Assistant Commissioner of Income-tax, V. The Ahmednagar Shahar Sahakari Bank Ltd., Shinde & Sons, Ahmednagar

ITA 1980/PUN/2013

• Counselvise Citation: 198024514 RSA 2013
• Duration Of Justice: 1 year(s) 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 08-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MRS KIRAN SANGMANE
• Keywords: Question of law; Capital receipt; Revenue expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.1862/PN/2013 (ASSESSMENT YEAR : 2010-11) AHMEDNAGAR SHAHAR SAHAKARI BANK LTD., C/O M/S SHANTILAL GANDHI, TAX CONSULTANT, 146 AMBER PLAZA, 1 ST FLOOR, STATION ROAD, AHMEDNAGAR 414 001. PAN : AAABB0323R . APPELLANT VS. ASSTT. COMMISSIONER OF INCOME TAX, AHMEDNAGAR CIRCLE, AHMEDNAGAR. . RESPONDENT ITA NO.1980/PN/2013 (ASSESSMENT YEAR : 2010-11) ASSTT. COMMISSIONER OF INCOME TAX, AHMEDNAGAR CIRCLE, AHMEDNAGAR. . APPELLANT VS. AHMEDNAGAR SHAHAR SAHAKARI BANK LTD., SARWARTHA, NAVI PETH, AHMEDNAGAR. PAN : AAABB0323R . RESPONDENT ASSESSEE BY : MRS. KIRAN SANGMANE DEPARTMENT BY : MR. RAJESH DAMOR DATE OF HEARING : 03-02-2015 DATE OF PRONOUNCEMENT : 20-02-2015 ORDER PER G. S. PANNU, AM THE CAPTIONED CROSS-APPEALS PREFERRED BY THE ASSESS EE AND THE REVENUE FOR ASSESSMENT YEAR 2010-11 WERE HEARD TOGE THER AND ARE BEING DISPOSED-OFF BY WAY OF A CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. THE CAPTIONED CROSS-APPEALS ARE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-IT/TP, PUNE DA TED 30.08.2013 WHICH, ITA NO.1862/PN/2013 ITA NO.1980/PN/2013 IN TURN, HAS ARISEN FROM AN ORDER DATED 31.01.2013 PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. IN APPEAL OF THE ASSESSEE, THE ONLY ISSUE IS WIT H REGARD TO AN ADDITION OF RS.6,71,662/- ON ACCOUNT OF UNPAID DIVIDENDS. IN BRIEF, THE RELEVANT FACTS ARE THAT THE ASSESSING OFFICER NOTED THAT A SUM OF RS.6 ,72,662/- WAS CREDITED TO THE GENERAL RESERVE ACCOUNT WHICH REPRESENTED UNCLA IMED DIVIDEND. ASSESSEE EXPLAINED THAT THE DIVIDEND IS CREDITED TO DIVIDEND PAYABLE ACCOUNT AFTER DECLARATION OF DIVIDEND AND ITS APPROVAL BY T HE GENERAL BODY MEETING. AT THE END OF THE YEAR, THE DIVIDEND REMAINING UNDISBU RSED IS TRANSFERRED TO UNCLAIMED DIVIDEND ACCOUNT AND IF A MEMBER DOES NOT COLLECT DIVIDEND WITHIN THREE YEARS FROM THE DATE OF GENERAL BODY MEETING, THE UNCLAIMED AMOUNTS ARE TRANSFERRED TO GENERAL RESERVE. IN ANY CASE, I T WAS POINTED OUT THAT EVEN ON A FUTURE DATE IF A MEMBER DEMANDS HIS DIVIDEND, THE BANK HAS TO PAY THE SAME. THE ASSESSING OFFICER WAS OF THE VIEW THAT I T REFLECTS A CESSATION OF LIABILITY AND THEREFORE THE AMOUNT OF UNCLAIMED DIV IDEND IS TAXABLE. THE CIT(A) HELD THAT UNCLAIMED DIVIDEND IS TAXABLE SINCE IT HA S BEEN FOREGONE BY THE MEMBER OF THE BANK. THE CIT(A) HAS ALSO RELIED UPO N THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. TVS SU NDARAM IYENGAR AND SONS LTD., (1996) 222 ITR 344 (SC) IN COMING TO THE SAID CONCLUSION. 