Assistant Commissioner of Income-tax, V. Sharad Nagari Sahakari Bank Ltd., Solapur

ITA 1240/PUN/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5307 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 1 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 07-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Depreciation; Question of law; Revenue expenditure
• Section: 260A; 145; 2

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE , . , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI D. KARUNAKAR A RAO, AM . / ITA NO.1240/PUN/2016 / ASSESSMENT YEAR : 2012-13 ACIT, CIRCLE-2, SOLAPUR . /APPELLANT VS. SHARAD NAGARI SAHAKARI BANK LTD., 218/219, GOLD FINCH PETH, SOLAPUR PAN : AAAAS9900L . / RESPONDENT / APPELLANT BY : SHRI ACHAL SHARMA / RESPONDENT BY : SHRI PRAMOD SHINGTE / DATE OF HEARING : 10.07.2018 / DATE OF PRONOUNCEMENT: 20.07.2018 / ORDER PER D. KARUNAKARA RAO, AM : THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER OF C IT(A)-7, PUNE, DATED 23-03-2016 FOR THE ASSESSMENT YEAR 2012-13. 2. GROUNDS RAISED BY THE REVENUE READ AS UNDER : 1. ON THE FACTS AND IN THE CIRCUM S TANCES OF THE CASE AND IN LAW, THE HON ' BLE CIT(A) PUNE HAS ERRED IN DELETING THE ADDITION OF RS.54 , 67 , 569 / - MADE BY THE A.O ., ON ACCOUNT OF A CCRUED INTEREST ON NON PERFORMING ASSETS U/S. 43D OF THE I.T ACT. 1961. 2. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THE FACT THAT THE ASSESSEE IS A CO-OPERATIVE BANK AND NOT A SCHEDULED BANK. 3. THE LEARNED CIT(A) , OUGHT TO HAVE HELD THAT THE PROVISIONS OF SECTION 43D ARE ONLY APPLICABLE TO FINANCIAL INSTITUTIONS A ND A SCHEDULED BANK. THUS, THE ASSESSEE BEING A N O N- S CHEDULED BANK COULD NOT TAKE THE BENEFIT OF SECTION 43D OF THE ACT. THEREFORE , THE LEARNED CIT(A) ON THIS COUNT ITSELF OUGHT TO HAVE DISMISSED THE APPEAL OF THE ASSESSEE , CONFIRMING THE ADDITION MADE BY THE A.O. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT(A), ERRED IN APPRECIATING THE PROVISIONS OF SECTION 145 OF THE ACT IN ITS CORRECT PERSPECTIVE. THE LEARNED CIT(A) OUGHT TO HAVE HELD THAT THE PROVISIONS OF ITA NO.1240/PUN/2016 SHARAD NAGARI SAH. BANK LTD., 2 SECTION 145 PERMITS THE ASSESSEE TO EITHER FOLLOW E ITHER MERCANTILE SYSTEM OF ACCOUNTING OR CASH SYSTEM OF ACCOUNTING. THE ASSESS EE IS NOT PERMITTED TO USE THE MIXED OR HYBRID SYSTEM OF ACCOUNTING. THUS , ON THIS COUNT ITSELF THE LEARNED CIT(A) SHOULD HAVE UPHELD THE ADDITION MADE BY THE AO ON ACCOUNT OF INTEREST ON NP A. 5. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THA T THE HON'BLE SUPREME COURT IN SOUTHERN TECHNOLOGIES LIMITED VS. J CIT 320 ITR 577 (SC) HAD HELD THAT THE RBI DIRECTIONS UNDER RBI ACT ARE PRUDENTIAL NORMS BUT HAVE NOTHING TO DO WITH COMPUTATION OF TAXABILITY OF PRO VISIONS OF NP A UNDER THE I.T.ACT, 1961. EVEN THOUGH THE RBI DIRECTIONS DEVIA TE FROM THE ACCOUNTING PRACTICE AS PROVIDED BY THE COMPANIES ACT , THEY DO NOT OVERRIDE THE PROVISIONS OF I.T. ACT, 1961. RBI DIRECTIONS AND IN COME TAX ACT, 1961 OPERATE IN DIFFERENT FIELDS. THEREFORE , THE ORDER OF THE AO DESERVES TO BE UPHELD. 