WERE HEARD TOGETHER AND A RE BEING DISPOSED OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENC E. 2. IN ITA NO.103/PN/2012, THE ASSESSEE HAS RAISED T HE FOLLOWING GROUNDS: 1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN HOLDING THAT THE RBI GUIDELINES DO NOT OVERRIDE THE MANDATORY PROVISIONS OF INCOME-TAX ACT, 1961 AN D THEREFORE, NOT BINDING ON THE INCOME-TAX DEPTT. IN SPITE OF BOARD CIRCULAR NO. 665 OF 1993 AND THE DECISION OF THE HON'BLE KERALA HIGH COURT IN CIT V. LORD KRISHNA BANK LTD. (2011) 55 DTR (KER) 277 MENTIONED BEFORE HIM. THE LD. A.O. DI SALLOWED THE CLAIM OF AMORTIZATION ON GOVT. SECURITIES, INVE STMENTS KNOWN AS SLR INVESTMENTS, DEPRECIATION ON GOVT. SEC URITIES, PROVISION FOR VALUATION OF NON-SLR CATEGORY AND BRO KEN PERIOD INTEREST. THE RBI GUIDELINES ON VALUATION OF GOVT. SECURITIES AND AMORTIZATION ARE BASED ON THEORY OF 'REAL INCOME' BEING 'SINE QUA NON' FOR COMPUTATION OF TAX ABLE INCOME UNDER I. T. ACT, 1961. 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE MADE BY THE A.O. OF THE CLAIM OF DEPRECIATION ON GO VERNMENT SECURITIES SHIFTED FROM AFS TO HTM SECURITIES OF RS.2,46,01,000/- HOLDING THAT RBI GUIDELINES COULD NOT OVERRIDE THE PROVISIONS OF THE INCOME-TAX ACT, 1961 . THE CIT(A) WAS UNDER OBLIGATION TO HONOUR THE C.B.D.T. INSTRUC TIONS AND THE JUDGMENT OF THE HON'BLE KERALA HIGH COURT IN LO RD KRISHNA BANK CASE IN THIS RESPECT. THE CLAIM BE ALLOWED. 3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE MADE BY THE A.O. OF THE CLAIM OF PREMIUM AMORTIZATI ON OF RS. 41,49,000/- HOLDING THAT RBI GUIDELINES COULD NOT O VERRIDE THE PROVISIONS OF THE INCOME-TAX ACT, 1961. THE LD. CIT (A) WAS UNDER OBLIGATION TO HONOUR THE C.B.D.T. INSTRUCTION S AND THE JUDGMENT OF THE HON'BLE KERALA HIGH COURT IN LORD K RISHNA BANK CASE IN THIS RESPECT. THE CLAIM BE ALLOWED. 4) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE MADE BY THE A.O. OF THE CLAIM OF DEPRECIATION ON GO VERNMENT SECURITIES OF RS. 21,55,000/- HOLDING THAT RBI GUID ELINES COULD NOT OVERRIDE THE PROVISIONS OF THE INCOME-TAX ACT, 1961. THE LD. CIT(A) WAS UNDER OBLIGATION TO HONOU R THE C.B.D.T. INSTRUCTIONS AND THE JUDGMENT OF THE HON'BLE KE RALA HIGH 3 COURT IN LORD KRISHNA BANK CASE IN THIS RESPECT. TH E CLAIM BE ALLOWED. 5) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD. CTT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE OF THE CLAIM OF DEPRECIATION ON OTHER INVESTMENTS O F RS. 2,92,000/-. THE CLAIM BE ALLOWED. 6) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD. CIT(A) WAS NOT JUSTIFIED IN SETTING ASIDE T HE CLAIM OF BROKEN PERIOD INTEREST OF RS.23,96,393/- TO THE FI LE OF THE A.O. AS HE HIMSELF COULD HAVE ALLOWED THE CLAIM. THE LD. CIT(A) WAS UNDER OBLIGATION TO HONOUR THE C.B.D. T. INSTRUCTIONS AND THE JUDGMENT OF THE HON'BLE KERALA HIGH COURT I N LORD KRISHNA BANK CASE IN THIS RESPECT. THE CLAIM BE ALL OWED. 7) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE OF THE CLAIM OF RS.1,53,352/- BEING AUDIT FEES PROV IDED. THE CLAIM BE ALLOWED. 8) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE CLAIM OF RS. 58,009/- HOLDING IT AS PRIOR PERIOD EXPENSES BUT WI THOUT TAKING INTO CONSIDERATION THAT THE LIABILITIES WERE CRYSTA LLIZED DURING THE YEAR UNDER APPEAL. THE CLAIM BE ALLOWED. 9) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD. CIT(A) WAS NOT JUSTIFIED IN DISALLOWING THE EXPENDITURE INVOKING THE PROVISIONS OF S.40 (A)(IA) OF RS. 31,1 82/-. SINCE PROVISIONS OF S. 40 (A)(I-A) ARE NOT APPLICABLE THE EXPENDITURE IS ALLOWABLE AND IT BE ALLOWED ACCORDINGLY. 10) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE APPELLANT DENIES ITS LIABILITY TO PAY INTEREST U/S. 234-B AND 234-C OF THE ACT AND THE SAME BE DELETED. 11) THE APPELLANT CRAVES TO LEAVE, ADD/AMEND OR ALTER A NY OF THE ABOVE GROUNDS OF APPEAL. 3. AT THE OUTSET OF HEARING, THE LEARNED AUTHORIZED REPRESENTATIVE DID NOT PRESS GROUNDS OF APPEAL NOS.1, 5, 6, 7, 8 A ND 9, SO THEY ARE DISMISSED AS NOT PRESSED. SIMILAR ISSUES IN OTHER APPEALS ARE ALSO NOT PRESSED, SO SAME ARE ALSO DISMISSED AS NOT PRES SED. 4 4. THE LEARNED AUTHORIZED REPRESENTATIVE POINTED OU T THAT THE ISSUES IN GROUND NOS.2, 3 AND 4 OF ASSESSEES APPEA LS ARE COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF ITAT, PUNE B ENCH A IN ITA NO.449/PN/2012 VIDE ORDER DATED 05.08.2013 IN THE C ASE OF DY.CIT VS. KALLAPPANNA AWADE ICHALKARANJI JANATA SAHAKARI BANK LTD., WHEREIN, THE SIMILAR ISSUES WERE DECIDED BY THE PUN E BENCH B IN FAVOUR OF ASSESSEE BY OBSERVING AS UNDER: 10. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE AS SESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BE FORE US. WE FIND AN IDENTICAL ISSUE HAD COME UP BEFORE THE TRIB UNAL IN THE CASE OF NAHSIK MERCHANT COOPERATIVE BANK LTD. (SUPR A). WE FIND THE TRIBUNAL HAS DISCUSSED THE ISSUE AND DISMI SSED THE GROUNDS RAISED BY THE REVENUE BY HOLDING AS UNDER : 4. AFTER GOING THROUGH RIVAL SUBMISSIONS AND MATE RIAL ON RECORD WE FIND THAT WITH THE ADVENT OF SECTION 8 0P(4) W.E.F. A.Y, 2007-08 HAS CLOSED THE DOORS FOR COOPER ATIVE BANKS FOR CLAIMING THE BENEFIT OF DEDUCTION U/S.80P (2)(A)(I) FROM THIS TOTAL INCOME. HOWEVER, THE COOPERATIVE SO CIETY SHOULD NOW BE ENTITLED TO BE ASSESSED AS NORMAL BAN KING COMPANY. THE CLAUSE (4) INSERTED IN SECTION 80P HAS TAKEN AWAY THE BENEFIT OF THE ERSTWHILE DEDUCTION AVAILAB LE TO COOPERATIVE SOCIETY IN CARRYING ON BUSINESS OF BANK ING OR PROVIDING CREDIT FACILITY TO ITS MEMBERS. THE NEW C LAUSE (4) INSERTED BY THE FINANCE ACT, 2006 W.E.F. 01-04-2007 READS AS UNDER : ' THE PROVISION OF THE SECTION WAS NOT IN RELATION TO ANY COOPERATIVE BANK OTHER THAN AGRICULTURAL CREDIT SOCIETY OR PRIMARY COOPERATIVE AGRICULTURAL AND RURAL DEVEL OPMENT BANK'. 5. THE INTENTION OF THE PROVISION MAY BE DERIVED MORE PRECISELY FROM RELEVANT PARA 166 OF THE BUDGET SPEECH WHICH STATED THAT : 'CO-OPERATIVE BANKS, LIK E ANY OTHER BANK, ARE LENDING INSTITUTIONS AND SHOULD PAY TAX ON THEIR PROFITS, PRIMARY AGRICULTURAL CREDIT SOCIETIE S (PACS) AND PRIMARY COOPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK (PCARDB) STAND ON A SPECIAL FOOTIN G AND WILL CONTINUE TO BE EXEMPT UNDER SECTION 80P OF THE INCOME TAX ACT. HOWEVER, I PROPOSE TO EXCLUDE ALL O THER CO-OPERATIVE BANKS FROM THE SCOPE OF THAT SECTION'. 5 ACCORDINGLY, SECTION 80P IS TO BE AMENDED TO GIVE E FFECT TO THE ABOVE PROPOSAL. IT IS ALSO PROPOSED TO AMEND SE CTION 2(24) TO PROVIDE THAT PROFITS AND GAINS OF BUSINESS OF BANKING (INCLUDING PROVIDING CREDIT FACILITIES) CAR RIED ON BY A CO-OPERATIVE SOCIETY WITH ITS MEMBERS SHALL BE IN CLUDED IN THE DEFINITION OF 'INCOME' (WITH EFFECT FROM 1ST APRIL, 2007)'. 6. COOPERATIVE BANK UNLIKE OTHER COMMERCIAL BANKS ARE SUBJECTED TO DUAL CONTROL FROM BOTH RBI A S WELL AS FROM STATE COOPERATIVE DEPARTMENT. THE ACCOUNTIN G TREATMENT FOR A COOPERATIVE BANK IS THEREFORE A RES ULT OF GUIDELINES FROM BOTH THE CONTROLLING AUTHORITIES. O RDINARILY A DEDUCTION IS NOT AVAILABLE TO AN ASSESSEE UNLESS SPECIFICALLY PROVIDED UNDER THE ACT. THIS IS IRRESP ECTIVE OF ACCOUNTING TREATMENT PROVIDED BY THE ASSESSEE IN IT S BOOKS OF ACCOUNTS. BUT AT THE SAME TIME IT WAS WELL SETTLED THAT DEDUCTION EXPRESSLY MENTIONED UNDER THE ACT AR E NOT EXHAUSTIVE AND PROFIT IS TO BE DERIVED ACCORDING TO ORDINARY COMMERCIAL PRINCIPLES. AS PER THE EXTANT R BI GUIDELINES DATED 01-07-2009 THE INVESTMENT PORTFOLI O OF THE BANKS IS REQUIRED TO BE CLASSIFIED UNDER 3 CATE GORIES VIZ., HELD THE MATURITY HTM), HELD FOR TRADING (HFT ) AND AVAILABLE FOR SALE (AFS). THE VALUE OF EACH KIND OF INVESTMENT IS TO BE DONE IN THE FOLLOWING MANNER: SR.NO. CLASSIFICATION VALUATION NORMS OF INVESTMENT . 1. HTM THESE ARE CARRIED AT ACQUISITION COST UNLESS THE COST IS MORE THAN THE FACE VALUE, IN WHI CH CASE THE PREMIUM SHOULD BE AMORTISED OVER THE PERIOD REMAINING TO MATURITY. THE PREMIUM IS REQUIRED TO B E AMORTISED OVER THE PERIOD REMAINING TO MATURITY. TH IS APART, ANY PERMANENT DIMINUTION IN VALUE SHALL FV S HALL GO ON TO REDUCE COST OF THE INVESTMENT. 2. AFS THE INDIVIDUAL SCRIPS IN THE AVAILABLE FOR SALE CATEGORY WILL BE MARKED TO MARKET AT QUARTERLY OR AT MORE FREQUENT INTERVALS. THESE INVESTMENTS ARE CONS IDERED TO FORM STOCK-IN-TRADE OF A BANK AND THEREFORE ARE TO BE VALUED AT COST OR NRV, WHICHEVER IS LESS. FALL IN V ALUE BELOW COST, THEREFORE, IS TO BE PROVIDED IMMEDIATEL Y, HOWEVER ANY NET APPRECIATION IN VALUE IS IGNORED AN D NOT RECOGNIZED AS INCOME ON THE BASIS OF CONSERVATISM. 