ACIT, Gulbarga V. Krishna Grameena Bank, Gulbarga

ITA 224/BANG/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60743 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 11-06-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 03-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation
• Section: 43B; 143(3); 142(1); 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH B BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER I.T.A. NO.146/BANG/2011 (ASSESSMENT YEAR : 2007-08) M/S. KRISHNA GRAMEENA BANK, HEAD OFFICE KUSNOOR ROAD, GULBARGA. . APPEL LANT. PAN AAGFK 6964K VS. ADDL. COMMISSIONER OF INCOME TAX, GULBARGA RANGE, GULBARGA. .. R ESPONDENT. I.T.A. NO.224/BANG/2011 (ASSESSMENT YEAR : 2007-08) (BY REVENUE) ASSESSEE BY : SHRI S. PARTHASARATHI. REVENUE BY : SHRI FARAHAT HUSSAIN QURESHI. DATE OF HEARING :11.06.2012. DATE OF PRONOUNCEMENT : 15.06.2012. O R D E R PER SHRI JASON P. BOAZ : THESE ARE TWO CROSS APPEALS, ONE BY THE ASSESSEE AND THE OTHER BY REVENUE, ARE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), HUBLI DATED 23.12.2010 FOR ASSESSMENT YEAR 2007-08. 2. THE FACTS OF THE CASE, IN BRIEF, ARE AS UNDER : 2.1 THE ASSESSEE, A CO-OPERATIVE BANK, FILED IT S RETURN OF INCOME FOR ASSESSMENT YEAR 2007-08 ON 31.7.2007 ADMITTING TAXABLE INCOME OF RS. 23,87,45,000. THE RETURN WAS PROCESSED UNDER SECTION 143(1) AND THE CASE WAS TAKEN UP FOR SCRUTINY BY ISSUE OF 2 ITA NOS.146 & 224/BANG/11 NOTICES UNDER SECTION 143(2) AND 142(1) OF THE INCO ME TAX ACT, 1961 (HEREIN AFTER REFERRED AS 'THE ACT'). THE ASSESSING OFFICER AFTE R EXCAMINING THE CASE, COMPLETED THE ASSESSMENT BY AN ORDER UNDER SECTION 143(3) OF THE ACT ON 29.12.2009 DETERMINING THE INCOME OF THE ASSESSEE AT RS. 29,40,17,881 AND IN DOING SO MADE THE FOLLOWING DISALLOWANCES : I) AMORTISATION OF PREMIUM PAID ON PURCHASE OF GOVT. SECURITIES. RS.4,84,11,629 II) ACTUARIAL VALAUTION OF PRIVILEGE LEAVE ENCASHMENT. RS.52,35,008 III) DISALLOWANCE U/S.40A(IA) RS.3,15,202 IV) DISALLOWANCE OF PROVISION FOR DEPRECIATION RS.6 0 ,000 2.2 THE ASSESSEE CARRIED THE MATTER IN APPEAL B EFORE THE LEARNED CIT(A), HUBLI WHO DISPOSED THE SAME BY ORDER DT.23.12.2010 ALLOWING T HE ASSESSEE PARTIAL RELIEF IN RESPECT OF THE ASSESSEES CLAIM FOR DEDUCTION OF TH E AMORTIZATION OF PREMIUM PAID ON GOVT. SECURITIES AMOUNTING TO RS. 4,84,11,629. THE LEARNED CIT(A), HOWEVER, SUSTAINED THE DISALLOWANCES MADE BY THE ASSESSING OFFICER IN RESPECT OF PRIVILEGE LEAVE ENCASHMENT AMOUNTING TO RS.52,35,008. 3. BOTH THE ASSESSEE AND REVENUE ARE IN APPEAL AGAINST THE ORDER OF THE CIT(A), HUBLI DT.23.12.2010. WE WILL FIRST TAKE UP THE ASS ESSEES APPEAL. ITA NO.146/BANG/2011 4. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE AS UNDER : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) GROSSLY ERRED IN UPHOLDING THE ASSESSMENT ORDER REG ARDING DISALLOWANCE OF PROVISION MADE FOR LEAVE ENCASHMENT. 2. THE LEARNED CIT(A) ERRED INUPHOLDING THAT THE PRIVILEGE LEAVE ENCASHMENT OF RS.52,35,008 BASE DON ACTUARIAL VALUA TIONBY ALLEGING THAT LIABILITY IS NOT CRYSTALISED AND IT IS AN CONTINGEN T LIABILITY. 3 ITA NOS.146 & 224/BANG/11 3. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THAT ACCOUNTING STANDARD ISSUED UNDER SECTION 145 OF THE INCOME TAX ACT, RECOGNIZES THE NEED FOR RECOGNIZING EXPENDITURE WHENIT ACCRUES UND ER MERCANTILE SYSTEM OF ACCOUNTING; THE LIABILITY PROVIDED ON THE BASIS OF ACTUARIAL VALUATION CANNOT BE CALLED AS CONTINGENT LIABILITY. EVEN AC COUNTING STANDARD 15 ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANT OF INDIA REGARDING TREATMENT OF RETIREMENT BENEFITS, MAKES IT MANDATOR Y TO PROVIDE FOR SUCH LIABILITY, AND THUS THE LEAVE ENCASHMENT ALSO IS NO T ESSENTIALLY DIFFERENT FROM GRATUITY, PENSION AND OTHER TERMINAL BENEFITS. 4. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED PROPERLY THE HON'BLE SUPREME COURTS RATIO REGARDING DEDUCTIBILITY OF PR OVISION FOR LEAVE ENCASHMENT (IN THE CASE OF BHARAT EARTH MOVERS VS. CIT 245 ITR 428 (SC) AND THE CALCUTTA HIGH COURT JUDGMENT IN 292 ITR WH ERE IN THE SECTION 43B(F) WAS STRUCK DOWN BY HOLDING THAT IT WAS ARBIT RARY, UNCONSCIONABLE AND HELD THAT THE PROVISION FOR LEAVE ENCASHMENT WAS NO T CONTINGENT LIABILITY AND WAS LIABLE TO BE ALLOWED WITHOUT APPLICATION OF SEC TION 43B(F) OF THE ACT. 5. WITHOUT PREJUDICE, THE DISALLOWANCE IS ARBIT RARY, EXCESSIVE AND OUGHT TO BE DELETED IN TOTO AND REDUCED SUBSTANTIALLY. 6. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, THE APPELLANT PRAYS THAT THE APPEAL MAY BE ALLOWED. 5. THE GROUNDS OF APPEAL AT S.NOS.5 & 6 ARE GENERAL IN NATURE AND NO ADJUDICATION IS CALLED FOR THEREON. 6.1 THE GROUNDS OF APPEAL RAISED AT S.NOS.1 TO 4 CHALLENGE THE FINDING OF THE LEARNED CIT(A) IN UPHOLDING THE DISALLOWANCE OF PROVISION M ADE BY THE ASSESSEE FOR PRIVILEGE LEAVE ENCASHMENT OF RS.52,35,008 BY HOLDING IT TO BE A CONTINGENT LIABILITY WHICH HAD NOT CRYSTALLIZED AND THEREFORE NOT ALLOWABLE AS A D EDUCTION. 6.2 THE LEARNED COUNSEL FOR THE ASSESSEE REITE RATED THE ARGUMENTS AND CONTENTIONS PUT FORTH IN THE GROUNDS OF APPEAL. THE LEARNED CO UNSEL FOR THE ASSESSEE FURTHER CONTENDED THAT THE LEARNED CIT(A) OUGHT TO HAVE APP RECIATED THE RATIO OF THE HON'BLE APEX COURT DECISION IN THE CASE OF BEML VS. CIT (24 5 ITR 428) IN ITS CORRECT PERSPECTIVE. THE LEARNED COUNSEL FOR THE ASSESSEE BROUGHT TO OUR NOTICE THE DECISION OF THE HON'BLE HIGH COURT OF CALCUTTA IN THE CASE O F EXIDE INDUSTRIES LTD. & ANOTHER 