3. BEFORE US, THE LD. REPRESENTATIVE FOR THE ASSESS EE SUBMITTED THAT AN IDENTICAL CONTROVERSY HAS BEEN CONSIDERED BY THE PU NE BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. M/S PEOPLES CO-OPERATIVE BA NK LTD. VIDE ITA NO.2197/PN/2012 DATED 27.09.2013, WHEREIN THE FOLLO WING DISCUSSION IS RELEVANT :- 5. GROUND NO.2 BY THE REVENUE READS AS UNDER : 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) IS CORRECT IN HOLDING THAT THE FORFEITED AMO UNT OF DIVIDEND IS NOT AN INCOME OF THE ASSESSEE U/S.28 OF THE ACT. ITA NO.1862/PN/2013 ITA NO.1980/PN/2013 6. THE ISSUE IS IN RESPECT OF THE TREATMENT OF TH E FORFEITED DIVIDEND WHICH IS CREDITED TO THE GENERAL RESERVE. THE AO HAS OBS ERVED THAT THE ASSESSEE HAS FORFEITED AN AMOUNT OF RS.10,30,2180/- ON ACCOU NT OF DIVIDEND PAYABLE WHICH IS SHOWN IN THE LIABILITY SIDE OF THE BALANCE SHEET BY REVERSING THE ENTRY AND CREDITED TO THE GENERAL RESERVE FUND. TH E AO HAS OBSERVED THAT THE DIVIDEND IS DECLARED BY THE ASSESSEE BANK OUT O F ITS PROFIT AS PER ITS REGULATIONS. THE AO MADE ADDITION TO THE EXTENT OF RS.10,30,218/- WHICH WAS IN RESPECT OF THE AMOUNT OF THE FORFEITED DIVIDEND BY HOLDING THAT THE SAME IS INCOME LIABLE TO TAX U/S.28 OF THE ACT. 6.1 IDENTICAL ISSUE HAS COME FOR CONSIDERATION BE FORE THIS BENCH IN CASE OF ACIT, CIRCLE-1, AURANGABAD VS. M/S. SUNDERLAL SW AJI URBAN CO-OP BANK LTD. - ITA NO.2353/PN/2013 ORDER DATED 24-09-2013. THE OPERATIVE PART OF THE DECISION IS AS UNDER : 7. WE HAVE HEARD THE PARTIES. IN THIS CASE, IT IS NOT CONTROVERTED BEFORE US BY THE LD. DR THAT THE DIVIDEND WHICH IS FORFEITED WAS PROVIDED FROM THE BUSINESS PROFIT WHICH HAS ALREADY SUFFERED THE TAX. IN OUR OPINION, AS RIGHTLY HELD BY THE LD.CIT(A), T HE PROVISIONS OF SECTION 41(1) ARE NOT APPLICABLE TO THE ISSUE BEFOR E US AS THE SAID PROVISION OPERATE IN THE DIFFERENT SITUATION. IN T HE CASE OF T.V. IYENGAR AND SONS LTD (SUPRA) APPLICABILITY OF THE SECTION 4 1(1) WAS BEFORE THE HONBLE SUPREME COURT BUT IN PRESENT CASE SECTION 4 1(1) ITSELF IS NOT APPLICABLE, THEN WE NEED NOT DISCUSS THE PRINCIPLES LAID DOWN IN THE SAID DECISION. WE FIND NO FAULT IN DELETING THE AD DITION BY THE LD.CIT(A), WHICH IS AS PER LAW. WE ACCORDINGLY CON FIRM THE ORDER OF THE LD.CIT(A) AND DISMISS THE GROUND NO.2 TAKEN BY THE REVENUE. 