3. HFT THE INDIVIDUAL SCRIPS IN THE HELD FOR TRADING CATEGORY WILL BE MARKED TO MARKET AT MONTHL Y OR 6 AT MORE FREQUENT INTERVALS AND PROVIDED FOR AS IN T HE CASE OF THOSE IN THE AVAILABLE FOR SALE CATEGORY. 7. IN PARA (VII) OF THE CBDT INSTRUCTION NO.17 OF 2008 DATED 26.11.2008, ON 'ASSESSMENT OF BANK - CHECK LI ST FOR DEDUCTION, STATES AS UNDER: 'AS PER RBI GUIDELINES DATED I6TH OCTOBER, 2000, TH E INVESTMENT PORTFOLIO OF THE BANKS IS REQUIRED TO BE CLASSIFIED UNDER THREE CATEGORIES VIZ. HELD TO MATU RITY (HTM), HELD FOR TRADING (HFT) AND AVAILABLE FOR SAL E (AFS). INVESTMENTS CLASSIFIED UNDER HTM CATEGORY NEED NOT BE MARKED TO MARKET AND ARE CARRIED AT ACQUISITION COS T UNLESS THESE ARE MORE THAN THE FACE VALUE, IN WHICH CASE THE PREMIUM SHOULD BE AMORTISED OVER THE PERIOD REMAINING TO MATURITY. IN THE CASE OF HFT AND AFS SECURITIES FORMING STOCK IN TRADE OF THE BANK, THE DEPRECIATION/ APPRECIATION IS TO BE AGGREGATED SCRI P WISE AND ONLY NET DEPRECIATION, IF ANY, IS REQUIRED TO B E PROVIDED FOR IN THE ACCOUNTS. THE LATEST GUIDELINES OF THE RBI MAY BE REFERRED TO FOR ALLOWING ANY SUCH CLAIMS .' 8. THE ITAT, MUMBAI BENCH, IN THE CASE OF ACIT VS. THE BANK OF RAJASTHAN LTD. (2011) TIOL-35-ITAT-MUMBAI, HAS HELD THAT IN CASE OF BANKS, THE PREMIUM PAID IN EXCESS O F FACE VALUE OF INVESTMENTS CLASSIFIED UNDER HTM CATEGORY WHICH HAS BEEN AMORTISED OVER THE PERIOD TILL MATURITY IS ALLOWABL E AS REVENUE EXPENDITURE SINCE THE CLAIM IS AS PER RBI GUIDELINE S AND CBDT ALSO HAS DIRECTED TO ALLOW SUCH PREMIUM. IT HAS ALS O BEEN HELD IN THE CASE OF CATHOLIC SYRIAN BANK LTD. VS. ACIT T HAT AMORTIZATION ON PURCHASE OF GOVERNMENT SECURITIES W AS MADE AS PER PRUDENTIAL NORMS OF THE RBI AND SAME WAS ALL OWABLE DEDUCTION. IN VIEW OF ABOVE, ASSESSEE WAS JUSTIFIE D IN CONTENDING FOR AMORTIZATION OF PREMIUM PAID IN EXCE SS OF FACE VALUE OF SECURITIES HELD TO MATURITY (HTM) CATEGORY OR PERIOD REMAINING TILL MATURITY WAS FOUND REASONABLE BY THE CIT(A). ACCORDINGLY ADDITION OF RS.17,91,659/- MADE BY THE ASSESSING OFFICER BY DISALLOWING AMOUNT TOWARDS AMORTIZATION OF GOVERNMENT SECURITIES (HMT) WAS DELETED. THIS REAS ONED FACTUAL AND LEGAL FINDING OF THE CIT(A) NEEDS NO IN TERFERENCE FROM OUR SIDE. WE UPHOLD THE SAME. 9. AS A RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 10.1 RESPECTFULLY FOLLOWING THE DECISION OF THE COO RDINATE BENCH OF THE TRIBUNAL AND IN ABSENCE OF ANY CONTRAR Y MATERIAL BROUGHT TO OUR NOTICE AGAINST THE ABOVE CITED DECIS ION WE FIND 7 NO INFIRMITY IN THE ORDER OF THE LD.CIT(A) DELETING THE ADDITION. ACCORDINGLY, THE ORDER OF THE LD.CIT(A) IS UPHELD A ND THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 4.1 NOTHING CONTRARY WAS BROUGHT TO OUR KNOWLEDGE. FACTS BEING SIMILAR, SO FOLLOWING THE SAME REASONING, THE DISAL LOWANCE MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE CIT(A) A RE SET ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE SAME . SIMILAR ISSUE AROSE IN OTHER APPEALS OF ASSESSEE. FACTS BEING SI MILAR IN OTHER ASSESSEES APPEAL, SO FOLLOWING THE SAME REASONING CORRESPONDING ISSUE IN OTHER APPEALS OF ASSESSEE ARE ALSO DECIDED IN FAVOUR OF ASSESSEE. THE ASSESSING OFFICER IS DIRECTED ACCORD INGLY. 5. ISSUE IN GROUND NO.10 PERTAINS TO INTEREST LIABI LITY U/S.234B & 234C OF ACT WHICH IS CONSEQUENTIAL OF OUTCOME OF OT HER ISSUE. THE ASSESSING OFFICER IS DIRECTED ACCORDINGLY. AS A RE SULT, THIS APPEAL OF ASSESSEE IS PARTLY ALLOWED AS INDICATED ABOVE. 6. IN ITA NO.1454/PN/2012, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LD. CIT(A) ERRED IN CONFIRMING THE FINDING OF THE A .O. THAT THE RBI GUIDELINES ARE NOT BINDING ON THE INCOME-TAX DEPARTMENT. THE RELIANCE PLACED ON THE VERDICT OF T HE HON'BLE SUPREME COURT AND HIGH COURT JUDGMENT WAS MISPLACED AS THEY SIMPLY DEALT IN THE ISSUE OF NBFC S CONCERNING RBI GUIDELINES 1998 FOR WRITE OFF OF NPA 'S WHICH DID NOT APPLY TO BANKS. THE BOARD CIRCULAR NO. 665 DID APPLY WHICH HELD RBI INSTRUCTIONS WERE BINDING ON T HE DEPARTMENT. THE HON'BLE KERALA HIGH COURT IN CIT V. LORD KRISHNA BANK LTD. (2011) 55 DTR (KER) 277 HELD SUCH RBI GUIDELINES WERE BINDING. IT BE HELD ACCORDINGLY. 