4 ITA NOS.146 & 224/BANG/11 VS. UOI & OTHERS REPORTED IN (2007) 292 ITR 470 (CA L) WHEREIN THE COURT STRUCK DOWN THE PROVISIONS OF SECTION 43B(F) HOLDING IT TO BE ARBITRARY AND UNCONSCIONABLE. THE HON'BLE COURT, IT IS SUBMITTED, HELD THAT PROVI SION FOR LEAVE ENCASHMENT WAS NOT A CONTINGENT LIABILITY AND WAS LIABLE TO BE ALLOWED D EPRECIATION HORS THE HON'BLE APEX COURTS DECISION IN THE CASE OF BEML (SUPRA). IN T HESE CIRCUMSTANCES, THE LEARNED COUNSEL FOR THE ASSESSEE PRAYED THAT ITS CLAIM FOR ALLOWING THE DEDUCTION ON ACCOUNT OF PROVISION MADE BY THE ASSESSEE FOR PRIVILEGE LEAVE ENCASHMENT OF RS. 52,35,008. 6.3 THE LEARNED DEPARTMENTAL REPRESENTATIVE ON HIS PART SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND PRAYED FOR THE ORDER OF T HE CIT(A) TO BE CONFIRMED ON THIS ISSUE. 6.3.1 WE HAVE HEARD BOTH PARTIES AND HAVE CAREF ULLY PERUSED AND CONSIDERED THE MATERIAL ON RECORD INCLUDING THE JUDICIAL DECISIONS CITED AND PLACED RELIANCE ON. IT IS A MATTER OF RECORD THAT THE ASSESSEE IN THE RELEVANT PERIOD HAD MADE A PROVISION FOR ENCASHMENT OF PRIVILEGE LEAVE AMOUNTING TO RS.52,35 ,008. WE FIND FROM A PERUSAL OF THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF BHARAT EARTH MOVERS LTD. (SUPRA) THAT THE RATIO AND REASONING THEREIN ON THE ISSUE OF ENCASHMENT OF LEAVE BY EMPLOYEES WOULD APPLY TO THE ASSESSEES CASE. IN T HAT CASE THE HON'BLE APEX COURT WAS OF THE VIEW THAT THE LAW ON THIS ISSUE IS SETTL ED. IF A BUSINESS LIABILITY HAS DEFINITELY ARISEN IN THE ACCOUNTING YEAR, THE DEDUC TION SHOULD BE ALLOWED, ALTHOUGH THE LIABILITY MAY HAVE TO BE QUANTIFIED AND DISCHARGED AT A FUTURE DATE. WHAT SHOULD BE CERTAIN IS THE INCURRING OF THE LIABILITY. IT SHOU LD BE CAPABLE OF BEING ESTIMATED WITH REASONABLE CERTAINTY, THOUGH THE ACTUAL QUANTIFICAT ION MAY NOT BE POSSIBLE. IF THESE 5 ITA NOS.146 & 224/BANG/11 REQUIREMENTS ARE SATISFIED, THE LIABILITY IS NOT A CONTINGENT ONE. THE LIABILITY IS PRESENT, THOUGH IT IS TO BE DISCHARGED AT A FUTURE DATE. IT DOES NOT MAKE A DIFFERENCE IF THE FUTURE DATE ON WHICH SUCH LIABILITY SHALL HA VE TO BE DISCHARGED IS NOT CERTAIN. THE HON'BLE APEX COURT DECIDED THAT THE LIABILITY I S NOT A CONTINGENT LIABILITY AND THE AMOUNT IS ENTITLED TO DEDUCTION. 6.3.2 WE HAVE ALSO PERUSED THE DECISION OF THE HON'BLE HIGH COURT OF CALCUTTA IN THE CASE OF EXIDE INDUSTRIES (SUPRA). AS SEEN FROM THE RECORDS OF ASSESSMENT AND THE ORDERS OF THE AUTHORITIES BELOW, THE DISALLOWANCE O F THE ASSESSEES CLAIM FOR DEDUCTION ON ACCOUNT OF PROVISION MADE FOR PRIVILEGE LEAVE EN CASHMENT WAS MADE BY INVOKING THE PROVISIONS OF SECTION 43B(F) OF THE ACT. WE FIND T HAT IN THE CASE OF EXIDE INDUSTRIES LTD. (SUPRA), THE HON'BLE COURT WHILE CONSIDERING T HE