6.2 ADMITTEDLY, IN THIS CASE THE PROVISION FOR DI VIDEND IS MADE OUT OF PROFIT WHICH HAS ALREADY SUFFERED TAX. ONLY THE PROVISION IS REVERSED AS PER BYE- LAWS OF THE COOPERATIVE SOCIETY. IN OUR OPINION, T HE LD.CIT(A) HAS RIGHTLY DELETED THE ADDITION AND NO INTERFERENCE IS CALLED FOR FROM OUR SIDE. ACCORDINGLY, GROUND NO.2 IS DISMISSED. 4. THE LD. DEPARTMENTAL REPRESENTATIVE APPEARING FO R THE REVENUE HAS REITERATED THE STAND OF THE REVENUE THAT ONCE THE D IVIDEND IS UNCLAIMED, IT REFLECTS EXTINGUISHMENT OF LIABILITY, AND IS LIABLE TO BE TAXED. 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL STANDS AN D FIND NO MERIT IN THE STAND OF THE REVENUE. QUITE CLEARLY, THE DIVIDEND IS PAID BY THE BANK OUT OF TAX PAID PROFITS. DIVIDENDS ARE DECLARED OUT OF SU CH PROFITS AND IS TO BE UNDERSTOOD AS AN APPORTIONMENT OF INCOME. IF FOR A NY REASON, THE DIVIDEND SO DECLARED IS NOT ACTUALLY DISBURSED AND WERE TO BE A DDED BACK TO THE TAXABLE INCOME, IT WOULD MEAN A DOUBLE TAXATION. THEREFORE , THERE IS NO JUSTIFICATION FOR TAXING UNCLAIMED DIVIDEND AS A CESSATION OF L IABILITY. NO DOUBT, CESSATION OF LIABILITY MAY BE A TAXABLE EVENT BUT ONLY IN SIT UATIONS WHERE SUCH LIABILITY HAS ITA NO.1862/PN/2013 ITA NO.1980/PN/2013 ENTERED THE COMPUTATION OF TAXABLE INCOME ON AN EAR LIER OCCASION. QUITE CLEARLY, THE DECLARATION OF DIVIDEND DOES NOT ENTER THE COMPUTATION OF TAXABLE INCOME AS THE DIVIDEND IS DECLARED OUT OF THE PROFI TS REMAINING AFTER TAXATION. 6. IN SO FAR AS, THE RELIANCE PLACED BY THE CIT(A) ON THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF TVS SUNDARAM I YENGAR AND SONS LTD. (SUPRA) IS CONCERNED, THE SAME IS QUITE MISPLACED. IN THE CASE BEFORE THE HONBLE SUPREME COURT, ASSESSEE HAD RECEIVED DEPOSI TS IN THE COURSE OF HIS BUSINESS WHICH WERE ORIGINALLY TREATED AS CAPITAL R ECEIPT. SOME OF THE DEPOSITS WERE NEITHER CLAIMED NOR RETURNED TO THE D EPOSITORS. SUCH UNRETURNED AND UNCLAIMED DEPOSITS WERE TAXED BY THE REVENUE, WHICH WAS UPHELD BY THE HONBLE SUPREME COURT. AS PER THE HO NBLE SUPREME COURT, BY LAPSE OF TIME, THE CLAIM OF DEPOSITS BECAME TIME-BA RRED AND THE AMOUNTS ATTAINED A TOTALLY DIFFERENT QUALITY. ACCORDING TO THE HONBLE SUPREME COURT, SUCH SURPLUS BECAME A TRADE SURPLUS BECAUSE THE AMO UNTS WERE RECEIVED ORIGINALLY IN THE COURSE OF TRADING TRANSACTIONS, T HOUGH TREATED AS A CAPITAL RECEIPT ORIGINALLY. QUITE CLEARLY, THE FACT-POSITI ON BEFORE THE HONBLE SUPREME COURT WAS QUITE DIFFERENT FROM THE ISSUE BEFORE US. 7. IT CANNOT BE ANYBODYS POSITION THAT THE UNCLAIM ED DIVIDEND IS A RECEIPT BY THE ASSESSEE IN THE COURSE OF ITS TRADING TRANSA CTIONS. IN-FACT, THE UNCLAIMED DIVIDEND AMOUNT, DOES NOT REFLECT ANY REC EIPT AT ALL. THEREFORE, IN OUR VIEW, THE RELIANCE PLACED BY THE CIT(A) ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF TVS SUNDARAM IYENGAR A ND SONS LTD. (SUPRA) IS ERRONEOUS. 