6. THE LEARNED CIT(A) OUGHT TO HAVE HELD THAT THE A SSESSEE DOES NOT SATISFY THE TWO CONDITIONS IN THE CBDT ' S CIRCULAR NO . F-201/81/84 ITA-II DATED 09/10/1984 AND HENCE COULD NOT AVAIL THE BENE FITS OF THE CIRCULAR. THE APPELLANT HEREIN REPRODUCES THE TWO CONDITIONS OF T HE CIRCULAR. (A) THE ASSESSEE SHOULD BE BANKING COMPANY. (B) SUCH INTEREST SHOULD HAVE REMAINED UNCOVERED FO R CONSECUTIVELY FOR THREE PREVIOUS Y EARS. 7. THE LEARNED CIT(A) ERRED IN PLACING RELIANCE ON THE DECISION OF ITAT IN THE CASE OF IN THE CASE OF OMERGA JANATA SAHAKARI B ANK LTD. IN ITA NO.350/PN/2013 DATED 31.10.2013.WHILE DELIVERING TH E SAID JUDGEMENT THE RELIANCE HAS BEEN PLACED ON THE JUDGEMENT IN THE CA SE OF DURGA CO.OPERATIVE BANK LTD. ,HELD THAT PROVISIONS OF SECTION 43D WERE APPLICABLE IN THE CASE OF ASSESSEE CO-OPERATIVE BANK UNLESS ACCRUED INTEREST WAS ROUTED THROUGH P&L ACCOUNT. HOWEVER , THE ABOVE DECISION HAS NOT BEEN ACCEPTED BY THE CIT , AURANGABAD AND APPEAL U/S. 260A HAS BEEN FILED WITH THE HON ' BLE HIGH COURT OF BOMBAY , BENCH AT AURANGABAD. FURTHER , APPEALS U/S. 260A ON THE SIMILAR ISSUE HAVE ALSO BEEN FILED BY THE HON ' BLE PR.CIT-6 PUNE IN THE CASE OF SHANKARRAO MOHITE PATIL SAHAKARI BANK LTD., AKLUJ D IST.:-SOLAPUR FOR A.Y 2009-10 AND A.Y 2010-11 WHEREIN SIMILAR ISSUE OF AC CRUED INTEREST ON NPA HAS BEEN INVOLVED. 8. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE HON'BLE CIT(A)-7, PUNE ERRED IN DELETING THE ADDITI ON OF RS. 7 , 031/-, MADE BY THE AO ON ACCOUNT OF AMORTIZATION OF PREMIUM ON INVE STMENTS. 9. THE HON'BLE CIT(A)-7, PUNE OUGHT TO HAVE APPRECI ATED THE FACT THAT THE SECURITIES HELD UNDER THE CATEGORY 'HELD TO MATURIT Y' (HTM) ARE IN THE NATURE OF CAPITAL ASSETS AND FOR THE PURPOSE OF INCOME TAX , THE SECURITIES HELD UNDER HTM HAS TO BE VALUED AT COST ONLY AND NO PART THERE OF CAN BE CLAIMED AS REVENUE EXPENDITURE IN COMPUTING THE TOTAL INCOME. 10. THE VERY FACT THAT THE PREMIUM PAID ON GOVT. SE CURITIES WAS AMORTIZED IN THE BOOKS OF ACCOUNT CLEARLY SHOWS THAT THE SECU RITIES WERE HELD AS HTM SECURITIES BY THE ASSESSEE BANK ON CAPITAL ACCOUNT. THEREFORE, THE SAID SECURITIES ARE PERMANENT SECURITIES IN THE NATURE O F CAPITAL ASSETS AND THE SAME CANNOT BE SEGREGATED FROM THE COST AND CLAIMED AS DEDUCTION. 