2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE MAD E BY THE A.O. OF RS. 17,89,000/- ON ACCOUNT OF CLAIM OF DEPR ECIATION MADE ON SHIFTING OF SECURITIES. THE CLAIM WAS MADE STRICTLY ADHERING TO THE RBI GUIDELINES IN THE MATTER. THE C LAIM BE ALLOWED. 8 3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE MADE BY THE A.O. OF THE CLAIM OF DEPRE CIATION ON GOVERNMENT SECURITIES SHIFTED FROM AFS TO HTM SECURITIES OF RS.2,46,01,000/- HOLDING THAT RBI GUI DELINES COULD NOT OVERRIDE THE PROVISIONS OF THE INCOME-TAX ACT, 1961. THE CIT(A) WAS UNDER OBLIGATION TO HONOUR THE C.B.D.T. INSTRUCTIONS AND THE JUDGMENT OF THE HON'B LE KERALA HIGH COURT IN LORD KRISHNA BANK CASE IN THIS RESPECT. THE CLAIM BE ALLOWED. 4) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE MADE BY THE A.O. OF THE CLAIM OF PREMI UM AMORTIZATION OF RS. 42,60,000/- HOLDING THAT RBI GU IDELINES COULD NOT OVERRIDE THE PROVISIONS OF THE INCOME TAX ACT, 1961. THE LD. CIT(A) WAS UNDER OBLIGATION TO HONOUR THE C.B.D.T. INSTRUCTIONS AND THE JUDGMENT OF THE HON'B LE KERALA HIGH COURT IN LORD KRISHNA BANK CASE IN THIS RESPECT. THE CLAIM BE ALLOWED. 5) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LD. CIT(A) WAS NOT JUSTIFIED IN REMANDING THE MATTE R TO THE FILE OF THE A.O. TO VERIFY THE ALLOWABILITY OF THE CLAIM OF DEDUCTION OF BROKEN PERIOD OF INTEREST. THE CLAIM W AS BASED ON THE PROVISIONS OF LAW ONLY. THE CONCERNING ALL F ACTS WERE BEFORE THE LD. CIT(A). THE LD. CIT(A) OUGHT TO HAVE DECIDED THE MATTER HIMSELF IN ACCORDANCE WITH LAW AND ERRED IN REMANDING THE MATTER TO A.O. IT BE HELD ACCORDIN GLY. 6) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LD. CIT(A) OUGHT TO HAVE ALLOWED THE BROKEN PERIOD INTEREST OF RS. 40,56,936/- CLAIMED BY THE APPELLANT BEING A LLOWABLE DEDUCTION. IT BE ALLOWED ACCORDINGLY. 7) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ADDI TION OF RS. 30,00,000/- MADE BY THE A.O. ON ACCOUNT OF INVESTME NT FLUCTUATION FUND. THE SAME BEING LEGALLY ALLOWABLE IT BE ALLOWED ACCORDINGLY. 8) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DISA LLOWANCE MADE BY A. O. OF RS. 75,00,000/- BEING CLAIM OF AMORTIZATION COST OF ACQUISITION. THE SAME BE ALLOW ED IN FULL. 9) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DISA LLOWANCE 9 MADE BY THE A. 0. OF AN AMOUNT OF RS. 91,444/- HOLD ING IT AS PRIOR PERIOD EXPENSES. THE CLAIM BE ALLOWED. 10) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DISA LLOWANCE OF RS.26,500/- MADE BY A.O. INVOKING S. 40(A)(I-A) OF THE ACT. SINCE THE EXPENDITURE WAS PAID DURING THE YEAR ITSE LF S. 40(A)(I-A) WAS NOT ATTRACTED. THE DISALLOWANCE BE D ELETED. 11) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LD. CIT(A) ERRED ON CONFIRMING THE DISALLOWANCE OF RS. 4,97,406/- MADE BY THE A.O. HOLDING IT AS CAPITAL EXPENDITURE BEING EXPENDITURE INCURRED ON LEASE HOL D PREMISES. IT IS SETTLED LAW THAT ANY EXPENDITURE M ADE ON LEASE HOLD PREMISES WILL NOT PARTAKE THE CHARACTER OF CAPITAL EXPENDITURE. THE DISALLOWANCE BE DELETED. 12) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LD. CIT(A) ERRED IN REMANDING THE MATTER TO THE FIL E OF THE A.O. AS THE CLAIM INVOLVED IN THE EXPENDITURE INCUR RED ON THE MERGER OF THE OTHER CO. OP. BANK OF RS.2,98,05,08 5/- WAS STRICTLY IN ACCORDANCE WITH THE PROVISIONS OF S. 72AB AND S. 44DB OF THE ACT. THE LD. CIT(A) OUGHT TO HAVE DE CIDED THE ISSUE AS IT WAS PURE QUESTION OF LAW AND ALL THE CO NCERNED FACTS WERE AVAILABLE BEFORE HIM. THE REMAND TO A.O. NOT PROPER AND LEGAL. IT BE HELD ACCORDINGLY. 13) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LEVY OF INTEREST U/S 234A AND 234B IS NOT JUSTIFIED AND IN THE CIRCUMSTANCES IT BE DELETED. 14) THE APPELLANT CRAVES/LEAVE TO ADD, AMEND OR ALTER A NY OF THE ABOVE GROUNDS OF APPEAL. 7. AT THE OUTSET OF HEARING, THE LEARNED AUTHORIZED REPRESENTATIVE HAS NOT PRESSED THE GROUNDS OF APPEAL NOS.1, 5, 6, 7, 8, 9, 10, 11 AND 12, SO THEY ARE DISMISSED AS NOT PRESSED. THE GROUNDS OF APPEAL NOS.2, 3 AND 4 ARE WITH REGARD TO CLAIM OF DEPRECIA TION ON GOVERNMENT SECURITIES SHIFTED FROM AFS TO HTM SECUR ITIES AT THE BEGINNING OF THE YEAR. THIS ISSUE HAS BEEN DISCUSS ED AND DECIDED IN ITA NO.103/PN/2012 VIDE PARA 4 OF THIS ORDER. FACT S BEING SIMILAR, SO FOLLOWING THE SAME REASONING, THE ISSUE HAS BEEN DECIDED IN FAVOUR OF ASSESSEE. 