8. AS A CONSEQUENCE, WE SET-ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS.6,71 ,662/-. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ITA NO.1862/PN/2013 ITA NO.1980/PN/2013 10. IN THE CROSS-APPEAL OF THE REVENUE, THE SOLITAR Y DISPUTE RAISED BY THE REVENUE IS WITH REGARD TO A DISALLOWANCE OF RS.11,3 8,000/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF AMORTIZATION OF PRE MIUM PAID FOR ACQUISITION OF SECURITIES CATEGORIZED AS HELD TO MATURITY (HTM), W HICH HAS SINCE BEEN DELETED BY THE CIT(A). 11. IN BRIEF, THE RELEVANT FACTS ARE THAT THE ASSES SEE IS A CO-OPERATIVE SOCIETY REGISTERED UNDER THE MAHARASHTRA CO-OPERATI VE SOCIETIES ACT, 1960 AND IS CARRYING ON THE BUSINESS OF BANKING IN TERMS OF A LICENSE ISSUED BY THE RESERVE BANK OF INDIA (RBI). ASSESSEE CLAIMED DEDU CTION FOR AMORTIZATION OF PREMIUM PAID ON ACQUISITION OF SECURITIES CATEGORIZ ED AS HTM, WHICH WAS DISALLOWED BY THE ASSESSING OFFICER ON THE GROUND T HAT THE SAME WAS CAPITAL IN NATURE. THE CIT(A) HAS DELETED THE ADDITION OF RS. 11,38,000/- FOLLOWING THE DECISION OF THE PUNE OF THE TRIBUNAL IN THE CASE OF LATUR URBAN CO-OPERATIVE BANK VS. DCIT VIDE ITA NO.778/PN/2011 DATED 31.08.2 012 WHEREIN THE SIMILAR ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE. AGAINST SUCH A DECISION OF THE CIT(A), REVENUE IS IN APPEAL BEFORE US. 12. BEFORE US, IT WAS A COMMON POINT BETWEEN THE PA RTIES THAT SIMILAR ISSUE OF THE ALLOWABILITY OF PREMIUM ON AMORTIZATION OF H TM SECURITIES, AROSE BEFORE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF PUNE DIST RICT CENTRAL CO. OPERATIVE BANK LTD. VS. ADDL.CIT IN ITA NO.1796/PN/2013 RELAT ING TO ASSESSMENT YEAR 2009-10 VIDE ORDER DATED 28 TH NOVEMBER 2014, IT WAS HELD AS UNDER:- 10. WE FIND THAT A SIMILAR ISSUE OF ALLOWABILIT Y OR DEDUCTION ON ACCOUNT OF AMORTIZATION OF PREMIUM EXPENDITURE FOR HTM SECURIT IES AROSE BEFORE PUNE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.1795/PN/2013 RELATING TO ASSESSMENT YEAR 2008-09 VIDE ORDER DATE D 22.09.2014 WHEREIN, IT WAS HELD AS UNDER:- 2.1 THE ONLY ISSUE REMAINS IS WITH REGARD TO DISAL LOWANCE MADE BY THE ASSESSING OFFICER OF RS.2,20,68,302/- CLAIMED B Y THE ASSESSEE AS AMORTIZATION OF PREMIUM EXPENDITURE FOR HTM SECURIT IES BY PAYMENT OF OVER AND ABOVE THE VALUE OF SUCH SECURITIES. THE L EARNED AUTHORIZED REPRESENTATIVE HAS POINTED OUT THAT THIS ISSUE IS C OVERED IN FAVOUR OF THE ASSESSEE BY ORDER OF THE HONBLE BOMBAY HIGH CO URT IN THE CASE ITA