ISSUE OF ALLOWABILITY OF ENCASHMENT OF LEAVE HAD STRUCK DOWN THE PROVISIONS OF SECTION 43B(F) OF THE ACT AS BEING ARBITRARY AND UNCONSCIONABLE AND IN PARAS 10 TO 13 THEREOF HAVE HELD AS UNDER : 10. THE SAID SECTION HAD UNDERGONE SEVERAL CHANGE S FROM TIME TO TIME AND ON EACH AND EVERY OCCASION THE LEGISLATURE CAME OUT WITH THE OBJECTS AND REASONS DISCLOSED THEREFOR. IN 1990 DEDUCTION ON AC COUNT OF UNPAID LOAN TO ANY PUBLIC FINANCIAL INSTITUTION OR A STATE FINANCI AL INSTITUTION WAS ROPED IN. BY A FURTHER AMENDMENT IN 1996 UNPAID LOAN OF SCHED ULED BANK WAS ALSO INCORPORATED. ON EACH SUCH OCCASION OBJECTS AND REA SONS WERE DISCLOSED. WHILE INSERTING CLAUSE (F) NO SPECIAL REASONS WERE DISCLOSED. HIS LORDSHIP HELD THAT SUCH DISCLOSURE WAS NOT MANDATORY. WE DO NOT HAVE ANY REASON FOR DISAGREEMENT ON SUCH ISSUE PROVIDED THE SUBJECT AME NDMENT COULD BE TERMED AS IN FURTHERANCE TO WIDEN THE SCOPE OF THE ORIGINAL SECTION ON THE IDENTICAL OBJECTS AND REASONS AS DISCLOSED AT THE T IME OF ENACTING THE ORIGINAL PROVISION. AS WE FIND, THE ORIGINAL SECTIO N WAS INCORPORATED TO PLUG IN DEDUCTIONS CLAIMED BY NOT DISCHARGING STATUTORY LIA BILITIES. WE ALSO FIND THAT PROVISION WAS SUBSEQUENTLY MADE TO RESTRICT DE DUCTIONS ON ACCOUNT OF UNPAID LOAN TO THE FINANCIAL INSTITUTIONS. LEAVE EN CASHMENT IS NEITHER STATUTORY LIABILITY NOR A CONTINGENT LIABILITY. IT WAS A PROVISION TO BE MADE FOR THE ENTITLEMENT OF AN EMPLOYEE ACHIEVED IN A PA RTICULAR FINANCIAL YEAR. 6 ITA NOS.146 & 224/BANG/11 AN EMPLOYEE EARNS CERTAIN AMOUNT BY NOT TAKING LEAV E WHICH HE OR SHE IS OTHERWISE ENTITLED TO IN THAT PARTICULAR YEAR. HENC E, THE EMPLOYER IS OBLIGED TO MAKE APPROPRIATE PROVISION FOR THE SAID AMOUNT. ONCE THE EMPLOYEE RETIRES HE OR SHE HAS TO BE PAID SUCH SUM ON CUMULA TIVE BASIS WHICH THE EMPLOYEE EARNS THROUGHOUT HIS OR HER SERVICE CAREER UNLESS HE OR SHE AVAILS THE LEAVE EARNED BY HIM OR HER. THAT, IN OUR VIEW, COULD NOT HAVE ANY NEXUS WITH THE ORIGINAL ENACTMENT. AN EMPLOYER IS ENTITLE D TO DEDUCTION FOR THE EXPENDITURE HE INCURS FOR RUNNING HIS BUSINESS WHIC H INCLUDES PAYMENT OF SALARY AND OTHER PERQUISITES TO HIS EMPLOYEES. HENC E, IT IS A TRADING LIABILITY. AS SUCH HE IS OTHERWISE ENTITLED TO HAVE DEDUCTION OF SUCH AMOUNT BY SHOWING THE SAME AS A PROVISIONAL EXPENDITURE IN HI S ACCOUNTS. THE LEGISLATURE BY WAY OF AMENDMENT RESTRICTS SUCH DEDU CTION IN CASE OF LEAVE ENCASHMENT UNLESS IT IS ACTUALLY PAID IN THAT PARTI CULAR FINANCIAL YEAR. THE LEGISLATURE IS FREE TO DO SO AFTER THEY DISCLOSE RE ASONS FOR THAT AND SUCH REASONS ARE NOT INCONSISTENT WITH THE MAIN OBJECT O F THE ENACTMENT. WE ARE DEPRIVED OF SUCH REASONS FOR OUR PERUSAL. MR. BANER JEE, APPEARING FOR THE REVENUE, COULD NOT ENLIGHTEN