11. THE HON'BLE CIT(A)-7, PUNE OUGHT TO HAVE APPREC IATED THAT THE CBDT INSTRUCTION NO. 17/2008 WAS ISSUED PRIOR TO THE DEC ISION OF THE APEX COURT IN THE CASE OF SOUTHERN TECHNOLOGIES LTD WHEREIN IT IS HELD THAT THE RBI GUIDELINES OR PRUDENTIAL NORMS ISSUED BY RBI ARE NO T INTENDED TO REGULATE INCOME TAX LAWS. THERE IS NO PROVISION UNDER THE I. T ACT TO ALLOW AMORTIZATION OF PREMIUM AS DEDUCTION EITHER IN THE YEAR OF ACQUI SITION OF HTM SECURITIES FOR COVER THE PERIOD OF MATURITY ON DEFERRED BASIS. THU S ON THIS COUNT ITSELF, THE TRIBUNAL SHOULD HAVE DISMISSED THE APPEAL OF THE AS SESSEE. ITA NO.1240/PUN/2016 SHARAD NAGARI SAH. BANK LTD., 3 12. THE ORDER OF THE HON'BLE CIT(A)-7 PUNE BE VACAT ED AND THAT OF AO BE RESTORED. 13. THE APPELLANT CRAVES TO ADD, ALTER, AMEND, SUBS TITUTE OR DELETE ANY OF THE GROUNDS OF APPEAL URGED HEREIN ABOVE AS AND WHE N FOUND NECESSARY. FROM THE ABOVE, IT IS EVIDENT THAT GROUND NOS. 1 TO 7 RELATES TO THE RECOGNITION OF INTEREST RELATABLE TO STICKY LOANS/BAD OR DO UBTFUL DEBTS OF THE ASSESSEE U/S.43D OF THE I.T. ACT. FURTHER, GROUND NOS . 8 TO 11 RELATES TO ADDITION ON ACCOUNT OF AMORTIZATION OF PREMIUM ON GOVERNME NT SECURITIES HELD UNDER THE CATEGORY HELD TO MATURITY. 3. BRIEFLY STATED RELEVANT FACTS ARE THAT ASSESSEE IS A COOPERATIVE SOCIETY (AN AOP) AND IS ENGAGED IN THE BUSINESS OF BANKING. ASSESS EE FILED THE RETURN OF INCOME ON 25-09-2012 DECLARING TOTAL INCOME OF RS.59,80,338/-. DURING THE ASSESSMENT PROCEEDINGS, AO NOTICED FROM THE B ALANCE SHEET, THAT THE ASSESSEE SHOWN NPA INTEREST INCOME OF RS.54,67,5 69/- RECEIVABLE FROM VARIOUS PARTIES. HOWEVER, ASSESSEE DID NOT OFFER THE SAID SUM FOR TAXATION. EVENTUALLY, THE AO MADE ADDITION OF RS.54,67,569/- TO THE TOTAL INCOME TREATING THE SAID SUM AS INCOME OF THE ASSESSEE. 4. IT WAS FURTHER NOTICED THAT ASSESSEE DEBITED AN AM OUNT OF RS.7,031/- TOWARDS AMORTIZATION OF PREMIUM ON SECURITIES HELD TO MATURITY. AS SESSEE SUBMITTED THAT AS ON 31-03-2012, ASSESSEE BANK HOLDS R S.2,96,64,500/- WORTH SECURITIES IN GOVT. OF INDIA SECURITIES. WHEN THESE SE CURITIES WERE PURCHASED, THE ENTIRE PREMIUM PAID ON PURCHASE OF SECUR ITIES WAS NOT BOOKED TO EXPENDITURE ACCOUNT. THEREFORE, THE SAME IS R EQUIRED TO BE AMORTIZED OVER THE PERIOD UNTIL THEIR MATURITY. ASSESSEE CLAIMED RS.7,031/- AS REVENUE EXPENDITURE. HOWEVER, THE AO OPINE D THAT AFS AND HFT ARE IN THE NATURE OF STOCK IN TRADE WHILE THE HTM SECURITIES ARE IN THE NATURE OF CAPITAL ASSETS. FOR THE PURPOSE OF INC OME-TAX, THE VALUATION IN RESPECT OF AFS AND HFT SECURITIES ARE TO BE VALUED AT COST OR ITA NO.1240/PUN/2016 SHARAD NAGARI SAH. BANK LTD., 4 MARKET, WHICHEVER IS LESS WHEREAS HTM SECURITIES HAVE T O BE VALUED AT COST ONLY AND NOT AT COST OF MARKET WHICHEVER IS LESS . AT THE END OF THE ASSESSMENT PROCEEDINGS U/S.143(3) OF THE ACT, THE AO DISALL OWED THE SUM OF RS.7,031/-. EVENTUALLY, WITH THE SAID ADDITIONS, THE AO CO MPUTED THE ASSESSED INCOME AT RS.1,14,54,940/- AGAINST THE RETURNED INCOME OF RS.59,80,338/-. 