NO.1862/PN/2013 ITA NO.1980/PN/2013 OF CIT VS. HDFC BANK LTD. (2014) 366 ITR 505 (BOM), WHEREIN THE HONBLE BOMBAY HIGH COURT ON SIMILAR ISSUE, HELD AS UNDER: AS FAR AS QUESTION (C) IS CONCERNED, WE FIND THAT AN IDENTICAL QUESTION OF LAW WAS FRAMED AND ANSWERED IN FAVOUR O F THE ASSESSEE BY THIS COURT IN ITS JUDGMENT DATED JULY 4 , 2014, IN INCOME TAX APPEAL NO.1079 OF 2012, CIT V. LORD KRIS HNA BANK LTD. (NOW MERGED WITH HDFC BANK LTD.) (2014) 366 IT R 416 (BOM). MR. SURESH KUMAR FAIRLY STATED THAT QUESTIO N (C) REPRODUCED ABOVE IS COVERED BY THE SAID ORDER. IN VIEW THEREOF, WE ARE OF THE VIEW THAT EVEN QUESTION (C) DOES NOT ARISE ANY SUBSTANTIAL QUESTION OF LAW THAT REQUIRES AN ANSWER FROM US. AND A SIMILAR VIEW HAS BEEN TAKEN BY ITAT, PUNE A BENCH IN THE CASE OF DY.CIT VS. KALLAPPANNA AWADE ICHALKARAN JI JANATA SAHAKARI BANK LTD. IN ITA NO.449/PN/2012 AND ANOTHE R BY OBSERVING AS UNDER: 10. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFI CER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE AS SESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND AN IDENTICAL ISSUE HAD COME UP BEFORE THE T RIBUNAL IN THE CASE OF NAHSIK MERCHANT COOPERATIVE BANK LTD. ( SUPRA). WE FIND THE TRIBUNAL HAS DISCUSSED THE ISSUE AND DI SMISSED THE GROUNDS RAISED BY THE REVENUE BY HOLDING AS UND ER : 4. AFTER GOING THROUGH RIVAL SUBMISSIONS AND MATERIAL ON RECORD WE FIND THAT WITH THE ADVENT OF SECTION 80P(4) W.E.F. A.Y, 2007-08 HAS CLOSED THE D OORS FOR COOPERATIVE BANKS FOR CLAIMING THE BENEFIT OF DEDUCTION U/S.80P(2)(A)(I) FROM THIS TOTAL INCOME. HOWEVER, THE COOPERATIVE SOCIETY SHOULD NOW BE ENTITLED TO BE ASSESSED AS NORMAL BANKING COMPANY. THE CLAUSE (4) INSERTED IN SECTION 80P HAS TAKEN AW AY THE BENEFIT OF THE ERSTWHILE DEDUCTION AVAILABLE TO COOPERATIVE SOCIETY IN CARRYING ON BUSINESS OF BANK ING OR PROVIDING CREDIT FACILITY TO ITS MEMBERS. THE NE W CLAUSE (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 DEVELOPMENT 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 SOCIE TIES (PACS) AND PRIMARY COOPERATIVE AGRICULTURAL AND RUR AL DEVELOPMENT BANK (PCARDB) STAND ON A SPECIAL FOOTING AND WILL CONTINUE TO BE EXEMPT UNDER SECTIO N 80P OF THE INCOME TAX ACT. HOWEVER, I PROPOSE TO EXCLUDE ALL OTHER CO-OPERATIVE BANKS FROM THE SCOPE OF THAT SECTION'. ACCORDINGLY, SECTION 80P IS TO BE AMENDED TO GIVE EFFECT TO THE ABOVE PROPOSAL. IT IS ALSO ITA NO.1862/PN/2013 ITA NO.1980/PN/2013 PROPOSED TO AMEND SECTION 2(24) TO PROVIDE THAT PRO FITS AND GAINS OF BUSINESS OF BANKING (INCLUDING PROVIDI NG CREDIT FACILITIES) CARRIED ON BY A CO-OPERATIVE SOC IETY WITH ITS MEMBERS SHALL BE INCLUDED 