10 8. ISSUE IN GROUND NO.13 PERTAINS TO INTEREST LIABI LITY U/S.234A & 234B OF ACT WHICH IS CONSEQUENTIAL OF OUTCOME OF OT HER ISSUE. THE ASSESSING OFFICER IS DIRECTED ACCORDINGLY. AS A RE SULT, THIS APPEAL OF ASSESSEE IS PARTLY ALLOWED. 9. IN ITA NO.2432/PN/2012, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LD. CIT(A) WAS NOT JUSTIFIED IN HOLDING THAT THE SI NCE RBI NORMS AND THE INCOME-TAX ACT OPERATE IN DIFFERENT F IELDS AND SUCH GUIDELINES HAVE NOTHING TO DO WITH THE COMPUTA TION OF TAXABLE INCOME. THE RBI GUIDELINES CANNOT OVERRIDE THE PERMISSIBLE DEDUCTIONS OR TAXABLE INCOME. THIS FIND ING IS CONTRARY TO SETTLED LAW AND ALSO CBDT INSTRUCTIONS NO. 17/2008 DT. 26-11-2008 WHERE THE CBDT HAS MANDATED THE DEPTT. TO REFER TO LATEST RBI GUIDELINES FOR ALLOWI NG THE CONCERNED CLAIMS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LD. CIT(A) ERRED IN CONFIRMING THE FINDING OF THE A .O. THAT THE RBI GUIDELINES ARE NOT BINDING ON THE INCOME-TAX DEPARTMENT. THE RELIANCE PLACED ON THE VERDICT OF T HE HON'BLE SUPREME COURT AND HIGH COURT JUDGMENT WAS MISPLACED AS THEY SIMPLY DEALT IN THE ISSUE OF NBFCS CONCERNING RBI GUIDELINES 1998 FOR WRITE OFF OF NPA'S WHICH DID NO T APPLY TO BANKS. THE BOARD CIRCULAR NO. 665 DID APPLY WHICH H ELD RBI INSTRUCTIONS WERE BINDING ON THE DEPARTMENT. THE HO N'BLE KERALA HIGH COURT IN CIT V. LORD KRISHNA BANK LTD. (2011) 55 DTR (KER) 277 HELD SUCH RBI GUIDELINES WERE BIND ING. IT BE HELD ACCORDINGLY. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE MADE BY THE A.O. OF THE CLAIM OF DEPRE CIATION ON GOVERNMENT SECURITIES SHIFTED FROM AFS TO AFT TO HTM SECURITIES OF RS.2,46,01,000/- HOLDING THAT RBI GUI DELINES COULD NOT OVERRIDE THE PROVISIONS OF THE INCOME-TAX ACT, 1961. THE CIT(A) WAS UNDER OBLIGATION TO HONOU R THE C.B.D.T. INSTRUCTIONS AND THE JUDGMENT OF THE HON'B LE KERALA HIGH COURT IN LORD KRISHNA BANK CASE IN THIS RESPEC T. THE CLAIM BE ALLOWED. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD.CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE D ISALLOWANCE MADE BY THE A.O. OF THE CLAIM OF DEPRECIATION ON GO VERNMENT 11 SECURITIES SHIFTED FROM HFT TO AFS SECURITIES OF RS.30,12,000/- HOLDING THAT RBI GUIDELINES COULD NO T OVERRIDE THE PROVISIONS OF THE INCOME-TAX ACT, 1961 . THE CIT(A) WAS UNDER OBLIGATION TO HONOUR THE C.B.D.T. INSTRUCTIONS AND THE JUDGMENT OF THE HON'BLE KERALA HIGH COURT IN LORD KRISHNA BANK CASE IN THIS RESPECT. TH E CLAIM BE ALLOWED. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE MADE BY THE A. 0. OF THE CLAIM OF DEPR ECIATION ON INVESTMENT ON VALUATION OF IT AS STOCK IN TRADE ON SHIFTING FROM AFS TO HTM RS.76,54,000/- HOLDING THAT RBI GUIDELINES COULD NOT OVERRIDE THE PROVISIONS OF THE INCOME- TAX ACT, 1961. THE CIT(A) WAS UNDER OBLIGATION TO H ONOUR THE C.B.D.T. INSTRUCTIONS AND THE JUDGMENT OF THE HON'B LE KERALA HIGH COURT IN LORD KRISHNA BANK CASE IN THIS RESPEC T. THE CLAIM BE ALLOWED. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE MADE BY THE A.O. OF THE CLAIM OF PREMI UM AMORTIZATION OF RS. 42,13,000/- HOLDING THAT RBI GU IDELINES COULD NOT OVERRIDE THE PROVISIONS OF THE INCOME-TAX ACT, 1961. THE LD. CIT(A) WAS UNDER OBLIGATION TO HONOUR THE C.B.D.T. INSTRUCTIONS NO. 17/2008 DT. 26-11-2008 AN D THE JUDGMENT OF THE HON'BLE KERALA HIGH COURT IN LORD K RISHNA BANK CASE IN THIS RESPECT. THE CLAIM BE ALLOWED. 7. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LD. CIT(A) WAS NOT JUSTIFIED IN REMANDING THE MATTE R TO THE FILE OF THE A. 0. TO VERIFY THE ALLOWABILITY OF THE CLAIM OF DEDUCTION OF BROKEN PERIOD OF INTEREST. THE CLAIM W AS BASED ON THE PROVISIONS OF LAW ONLY. THE CONCERNING ALL F ACTS WERE BEFORE THE LD. CIT(A). THE LD. CIT(A) OUGHT TO HAVE DECIDED THE MATTER HIMSELF IN ACCORDANCE WITH LAW AND ERRED IN REMANDING THE MATTER TO A. 0. IT BE HELD ACCORDINGL Y. 8. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LD. CIT(A) OUGHT TO HAVE ALLOWED THE BROKEN PERIOD INTEREST OF RS.45,75,154/- CLAIMED BY THE APPELLANT BEING ALLOWABLE DEDUCTION. IT BE ALLOWED ACCORDINGLY. 9. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW AND FOLLOWING THE ITAT MUMBAI BENCH DECISION IN DY. CIT V. BANQUE INDOSUEZ & ORS. (AND VICE VERSA) (2012) 19 U R (TRIB) 463 (MUMBAI) WHERE IT HAS BEEN HELD THAT THE BROKEN PERIOD INTEREST WAS AN ALLOWABLE DEDUCTION. IT BE HELD ACC ORDINGLY. 12 10. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW AND FOLLOWING HON'BLE BOMBAY HIGH COURT JUDGMENT REPORT ED AS DIRECTOR OF INCOME-TAX (INTERNATIONAL TAXATION) V. CREDIT SUISIE FIRST BOSTEN (CYPRUS) LTD. (2012) 76 DTR (BO M) 215 IT BE HELD THAT RIGHT TO RECEIVE INTEREST ON GOVT. SEC URITIES VESTS IN THE HOLDER ONLY ON THE DUE DATE MENTIONED IN THE SECURITIES AND CONSEQUENTLY INTEREST ON SECURITIES ACCRUES ONLY ON THE DUE DATE AND NOT ON ANY OTHER DATE. THE CONTENTION THAT INTEREST ACCRUES FOR BROKEN PERIOD BETWEEN TWO CONSECUTIVE DATES STIPULATED IN THE AGREEMENT F OR PAYMENT OF INTEREST HAS NO BASIS IN LAW. THEREFORE, ADDITION SUSTAINED ON ACCOUNT OF 'BROKEN PERIOD INTEREST' IS ILLEGAL AND IT BE QUASHED. 11. N THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LA W THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DISA LLOWANCE MADE BY A.O. OF RS. 75,00,000/- BEING CLAIM OF AMOR TIZATION COST OF ACQUISITION. THE SAME BE ALLOWED IN FULL. 12. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LD. CIT(A) WAS NOT JUSTIFIED IN SUSTAINING THE CLAI M OF DISALLOWANCE OF RS.18,44,382/- BEING AMOUNT WRITTEN OFF ON ACCOUNT OF DEAD STOCK. IT BE ALLOWED TO THE ASSESSE E. 13. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LD. CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE DISAL LOWANCE MADE BY A.O. OF RS.5,98,741/- ON ACCOUNT OF GROSSIN G UP OF INSURANCE COMMISSION BY TDS AMOUNT AS NET COMMISSIO N WAS ONLY TAXABLE IN THE YEAR UNDER APPEAL. THE DISA LLOWANCE BE DELETED. 14. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LD. CIT(A) WAS MADE NOT JUSTIFIED IN UPHOLDING THE DISALLOWANCE MADE BY A.O. OF RS.5,98,741/- ON ACCOU NT OF GROSSING UP OF INSURANCE COMMISSION BY TDS AMOUNT A S NET COMMISSION WAS ONLY TAXABLE IN THE YEAR UNDER APPEA L. THE DISALLOWANCE BE DELETED. 15. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LD. CIT(A) WAS MADE NOT JUSTIFIED IN SUFFERING THE DISALLOWANCE MADE BY A.O. OF RS.3,00,000/- ON ACCOU NT OF DEPRECIATION ON ACCOUNT OF VALUATION OF NON-SLR CAT EGORY OF SECURITIES. IT WAS NOT SIMPLY A PROVISIONS. IT BE A LLOWED. 16. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LD. CIT(A) WAS NOT JUSTIFIED IN SUSTAINING THE DISA LLOWANCE MADE BY THE A.O. IN RESPECT OF EXPENDITURE OF BUILD ING/ STRONG ROOM MAINTENANCE ON THE PREMISE ACQUIRED ON LEASEHOLD BASIS OF RS.3,98,983/-. THE EXPEN DITURE IS 13 ALLOWABLE ON ACCORDANCE WITH THE SETTLED LAW IN THE MATTER BY JUDICIAL VERDICTS. IT BE ALLOWED ACCORDIN GLY. 17. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LD. CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE DISAL LOWANCE MADE BY THE A.O. OF RS.52,178/- HOLDING IT AS PRIOR PERIOD EXPENSE. THE CLAIM WAS RIGHTLY MADE AND IT BE ALLOW ED. 18. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LEVY OF INTEREST U/S 234B AND 234C IS NOT JUSTIFIED AND IN THE CIRCUMSTANCES IT BE DELETED. 19. THE APPELLANT CRAVES/LEAVE TO ADD, AMEND OR ALTER A NY OF THE ABOVE GROUNDS OF APPEAL. 10. AT THE OUTSET OF HEARING, THE LEARNED AUTHORIZE D REPRESENTATIVE DID NOT PRESSED THE GROUNDS OF APPEAL NOS.1, 2, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16 AND 17, SO THEY ARE DISMISSED AS NOT PRESSED. THE GROUNDS OF APPEAL NOS.3, 4, 5 AND 6 ARE WITH REGARD TO CLAIM OF DEPRECIATION ON GOVERNMENT SECURITIES SHIFTED FROM AFS TO HTM SECURITIES AT THE BEGINNING OF THE YEAR. THIS ISSU E HAS BEEN DISCUSSED AND DECIDED IN ITA NO.103/PN/2012 VIDE PA RA 4 OF THIS ORDER. FACTS BEING SIMILAR, SO FOLLOWING THE SAME REASONING, THE ISSUE HAS BEEN DECIDED IN FAVOUR OF ASSESSEE. 11. ISSUE IN GROUND NO.18 PERTAINS TO INTEREST LIAB ILITY U/S.234B & 234C OF ACT WHICH IS CONSEQUENTIAL OF OUTCOME OF OT HER ISSUE. THE ASSESSING OFFICER IS DIRECTED ACCORDINGLY. 