5. IN THE FIRST APPELLATE PROCEEDINGS, WITH REGARD TO ALLOW ING OF INTEREST OF NPA, THE CIT(A) RELYING ON THE DECISIONS OF TRIBUNAL IN TH E CASE OF OSMANABAD JANTA SAHAKARI BANK LTD. IN ITA NO.795/PN/2011 , DATED 31- 08-2012, OMERGA JANTA SAHAKARI BANK LTD. IN ITA NO.350/PN /2013 & CO NO.61/PN/2013, DATED 31-10-2013, JUDGMENT OF HONBLE BOM BAY HIGH COURT IN THE CASE OF CIT, AURANGABAD VS. M/S. DEOGIRI NAGA RI SAHAKARI BANK LTD. 128 DTR 0209, DATED 22-01-2015 AND OTHERS A ND DELETED THE ADDITION OF RS.54,67,569/-. 6. REGARDING THE OTHER ISSUE OF AMORTISATION OF PREMIUM ON SECURITIES AMOUNTING TO RS.7,031/- ALSO, THE CIT(A) RELYING ON THE DE CISION OF PUNE BENCH OF THE TRIBUNAL IN THE CASE OF LOKMANGAL CO-OPERATIV E BANK LTD. ITA NO.1540/PN/2014 FOR A.Y. 2009-10 & ITA NO.1541/PN/20 14 FOR A.Y. 2010-11, DATED 28-11-2014 ALLOWED THE ISSUE IN FAVOUR OF T HE ASSESSEE. CONTENTS OF PARA NO.7.4 TO 7.5 OF THE ORDER OF CIT(A) ARE R ELEVANT ON THIS ISSUE. 7. AGGRIEVED WITH THE ORDER OF CIT(A), THE REVENUE FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL CHALLENGING THE ABOVE TWO ISSUE S WITH THE GROUNDS EXTRACTED ABOVE. 8. LD. DR FOR THE REVENUE RELIED ON THE ARGUMENTATIVE GRO UNDS RAISED BY THE REVENUE IN THE APPEAL AND RELIED ON THE ORDER OF AO. ITA NO.1240/PUN/2016 SHARAD NAGARI SAH. BANK LTD., 5 9. BEFORE US, ON THE FIRST ISSUE OF RECOGNITION OF INTEREST A CCRUED ON NPA, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE INTEREST ON NPAS IS NOT TO BE TAXED AS INCOME OF THE ASSESSEE IN VIEW OF THE PRUDE NTIAL GUIDELINE ISSUED BY THE RBI ON ONE SIDE AND SUPREME COURT JUDGMENTS ON THE OTHER. IN THIS REGARD, LD. COUNSEL FOR THE ASSESSEE FILED THE JUDG MENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. M/S. DEOGIRI NAGAR I SAHAKARI BANK LTD., AURANGABAD IN INCOME TAX APPEAL NO.53/2014 AND OTHERS DATED 22-01-2015 AND SUBMITTED THAT THE ORDER OF CIT(A) IS FAIR AND REASONABLE AND IT SHOULD NOT BE DISTURBED. REGARDING THE SECOND ISSUE OF AMORTIZATION OF PREMIUM ON GOVT. SECURITIES UNDER THE CATEGORY HELD TO MATURITY, LD. COU NSEL FOR THE ASSESSEE RELIED ON THE ORDER OF CIT(A). FURTHER, HE SUBMI TTED THAT THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. M/S. GAJANAN NAGARI SAHAKARI BANK LTD. IN INCOME TAX APPEAL NO.39 OF 20 14 HAD AN OCCASION TO DECIDE THE IDENTICAL ISSUE IN FAVOUR OF THE ASSE SSEE AND AGAINST THE REVENUE. LD. COUNSEL FILED THE COPIES OF THE SAID JUDGMENTS. 10. WE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVE NUE AND THE DECISIONS RELIED ON BY THE LD. COUNSEL FOR THE ASSESSE E. REGARDING THE ISSUE OF ALLOWING OF INTEREST ACCRUED ON NPA AMOUNTING TO RS.54,67,569/-, WE PERUSED THE CONTENTS OF PARA NO. 6.1 TO 6.4 IN GENERA L AND PARA NO. 6.4 OF THE ORDER OF CIT(A) IN PARTICULAR AND FIND THE ISSUE NOW STANDS COVERED IN FAVOUR OF THE ASSESSEE. FOR THE SAKE OF COMPLETENESS, WE FIND IT RELEVANT TO EXTRACT THE SAID OPERATIONAL PARA AND THE SAME READS