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 ACCOUNTING TREATMENT FOR A COOPERATIVE BANK IS THER EFORE A RESULT OF GUIDELINES FROM BOTH THE CONTROLLING AUTHORITIES. ORDINARILY A DEDUCTION IS NOT AVAILABL E TO AN ASSESSEE UNLESS SPECIFICALLY PROVIDED UNDER THE ACT . THIS IS IRRESPECTIVE OF ACCOUNTING TREATMENT PROVID ED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNTS. BUT AT THE S AME TIME IT WAS WELL SETTLED THAT DEDUCTION EXPRESSLY MENTIONED UNDER THE ACT ARE NOT EXHAUSTIVE AND PROF IT IS TO BE DERIVED ACCORDING TO ORDINARY COMMERCIAL PRINCIPLES. AS PER THE EXTANT RBI GUIDELINES DATED 01- 07-2009 THE INVESTMENT PORTFOLIO OF THE BANKS IS REQUIRED TO BE CLASSIFIED UNDER 3 CATEGORIES 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.. 2.. 3.. 7. IN PARA (VII) OF THE CBDT INSTRUCTION NO.17 OF 2008 DATED 26.11.2008, ON 'ASSESSMENT OF BANK - CHECK LIST FOR DEDUCTION, STATES AS UNDER: 'AS PER RBI GUIDELINES..' 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 OF FACE VALUE OF INVESTMENTS CLASSIF IED UNDER HTM CATEGORY WHICH HAS BEEN AMORTISED OVER THE PERIOD TILL MATURITY IS ALLOWABLE AS REVENUE EXPENDITURE SINCE THE CLAIM IS AS PER RBI GUIDELINE S AND CBDT ALSO HAS DIRECTED TO ALLOW SUCH PREMIUM. I T HAS ALSO BEEN HELD IN THE CASE OF CATHOLIC SYRIAN B ANK LTD. VS. ACIT THAT AMORTIZATION ON PURCHASE OF GOVERNMENT SECURITIES WAS MADE AS PER PRUDENTIAL NORMS OF THE RBI AND SAME WAS ALLOWABLE DEDUCTION. IN VIEW OF ABOVE, ASSESSEE WAS JUSTIFIED IN CONTEND ING FOR AMORTIZATION OF PREMIUM PAID IN EXCESS OF FACE VALUE OF SECURITIES HELD TO MATURITY (HTM) CATEGORY OR PE RIOD REMAINING TILL MATURITY WAS FOUND REASONABLE BY THE CIT(A). ACCORDINGLY ADDITION OF RS.17,91,659/- MAD E BY THE ASSESSING OFFICER BY DISALLOWING AMOUNT TOWARDS AMORTIZATION OF GOVERNMENT SECURITIES (HMT) WAS DELETED. THIS REASONED FACTUAL AND LEGAL FINDING O F THE CIT(A) NEEDS NO INTERFERENCE FROM OUR SIDE. WE UPH OLD THE SAME. ITA NO.1862/PN/2013 ITA NO.1980/PN/2013 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 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. 2.2 NOTHING CONTRARY HAS BEEN BROUGHT TO OUR KNOWLE DGE ON BEHALF OF THE REVENUE. FACTS BEING SIMILAR, SO FOLLOWING THE SAME REASONING WE HOLD THAT IN CASE OF BANKS, THE PREMIUM PAID IN EXCESS OF 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. IN VIEW OF ABO VE, THE ASSESSEE IS JUSTIFIED IN CONTENDING THAT THE AMORTIZATION OF PR EMIUM IN EXCESS OF FACE VALUE SECURITIES AS HTM, PERIOD REMAINING DIFF ERENCE WAS FOUND REASONABLE. ACCORDINGLY, THE DISALLOWANCE OF RS.2, 20,68,302/- MADE BY THE ASSESSING OFFICER CLAIMED AS AMORTIZATION OF PREMIUM EXPENDITURE FOR HTM SECURITIES BY PAYMENT OF PREMIU M OVER AND ABOVE THE FACE VALUE OF SUCH SECURITIES IS DIRECTED TO BE ALLOWED. 