US ON THAT SCORE. WE A LSO DO NOT FIND SUCH ENACTMENT CONSISTENT WITH THE ORIGINAL PROVISION BE ING SECTION 43B WHICH WAS ORIGINALLY INSERTED TO PLUG IN EVASION OF STATU TORY LIABILITY. THE APEX COURT CONSIDERED THE SITUATION IN THE CASE OF BHARA T EARTH MOVERS (SUPRA), WHEN CLAUSE (F) WAS NOT THERE. THE APEX COURT, CONS IDERING ALL ASPECTS AS DISCLOSED BY US HEREINBEFORE, REJECTED THE CONTENTI ON OF THE REVENUE AND GRANTED APPROPRIATE DEDUCTION TO THE CONCERNED ASSE SSEE. THE LEGISLATURE TO GET RID OF THE DECISION OF THE APEX COURT BROUGH T OUT THE AMENDMENT WHICH WOULD OTHERWISE NULLIFY THE JUDGE MADE LAW. T HE APEX COURT DECISIONS ARE JUDGE-MADE LAW AND ARE APPLICABLE TO ALL UNDER THE CONSTITUTION. WE, NOT FOR A SINGLE MOMENT, OBSERVE THAT LEGISLATURE WAS N OT ENTITLED TO BRING SUCH AMENDMENT. THEY WERE WITHIN THEIR POWER TO BRING SU CH AMENDMENT. HOWEVER, THEY MUST DISCLOSE REASON WHICH WOULD BE C ONSISTENT WITH THE PROVISIONS OF THE CONSTITUTION AND THE LAWS OF THE LAND AND NOT FOR THE SOLE OBJECT OF NULLIFYING THE APEX COURT DECISION. 11. IN THIS REGARD THE OBSERVATION OF THE APEX COUR T IN THE CASE OF BHARAT EARTH MOVERS (SUPRA) IS QUOTED BELOW: THE LAW IS SETTLED: IF A BUSINESS LIABILITY HAS DEF INITELY ARISEN IN THE ACCOUNTING YEAR, THE DEDUCTION SHOULD BE ALLOWED AL THOUGH THE LIABILITY MAY HAVE TO BE QUANTIFIED AND DISCHARGED AT A FUTURE DA TE. WHAT SHOULD BE CERTAIN IS THE INCURRING OF THE LIABILITY. IT SHOUL D ALSO BE CAPABLE OF BEING ESTIMATED WITH REASONABLE CERTAINTY THOUGH THE ACTU AL QUANTIFICATION MAY NOT BE POSSIBLE. IF THESE REQUIREMENTS ARE SATISFIE D THE LIABILITY IS NOT A CONTINGENT ONE. THE LIABILITY IS IN PRAESENTI THOUG H IT WILL BE DISCHARGED AT A FUTURE DATE. IT DOES NOT MAKE ANY DIFFERENCE IF THE FUTURE DATE ON WHICH THE LIABILITY SHALL HAVE TO BE DISCHARGED IS NOT CE RTAIN.... 7 ITA NOS.146 & 224/BANG/11 APPLYING THE ABOVESAID SETTLED PRINCIPLES TO THE FA CTS OF THE CASE AT HAND WE ARE SATISFIED THAT THE PROVISION MADE BY THE APP ELLANT COMPANY FOR MEETING THE LIABILITY INCURRED BY IT UNDER THE LEAV E ENCASHMENT SCHEME PROPORTIONATE WITH THE ENTITLEMENT EARNED BY EMPLOY EES OF THE COMPANY, INCLUSIVE OF THE OFFICERS AND THE STAFF, SUBJECT TO THE CEILING ON ACCUMULATION AS APPLICABLE ON THE RELEVANT DATE, IS ENTITLED TO DEDUCTION OUT OF THE GROSS RECEIPTS FOR THE ACCOUNTING YEAR DURIN G WHICH THE PROVISION IS MADE FOR THE LIABILITY. THE LIABILITY IS NOT A CONT INGENT LIABILITY. THE HIGH COURT WAS NOT RIGHT IN TAKING THE VIEW TO THE CONTR ARY. 12. WITH DEEPEST REGARD WE HAVE FOR HIS LORDSHIP, W E ARE UNABLE TO AGREE WITH HIS LORDSHIP ON THIS ISSUE. 