12. IN ITA NO.2194/PN/2012, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DISA LLOWANCE OF RS.1,11,21,000/- ON ACCOUNT OF CLAIM OF AMORTIZATIO N OF PREMIUM PAID FOR ACQUISITION OF HTM SECURITIES MADE BY THE A.O, WHICH IS ON MISCONCEPTION OF LAW HOLDING THAT THERE IS NO PROVISION IN THE INCOME-TAX ACT, TO ALLOW AMORTIZAT ION OF PREMIUM AS DEDUCTION EITHER IN THE YEAR OF ACQUISIT ION OR OVER THE PERIOD OF MATURITY. THE LD. CIT(A) DID NOT PASS THE ORDER CONFIRMING THE DISALLOWANCE A 'SPEAKING ORDER ' PROVIDING CORRECT AND SOUND REASONS. THE DISALLOWANCE BE DELE TED. 14 2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE CBDT INSTRUCTIONS NO. 17/2008 DT. 26-11-200 8 WERE BINDING ON THE DEPARTMENTAL AUTHORITIES. THE IN STRUCTION NO. (VII) MANDATES TO THE DEPARTMENTAL AUTHORITIES TH AT 'INVESTMENTS CLASSIFIED UNDER HTM CATEGORY NEED NOT BE MARKED TO MARKET AND ARE CARRIED AT ACQUISITION COS T UNLESS THESE ARE MORE THAN THE FACE VALUE IN WHICH THE PRE MIUM SHOULD BE AMORTIZED OVER THE PERIOD REMAINING TO MA TURITY. THE LATEST GUIDELINES OF RBI MAY BE REFERRED TO FOR ALL OWING SUCH CLAIMS.' THE CBDT INSTRUCTIONS ARE BINDING ON DEPARTMENTAL AUTHORITIES. THE DISALLOWANCE MADE B Y A. 0. AND CONFIRMED BY LD. CIT(A) IS CONTRARY TO CBDT INSTRUC TIONS AND PROVISIONS OF LAW. THE DISALLOWANCE CONFIRMED BE QU ASHED. 3) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DISA LLOWANCE MADE BY THE A.O. OF RS. 2,46,60,303/- SO CLAIMED BY THE APPELLANT U/S 36(L)(VII-A) OF THE ACT. THE DISALLOW ANCE IS UNDER MISCONCEPTION OF LAW. THE LD. CIT(A) OUGHT TO HAVE CONSIDERED THE HON'BLE SUPREME COURT JUDGMENT IN THE CASE OF C ATHOLIC SYRIAN BANK LTD. V. CIT(2012) 343 ITR 270 (SC) THE COPY OF WHICH WAS ALSO SUBMITTED BEFORE HIM. THE PRINCIPLE ENUNCIATED IS EVEN THE DEDUCTION U/S 36(L)(VII-A) WAS TO BE AL LOWED SIMPLY ON PROVISION MADE ALSO. THE DISALLOWANCE WAS NOT PR OPER IT BE DELETED. 4) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DISA LLOWANCE MADE BY THE A.O. OF IRRECOVERABLE INTEREST HAVING D ECLARED AS NPA'S BASED ON RESERVE BANK GUIDELINES AND AS PER S ETTLED JUDICIAL VIEWS THAT SUCH NPA'S ARE REQUIRED TO BE A SSESSED ON CASH BASIS ONLY. THE DISALLOWANCE MADE BY A.O. AND CONFIRMED BY LD. CIT(A) IS AGAINST LAW AND JUDICIAL PRECEDENT S AND THEREFORE, WITHOUT JURISDICTION. THE DISALLOWANCE B E QUASHED. 5) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DISA LLOWANCE OF RS.5,00,000/-MADE BY THE A.O. STATING THAT CONTINGE NT PROVISION WAS NOT ALLOWABLE. THE CIT(A) FAILED TO A PPRECIATE THE CLAIM OF DEDUCTION MADE. IT BE ALLOWED ACCORDINGLY. 6) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE JURISDICTION TO COMPLETE THE ASSESSMENT U/S 143(3) WAS ASSIGNED BY JCIT, SATARA, WHICH IS NOT ACCORDI NG TO LAW. THE PROPER AUTHORITY WAS THE COMMISSIONER OF I NCOME-TAX, PUNE. THE TRO HAS ASSUMED THE JURISDICTION WHI CH IS INVALID. THE ASSESSMENT COMPLETED WITHOUT JUR ISDICTION BE QUASHED. 15 7) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DISA LLOWANCE OF RS.1,96,69,614/- HOLDING THAT THE PROVISION MADE OF RS. 2,41,69,614/- WAS IN EXCESS BY RS. 45,00,000/- THE PROVISION OF RS. 2,41,69,614/- HAVING CORRECTLY MADE U/S 36(L )(VII-A) WAS ALLOWABLE IN VIEW OF JUDICIAL PRECEDENT /PRONOUNCED BY HON'BLE SUPREME COURT IN CATHOLIC SYRIAN BANK CASE / (SUPRA ). THE DISALLOWANCE BEING AGAINST LAW BE DELETED. 8) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LEVY OF INTEREST U/S 234A, 234B IS NOT JUSTIFIED AN D IN THE CIRCUMSTANCES IT BE DELETED. 9) THE APPELLANT CRAVES/LEAVE TO ADD, AMEND OR ALTER A NY OF THE ABOVE GROUNDS OF APPEAL. 13. AT THE OUTSET OF HEARING, THE LEARNED AUTHORIZE D REPRESENTATIVE DID NOT PRESSED THE GROUNDS OF APPEAL NOS.5, 6 AND 7, SO THEY ARE DISMISSED AS NOT PRESSED. THE OTHER GROUNDS OF APP EAL WITH REGARD TO CLAIM OF PREMIUM ON ACQUISITION OF GOVERNMENT SE CURITIES. THIS ISSUE HAS BEEN DISCUSSED AND DECIDED IN ITA NO.103/ PN/2012 VIDE PARA 4 OF THIS ORDER. FACTS BEING SIMILAR, SO FOLL OWING THE SAME REASONING, THE ISSUE HAS BEEN DECIDED IN FAVOUR OF ASSESSEE. 14. ISSUE IN GROUND NO.8 PERTAINS TO INTEREST LIAB ILITY U/S.234A & 234B OF ACT WHICH IS CONSEQUENTIAL OF OUTCOME OF OT HER ISSUE. THE ASSESSING OFFICER IS DIRECTED ACCORDINGLY. 