AS UNDER : 6.4 RESPECTFULLY FOLLOWING THE DECISION OF THE ITAT PUNE IN THE CASE OF OMERGA JANTA SAHAKARI BANK LTD. (SUPRA) AND JURISDI CTIONAL BOMBAY HIGH COURT IN THE CASE OF DEOGIRI SAHAKARI BANK LTD . (SUPRA) THE AMOUNT OF RS.54,67,569/- DIRECTLY TAKEN INTO THE BA LANCE SHEET IS NOT TO BE TAXED IN THE YEAR UNDER CONSIDERATION. THEREFORE, THE GROUND NO. 1,2, 3, AND 5 OF THE APPEAL IS ALLOWED. ITA NO.1240/PUN/2016 SHARAD NAGARI SAH. BANK LTD., 6 10.1 WE FIND THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. M/S. DEOGIRI NAGARI SAHAKARI BANK LTD. (SUPRA) DECIDED THE ISSUE UNDER CONSIDERATION IN FAVOUR OF THE ASSESSEE AND AGAINST THE R EVENUE BY HOLDING AS UNDER : 9. THE INCOME TAX APPELLATE TRIBUNAL HAS REFERRED THE CASE OF M/S. VASISTH CHAY VYAPAR LIMITED 330 ITR 440 (DELHI). I N THIS CASE, THE REVENUE RELIED UPON THE DECISION OF THE HONBLE SUPREME COU RT IN THE CASE OF SOUTHERN TECHNOLOGIES LTD. SUPRA. THE LEARNED INCOME TAX AP PELLATE TRIBUNAL HAS REPRODUCED THE OBSERVATIONS MADE BY THE DELHI HIGH COURT WHILE REFERRING THE SAID CASE OF M/S. SOUTHERN TECHNOLOGIES LIMITED SUPR A. THE ASSESSEE HEREIN BEING A CO-OPERATIVE BANK ALSO GOVERNED BY THE RESE RVE BANK OF INDIA AND THUS THE DIRECTIONS WITH REGARD TO THE PRUDENTIAL N ORMS ISSUED BY THE RESERVE BANK OF INDIA ARE EQUALLY APPLICABLE TO THE CO-OPER ATIVE BANKS. THE HONBLE SUPREME COURT IN THE CASE OF SOUTHERN TECHNOLOGIES LIMITED SUPRA HELD THAT PROVISIONS OF SECTION 45Q OF RESERVE BANK OF INDIA ACT HAS AN OVERRIDING EFFECT VIS-A-VIS INCOME RECOGNITION P RINCIPLE UNDER THE COMPANIES ACT. HENCE, SECTION 45Q OF THE RBI ACT S HALL HAVE OVERRIDING EFFECT OVER THE INCOME RECOGNITION PRINC IPLE FOLLOWED BY COOPERATIVE BANKS. HENCE, THE ASSESSING OFFICER HAS TO FOLLOW THE RE SERVE BANK OF INDIA DIRECTIONS 1998, AS HELD BY THE HONB LE SUPREME COURT. 10. THE HONOURABLE APEX COURT IN THE CASE OF UCO BA NK CASE (SUPRA) HAD AN OCCASION TO CONSIDER THE NATURE OF CBDT CIRCULAR AND HONBLE APEX COURT HAS THUS HELD THAT BOARD HAS POWER, INTER ALIA, TO TONE DOWN THE RIGOUR OF THE LAW AND ENSURE A FAIR ENFORCEMENT OF ITS PROVISIONS , BY ISSUING CIRCULAR IN EXERCISE OF ITS STATUTORY POWERS UNDER SECTION 119 OF ACT WHICH ARE BINDING ON THE AUTHORITIES IN THE ADMINISTRATION OF THE ACT, I T IS A BENEFICIAL POWER GIVEN TO THE BOARD FOR PROPER ADMINISTRATION OF FISCAL LA W SO THAT UNDUE HARDSHIP MAY NOT BE CAUSED TO THE ASSESSEE AND THE FISCAL LA WS MAY BE CORRECTLY APPLIED. FURTHER A SIMILAR ISSUE WAS RAISED ABOUT INTEREST ACCRUED ON A STICKY LOAN WHICH WAS NOT RECOVERED BY THE ASSESS EE-BANK FOR THE LAST THREE YEARS AND TRANSFERRED TO THE SUSPENSE ACCOUNT, WOUL D OR WOULD NOT BE INCLUDED IN THE INCOME OF THE ASSESSEE FOR THE PART ICULAR ASSESSMENT YEAR, .................... 