11. THE HONBLE BOMBAY HIGH COURT IN CIT VS. HDFC B ANK (SUPRA) HELD THAT THE ASSESSEE THEREIN WAS ENTITLED TO DEDUCTION WITH RESPECT TO THE DIMINUTION IN THE VALUE OF INVESTMENTS AND AMORTIZA TION OF PREMIUM ON INVESTMENTS HELD TO MATURITY ON THE GROUND OF MANDA TE OF THE RBI GUIDELINES. THE ISSUE RAISED IN THE PRESENT APPEAL IS IDENTICAL TO THE ISSUE BEFORE THE PUNE BENCH OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FO R ASSESSMENT YEAR 2008- 09 AND HONBLE BOMBAY HIGH COURT IN CIT VS. HDFC BA NK (SUPRA). WE HOLD THAT AMORTIZATION OF PREMIUM EXPENDITURE FOR SECURI TIES HELD TO MATURITY IN VIEW OF RBI GUIDELINES ARE ALLOWABLE BUSINESS EXPEN DITURE IN THE CASE OF ASSESSEE. THE GROUNDS OF APPEAL NO.1 AND 2 RAISED BY THE ASSESSEE ARE THUS, ALLOWED. 13. WE FURTHER FIND THAT THE HONBLE BOMBAY HIGH CO URT IN CASE OF HDFC BANK LTD. (SUPRA) IN INCOME TAX APPEAL NO.330 OF 20 12 VIDE ORDER DATED 23.07.2014, ON A SIMILAR ISSUE ON ACCOUNT OF DEDUCT ION WITH RESPECT TO DIMINUTION IN THE VALUE OF INVESTMENT AND AMORTIZAT ION OF PREMIUM ON INVESTMENT (HELD TO MATURITY) AFTER REFERRING TO TH E MANDATE OF THE RBI GUIDELINES, AND THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF SOUTHERN TECHNOLOGIES VS. JCIT, (2010) 320 ITR 577 (SC) HAD DISMISSED THE APPEAL FILED BY THE REVENUE. 14. THE ISSUE ARISING IN THE PRESENT APPEAL IS IDEN TICAL TO THE ISSUE DECIDED BY THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF PU NE DISTRICT CENTRAL CO. ITA NO.1862/PN/2013 ITA NO.1980/PN/2013 OPERATIVE BANK LTD. (SUPRA) AND ALSO THE HONBLE BO MBAY HIGH COURT IN THE CASE OF HDFC BANK LTD. (SUPRA), AND FOLLOWING THE S AME PARITY OF REASONING, WE HOLD THAT THE ASSESSEE IS ENTITLED TO THE DEDUCT ION OF RS.11,38,000/- BEING THE PREMIUM ON AMORTIZATION OF SECURITIES. ACCORDI NGLY, WE HEREBY AFFIRM THE ACTION OF CIT(A) IN DELETING THE DISALLOWANCE OF RS .11,38,000/- REPRESENTING AMORTIZATION OF PREMIUM PAID ON GOVERNMENT SECURITI ES UNDER THE HTM CATEGORY. THUS ON THIS ASPECT, REVENUE FAILS. 15. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. 16. RESULTANTLY, WHEREAS THE APPEAL OF THE ASSESSEE IS ALLOWED THAT OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON 20 TH FEBRUARY, 2015. SD/- SD/- (R.S. PADVEKAR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 20 TH FEBRUARY, 2015. SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-IT/TP, PUNE; 4) THE CIT-IT/TP, PUNE; 5) THE DR A BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T., PUNE