15. IN ITA NO.1515/PN/2012, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LD. CIT(A) ERRED IN CONFIRMING THE FINDING OF THE A .O. THAT THE RBI GUIDELINES ARE NOT BINDING ON THE INCOME-TAX DE PARTMENT. THE RELIANCE PLACED ON THE VERDICT OF THE HON'BLE S UPREME COURT AND HIGH COURT JUDGMENT WAS MISPLACED AS THEY SIMPLY DEALT IN THE ISSUE OF NBFCS CONCERNING RBI GUIDELIN ES 1998 FOR WRITE OFF OF IMPA'S WHICH DID NOT APPLY TO BANKS. T HE BOARD CIRCULAR NO. 665 DID APPLY WHICH HELD RBI INSTRUCTI ONS WERE BINDING ON THE DEPARTMENT. THE HON'BLE KERALA HIGH COURT IN CIT V. LORD KRISHNA BANK LTD. (2011) 55 DTR (KER ) 277 HELD SUCH RBI GUIDELINES WERE BINDING. IT BE HELD ACCOR DINGLY. 16 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE MADE BY THE A. O. OF THE CLAIM OF PREMIUM AMORTIZAT ION OF RS. 1,11/21,0007- HOLDING THAT RBI GUIDELINES COULD NOT OVERRIDE THE PROVISIONS OF THE INCOME- TAX ACT, 1961. THE LD . CIT(A) WAS UNDER OBLIGATION TO HONOUR THE C.B.D.T. INSTRUCTION S AND THE JUDGMENT OF THE HON'BLE KERALA HIGH COURT IN LORD K RISHNA BANK CASE IN THIS RESPECT. THE CLAIM BE ALLOWED. 3) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LD. CIT(A) ERRED IN RELYING ON THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF SOUTHEN TECHNOLO GIES LTD., 320 ITR 577 AS IT WAS DISTINGUISHABLE ON FACTS AND LAW SINCE IT PERTAINED TO NBFC'S AS DEFINED IN CH. III- B OF THE RESERVE BANK OF INDIA ACT, 1934. THE PROVISIONS OF CH. III-B (SUPRA) ONLY APPLIED TO NBFC'S. THE RELIANCE OF THE LD. OT(A) ON SUPREME COURT JUDGMENT FOR CONFIRMING THE DISALL OWANCE OF RS.1,11,21,000/- WAS BAD IN LAW AND WITHOUT JURISDI CTION. 4) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LD. CIT(A) ERRED TO UNDERSTAND THE PRINCIPLES OF FI SCAL POLICY THAT ARE FORMULATED BY RBI TO CONTROL THE FINANCES OF THE NATION. THE POLICY OF CLASSIFICATION OF HTM SECURITIES AND TRANSFER WAS AT A TIME WHEN BANKS ARE ON THE BRINK OF EXHAUSTING THE HELD TO MATURITY CAP WHICH PROTECT THEM FROM MARK TO MAR KET LOSSES AND SUPPORTS THE GOVERNMENT'S HIGH BORROWING PROGRA MME. IN A WAY ON EXPECTATION OF RISING YIELDS BANKS HAD SHIFT ED BONDS OF HTM CATEGORY TO SAVE FROM TRADING LOSSES AND THEREF ORE ACTIONS ARE IN THE INTERESTS OF THE BANKING BUSINESS. THE C ONFIRMATION OF DISALLOWANCE OF RS. 1,11,21,000/- WAS NOT PROPER . 5) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DISA LLOWANCE OF RS. 2,08,09,305/- MADE BY THE A. O. REGARDING TO PR OVISIONS OF S. 36(L)(VII-A) OF THE ACT. THE LD. CIT(A) FAILED T O APPRECIATE THAT THE DISALLOWANCE MADE BY A. 0. WAS NOT IN CONFORMIT Y OF THE PROVISIONS OF LAW WHICH PROVISIONS WERE EXPLAINED B Y HON'BLE SUPREME COURT IN THE CASE OF CATHOLIC SYRIAN BANK L TD. V. CIT(2012) 343 ITR 270 (SC). IN VIEW OF THIS THE CON FIRMED DISALLOWANCE BY LD. CIT(A) OF RS. 2,08,09,305/- BE QUASHED. 6) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LEVY OF INTEREST U/S 234B AND 234C IS NOT JUSTIFIED AND IN THE CIRCUMSTANCES IT BE DELETED. 7) THE APPELLANT CRAVES/LEAVE TO ADD, AMEND OR ALTER A NY OF THE ABOVE GROUNDS OF APPEAL. 17 16. AT THE OUTSET OF HEARING, THE LEARNED AUTHORIZ ED REPRESENTATIVE DID NOT PRESSED THE GROUNDS OF APPEAL NOS.5, 6 AND 7, SO THEY ARE DISMISSED AS NOT PRESSED. THE OTHER GROUNDS OF APP EAL WITH REGARD TO CLAIM OF PREMIUM ON ACQUISITION OF GOVERNMENT SE CURITIES. THIS ISSUE HAS BEEN DISCUSSED AND DECIDED IN ITA NO.103/ PN/2012 VIDE PARA 4 OF THIS ORDER. FACTS BEING SIMILAR, SO FOLL OWING THE SAME REASONING, THE ISSUE HAS BEEN DECIDED IN FAVOUR OF ASSESSEE. ISSUE IN GROUND NO.6 PERTAINS TO INTEREST LIABILITY U/S.23B & 234C OF ACT WHICH IS CONSEQUENTIAL OF OUTCOME OF OTHER ISSUE. THE ASSESSING OFFICER IS DIRECTED ACCORDINGLY. 17. IN THE RESULT, ALL THE ASSESSEES APPEALS ARE P ARTLY ALLOWED AS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT ON THIS THE 31 ST DAY OF JANUARY, 2014. SD/- SD/- (R.K. PANDA) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 31 ST JANUARY, 2014 GCVSR COPY TO:- 1. ASSESSEE 2. DEPARTMENT 3. THE CIT(A)-III, PUNE 4. THE CIT-III, PUNE 5. THE DR, B BENCH, I.T.A.T., PUNE. 6. GUARD FILE BY ORDER //TRUE COPY// SENIOR PRIVATE SECRETARY, I.T.A.T., PUNE