11. THE LEARNED COUNSEL FOR RESPONDENT HAS PLACED R ELIANCE IN A CASE OF MERCANTILE BANK LTD., BOMBAY VS. THE COMMISSIONER O F INCOME TAX, BOMBAY, CITY-III REPORTED IN (2006) 5 SCC 221, WHERE SIMILA R QUESTION WAS RAISED BEFORE THE APEX COURT. THE QUESTION WAS WHETHER TH E ASSESSEE IS LIABLE TO BE TAXED UNDER INCOME TAX ACT, 1961 IN RESPECT OF THE INTEREST ON DOUBTFUL ADVANCES CREDITED TO THE INTEREST SUSPENSE ACCOUNT. IN THIS CASE, THE UCO BANKS CASE (SUPRA) WAS ALSO REFERRED AND THE H ONBLE APEX COURT HAS ALLOWED THE APPEAL TO THE EXTENT OF QUESTION RAISED AS AFORESAID. FURTHERMORE, THE RESPONDENT CO-OPERATIVE BANKS, AS UNDERSTOOD BY SECTION 43 C OF THE INCOME TAX ACT ON THE SCHEDULED BANK. 12. LEARNED COUNSEL FOR THE APPELLANTS/REVENUE PLAC ED RELIANCE ON THE JUDGMENT IN THE CASE OF SOUTHERN TECHNOLOGIES LTD. VS. JOINT COMMISSIONER OF INCOME TAX, COIMBATORE REPORTED IN 2010 (2) SCC 548 . HOWEVER, THIS JUDGMENT PERTAINS TO NON BANKING FINANCIAL COMPANIE S. UCO BANK CASE (SUPRA) AND MERCANTILE BANK (SUPRA) CASE SQUARELY A PPLIES TO THE FACTS OF THE PRESENT CASE AND ISSUED INVOLVED. WE THEREF ORE, DO NOT FIND IT NECESSARY TO INTERFERE IN THE JUDGMENT OF THE APPEL LATE TRIBUNAL. WE HOLD THAT NO SUBSTANTIAL QUESTION OF LAW ARISES IN THESE APPEALS. ITA NO.1240/PUN/2016 SHARAD NAGARI SAH. BANK LTD., 7 FROM THE ABOVE, IT IS EVIDENT THAT THE HONBLE JURISDICTION AL HIGH COURT HAS ANALYSED THE APPLICABILITY OF THE RATIO OF THE JU DGMENT OF SUPREME COURT IN THE CASE OF SOUTHERN TECHNOLOGIES LTD. AND FOUND INAPPLICABLE TO THE NON-BANKING FINANCIAL COMPANIES. IT IS ALSO EVIDENT THAT OVERRIDING EFFECT OF THE PROVISIONS OF THE RBI ACT IN MATTER S OF RECOGNITION OF INTEREST INCOME RELATING TO STICKY LOANS IS ALSO DECIDED IN FA VOUR OF THE ASSESSEE IN VIEW OF OTHER SUPREME COURT JUDGMENTS IN T HE CASE OF UCO BANK AND MERCANTILE BANK (SUPRA). CIT(A) ALSO FOLLOWED THE IT ATS DECISIONS WHILE GIVING RELIEF TO THE ASSESSEE. THEREFORE, IN OU R OPINION, WE FIND NO REASON TO INTERFERE WITH THE CONCLUSIONS OF THE CI T(A) IN THIS REGARD. WE THEREFORE UPHOLD THE ORDER OF CIT(A) AND DIRECT THE AO TO DELETE THE ADDITION. ACCORDINGLY, THE GROUND NOS. 1 TO 7 RAISED BY T HE REVENUE ARE DISMISSED. 11. REGARDING THE SECOND ISSUE OF AMORTISATION OF PREMIUM ON SECURITIES AMOUNTING TO RS.7,031/-, WE HEARD BOTH THE SIDES AND PER USED THE ORDERS OF THE REVENUE. ON GOING THROUGH THE SAME, WE FIND THIS I SSUE ALSO IS OF COVERED NATURE BY VIRTUE OF THE ORDER OF PUNE BENCH OF THE TRIBUNAL IN THE CASE OF LOKMANGAL CO-OPERATIVE BANK LTD. (SUPRA). FOR TH E SAKE OF COMPLETENESS, WE PROCEED TO REPRODUCE THE FINDING GIVEN B Y THE CIT(A) ON THIS ISSUE HERE AS UNDER : 15. THE CIT(A) HAS ALSO AFFIRMED THE AFORESAID STA ND OF THE ASSESSING OFFICER. THE CIT(A) FOLLOWED THE JUDGEMENT OF THE H ON'BLE RAJASTHAN HIGH COURT IN THE CASE OF BANK OF RAJASTHAN