13. THE APPEAL SUCCEEDS AND IS ALLOWED. SECTION 43B (F) IS STRUCK DOWN BEING ARBITRARY, UNCONSCIONABLE AND DE HORS THE APEX COUR T DECISION IN THE CASE OF BHARAT EARTH MOVERS (SUPRA). 6.3.3 IN VIEW OF THE FACTS AND CIRCUMSTANCES O F THE CASE AS DISCUSSED ABOVE AND IN ACCORDANCE WITH THE RATIO AND REASONING LAID DOWN B Y THE HON'BLE APEX COURT IN THE CASE OF BEML (SUPRA) AND THE FACT THAT THE HON'BLE HIGH COURT OF CALCUTTA IN THE CASE OF EXIDE INDUSTRIES LTD. (SURPA) STRUCK DOWN THE PR OVISIONS OF SECTION 43B(F) OF THE ACT, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSE ES CLAIM FOR DEDUCTION OF THE PROVISION FOR PRIVILEGE LEAVE ENCASHMENT IS NOT A C ONTINGENT LIABILITY AND IS TO BE ALLOWED. IT IS ORDERED ACCORDINGLY. ITA NO.224/BANG/2011 (REVENUES APPEAL) 7.1 THE GROUNDS OF APPEAL RAISED BY REVENUE AR E AS UNDER : 1. THE LEARNED CIT(A) ERRED IN HOLDING THAT AMORT IZATION OF PREMIUM PAID ON GOVERNMENT SECURITIES IS AN ALLOWABLE EXPENDITUR E IGNORING THE PARA 2(VI) OF THE CBDT INSTRUCTION NO.17 OF 2008 DATED 26/11/ 2008. 2. THE LEARNED CIT(A) ERRED IN HOLDING THAT AMOR TIZATION OF PREMIUM PAID ON GOVERNMENT SECURITIES OVER REMAINING LIFE OF THE SECURITIES AS AN ALLOWABLE EXPENDITURE IGNORING THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF VIJAY BANK VS. ADDL. CIT 187 ITR 541 ( SC) 8 ITA NOS.146 & 224/BANG/11 7.2 THE LEARNED DEPARTMENTAL REPRESENTATIVE SUB MITTED THAT THE LEARNED CIT(A) ERRED IN HOLDING THAT THE AMORTIZATION OF PREMIUM P AID ON GOVT. SECURITIES IS AN ALLOWABLE EXPENDITURE IGNORING THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF VIJAYA BANK REPORTED IN 187 ITR 541 IN PARA 2(VII) OF CBDTS INSTRUCTION NO.17 OF 2008. 7.3 THE LEARNED COUNSEL FOR THE ASSESSEE SUPPOR TED THE FINDING OF THE LEARNED CIT(A) IN DELETING THE DISALLOWANCE OF RS.4,84,11,6 29 MADE BY THE ASSESSING OFFICER IN RESPECT OF AMORTIZATION OF PREMIUM ON PURCHASE OF G OVT. SECURITIES IN ACCORDANCE WITH THE CBDTS INSTRUCTION NO.17 VIDE PARA 2(VII) DT.26 .11.2008. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO PLACED RELIANCE ON THE DECISION O F THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF SIR M. VISHVESHWARAYA CO-OP ERATIVE BANK LTD. VS. JCIT I N ITA NO.1122/BANG/2010 DT.11.5.2012 ( A COPY OF WHICH IS PLACED ON RECORD.) THE LEARNE D COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO PARA 4 TO PARA 8 OF THIS ORDER IN WHICH AN IDENTICAL ISSUE ON AMORTIZATION OF PREMIUM ON IN VESTMENTS WAS EXHAUSTIVELY CONSIDERED BY THIS TRIBUNAL AFTER WHICH IT HELD THA T THE ASSESSEE WAS ENTITLED TO SUCH DEDUCTION. IN THESE CIRCUMSTANCES, THE LEARNED COUN SEL FOR THE ASSESSEE PRAYED THAT SINCE THE DECISION OF THE TRIBUNAL IS SQUARELY APPL ICABLE TO ITS CASE, AND IS IN ITS FAVOUR, REVENUES APPEAL ON THIS POINT IS LIABLE TO BE DISM ISSED. 