LTD. (SUPRA) , WHICH HAD DISSENTED FROM THE JUDGEMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF AMERICAN EXPRESS INTERNATIONAL BANKING CORPORATI ON VS. CIT, 258 ITR 601 (BOM), BY RELYING ON THE HON'BLE SUPREME COURT IN T HE CASE OF VIJAYA BANK LTD. (SUPRA). AGAINST SUCH DECISION OF THE CIT(A), ASSESSEE IS IN APPEAL BY WAY OF CROSS- OBJECTION BEFORE US. 16. AT THE TIME OF HEARING, IT WAS A COMMON POINT B ETWEEN THE PARTIES THAT THAT HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT V S. HDFC BANK LTD., 107 DTR 140 (BOM) HAS HELD THAT THE 'BROKEN PERIOD INTE REST' IS ALLOWABLE AS A DEDUCTION. IT IS ALSO NOTEWORTHY THAT THE HON'BLE B OMBAY HIGH COURT IN THECASE OF HDFC BANK LTD. (SUPRA) CONSIDERED THE DE CISIONS OF THE HON'BLE SUPREME COURT IN THE CASE OF VIJAYA BANK LTD. (SUPR A) AS ALSO THAT OF THE HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF BANK OF RAJASTHAN LTD. (SUPRA) ITA NO.1240/PUN/2016 SHARAD NAGARI SAH. BANK LTD., 8 AND THEREAFTER, IT HAS UPHELD THE STAND OF THE ASSE SSEE THAT 'BROKEN PERIOD INTEREST' IS ALLOWABLE AS A DEDUCTION. IN VIEW OF T HE AFORESAID AUTHORITATIVE PRONOUNCEMENT BY THE HON'BLE BOMBAY HIGH COURT, WE FIND NO JUSTIFICATION TO UPHOLD THE STAND OF THE INCOME-TAX AUTHORITIES. FOL LOWING THE JUDGEMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF HDFC BANK LTD. (SUPRA), WE HEREBY SET-ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED ADDITION. 25. THE ONLY OTHER REMAINING GROUND IN THE CROSS-O BJECTION IS WITH REGARD TO THE ACTION OF THE CIT(A) IN CONFIRMING THE DISALLOW ANCE OF RS.3,70,913/- REPRESENTING AMORTIZATION OF PREMIUM PAID ON ACQUIS ITION OF HELD TO MATURITY (HTM) SECURITIES. 26. IN THIS CONTEXT, BRIEF FACTS ARE THAT BEFORE TH E CIT(A) ASSESSEE CLAIMED DEDUCTION OF RS.3,70,913/- ON ACCOUNT OF AMORTIZATI ON OF PREMIUM PAID ON GOVERNMENT SECURITIES IN THE CATEGORY OF INVESTMENT S HELD TO MATURITY (I.E. HTM). THE SAID PREMIUM REPRESENTED THE EXCESS OF AC QUISITION COST OVER THE FACE VALUE OF THE SECURITIES AND THE CLAIM OF THE A SSESSEE WAS THAT THE SAME WAS TO BE AMORTIZED OVER THE REMAINING PERIOD OF MA TURITY OF THE SECURITIES. THE CLAIM OF THE ASSESSEE WAS BASED ON THE MASTER C IRCULAR DATED 12.07.2006 ISSUED BY THE RESERVE BANK OF INDIA. THE CIT(A) DID NOT ACCEPT THE PLEA OF THE ASSESSEE AND SUSTAINED THE DISALLOW ANCE OF RS.3,70,913/-. AGAINST SUCH A DECISION OF THE CIT(A), ASSESSEE IS IN APPEAL BY WAY OF CROSS- OBJECTION BEFORE US. 27. IT WAS A COMMON POINT BETWEEN THE PARTIES THAT THE SAID ISSUE IS NO LONGER RES-INTEGRA AND HAS BEEN ADJUDICATED IN FAVO UR OF THE ASSESSEE BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF HDFC BANK LTD. (SUPRA). THE HON'BLE BOMBAY HIGH COURT REFERRED TO ITS EARLIER D ECISION IN THE CASE OF CIT VS. LORD KRISHNA BANK LTD. (2014) 107 DTR 138 (BOM) AND DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. IN VIEW OF THE AFORESAID , THE ORDER OF THE CIT(A) IS SET-ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO DELETE AN ADDITION OF RS.3,70,913/- REPRESENTING AMORTIZATION OF PREMI UM PAID ON HTM SECURITIES. THUS, THE GROUND OF THE ASSESSEE IS ALL OWED. 7.5 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE & LAW APPARENT FROM THE RECORDS. RESPECTFULLY FOLLOWING THE DECISION OF ITAT AS MENTIONED ABOVE THE AMORTIZATION PREMIUM ON HTM SECURITIES IS ALLOWABLE. THEREFORE, ADDITION ON AC COUNT OF AMORTIZATION PREMIUM PAID ON HTM SECURITIES OF RS.7 ,301/- IS DELETED. ACCORDINGLY, THE GROUND NO.6 OF THE APPEAL IS ALLOW ED. 12. SIMILAR VIEW WAS TAKEN BY THE HONBLE BOMBAY HIGH COU RT IN THE CASE OF THE CIT VS. GAJANAN NAGARI SAHAKARI BANK LTD. IN INCOME TAX APPEAL NO.39 OF 2014, DATED 07-01-2015. FOR THE SAKE OF COMPLETENESS, WE REPRODUCE THE OPERATIONAL PARAS AS FOLLOWS : 3. AS SAID ABOVE, IN THE APPEAL AS WELL AS BEFORE THE APPELLATE TRIBUNAL, IT WAS HELD THAT THE SECURITIES WERE STOCK IN TRADE AND SO DEPRECIATION WOULD AMOUNT TO LOSS AND NOT INCOME. THE AUTHORITIES BEL OW HELD THAT THIS ASPECT IS WELL SETTLED THROUGH THE JUDGMENT OF THIS COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. BANK OF BARODA, REPORTED IN (2003) 2 62 ITR 334 (BOMBAY) AS WELL AS IN THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF UCO BANK VS. THE COMMISSIONER OF INCOME TAX, REPORTED IN 240 ITR 355 (SC)). THE SUPREME COURT IN THE SAID JUDGMENT HELD THAT MERELY BECAUSE THE SECURITIES ARE KEPT UNDER THE HEAD BY THE BANK TILL THE MATURI TY, THE SAID SECURITY ITA NO.1240/PUN/2016 SHARAD NAGARI SAH. BANK LTD., 9 CANNOT BE TREATED AS A PURELY INVESTMENT. THE SECU RITY HELD BY THE BANK IS IN THE NATURE OF STOCK IN TRADE. 4. IN VIEW OF THE ABOVE, RELIANCE PLACED BY THE DEP ARTMENT ON THE JUDGMENT IN THE CASE OF VIJAYA BANK VS. COMMISSIONE R OF INCOME TAX, REPORTED IN 187 ITR 541 (SC) IS MISPLACED. THUS, T HE APPEAL DOES NOT RAISE ANY SUBSTANTIAL QUESTION OF LAW AND THE SAME IS THER EFORE, DISMISSED. IN VIEW OF THE ABOVE BINDING PRECEDENTS, WE HOLD THAT THE ADDITION ON ACCOUNT OF AMORTIZATION OF PREMIUM ON HTM SECURITIES IS ALLOW ABLE IN FAVOUR OF THE ASSESSEE. WE THEREFORE UPHOLD THE ORDER OF CIT(A) ON ACCOUNT OF BO TH THE ISSUES. ACCORDINGLY, THE RELEVANT GROUND NOS. 8 TO 11 R AISED BY THE REVENUE ARE DISMISSED. 13. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON THIS 20 TH DAY OF JULY, 2018. SD/- SD/- (SUSHMA CHOWLA) (D.KARUNAKAR A RAO ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / PUNE; DATED : 20 TH JULY, 2018. SATISH / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A)-7, PUNE 4. / THE PR. CIT-6, PUNE 5. , , A / DR A, ITAT, PUNE; 6. / GUARD FILE. / BY ORDER, //TRUE COPY// SENIOR PRIVATE SECRETARY , / ITAT, PUNE