7.4 WE HAVE HEARD BOTH PARTIES AND HAVE CAREFUL LY PERUSED AND CONSIDERED THE MATERIAL ON RECORD AND THE JUDICIAL DECISIONS CITED OF VARIOUS BENCHES OF THE TRIBUNAL IN RESPECT OF THE ASSESSEES CLAIM FOR DEDUCTION ON AC COUNT OF EXPENDITURE INCURRED ON AMORTIZATION OF PREMIUM ON PURCHASE OF GOVT. SECURI TIES AMOUNTING TO RS.4,84,11,629. 9 ITA NOS.146 & 224/BANG/11 WE FIND FROM A PERUSAL OF THE DECISION OF THE CO-OR DINATE BENCH OF THE TRIBUNAL IN THE CASE OF SIR M. VISHVESWARAYA CO-OP. BANK LTD. (SUPR A) THAT THE TRIBUNAL HAD OCCASION TO CONSIDER A SIMILAR ISSUE OF AMORTIZATION OF PREMIUM ON INVESTMENTS EXHAUSTIVELY AT PARAS 4 TO 8 THEREOF AFTER WHICH IT HELD THAT THE A SSESSEE WAS ENTITLED TO SUCH DEDUCTION. THE OPERATIVE PART OF THE SAID ORDER AT PARA 8 THEREOF, IS AS UNDER : 08. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMI SSIONS AND PERUSED THE RELEVANT FACTS AND MATERIALS ON RECORD. WE HAVE ALS O CONSIDERED THE FINDINGS OF THE VARIOUS BENCHES OF THE TRIBUNAL, AS UNDER : (I) CATHOLIC SYRIAN BANK LTD V. ACIT (2010) 38 SO T 553 (COCH) : AN IDENTICAL ISSUE TO THAT OF THE SUBJECT MATTER UN DER CONSIDERATION HAD ARISEN BEFORE THE COCHIN BENCH. AFTER ANALYZING THE ISSUE IN DEPTH, THE BENCH HAS OBSERVED THAT WITH REGARD TO AMORTIZATION OF PREMIUM ON PURCHASE OF GOVERNMENT SECURITIES, IT WAS CLARIFIED THAT THIS WAS MADE AS PER THE PRUDENTIAL NORMS OF THE RBI. FOLLOWING THE TRIBUNAL DECISION IN THE ASSESSEE'S OWN CASE AND CONSIDERING THAT THE ASSESS EE BANK IS FOLLOWING CONSISTENT AND REGULAR METHOD OF ACCOUNTING SYSTEM, THERE IS NO JUSTIFICATION IN INTERFERING WITH THE ORDER OF THE COMMISSIONER OF INCOME- TAX (APPEALS) ON THIS ISSUE OF AMORTIZATION OF PREM IUM ON GOVERNMENT SECURITIES. UNITED COMMERCIAL BANK V. CIT (1999) 15 6 CTR (SC) 380 ; (1999) 240 ITR 355 (SC) AND SOUTH INDIAN BANK LTD., (ITA NO.126/COCH/2004,DATED.___ SEPT, 2005 FOLLOWED.' (II) THE KHANAPUR CO-OP BANK LTD V. ITO ITA NO.141/PNJ/2011,DATED.8.9.2011: THE HON'BLE BENCH OF PANAJI TRIBUNAL HAD RECORDED I TS FINDINGS THAT '6. LIKEWISE, THE PREMIUM AMORTIZED AT RS.1,78,098/- IS CLAIMED TO BE IN RESPECT OF SECURITIES HELD UNDER THE CATEGORY 'HELD TO MATURITY'. THE ASSESSING OFFICER HAS TAKEN THEM AS LONG TERM INVES TMENTS. IN OTHER WORDS, HE HAS ACCEPTED THE ASSESSEE'S CLAIM THAT TH E SECURITIES ARE 'HELD TO MATURITY'. THAT BEING SO AND HAVING REGARD TO THE C BDT INSTRUCTION NO.17 OF 2008 DATED.26.11.2008 AS REPRODUCED HEREIN ABOVE , THE PREMIUM PAID ON SUCH GOVERNMENT SECURITIES IS REQUIRED TO BE AMORTI ZED OVER THE PERIOD REMAINING TO MATURITY .' (III) IN THE CASE OF CORPORATION BANK V. ACIT, M'LO RE IN ITA.112/BANG/2008 (BANG), FOR THE ASSESSMENT YEAR 2004-05, THE EARLIE R BENCH HAD ALSO HELD A SIMILAR VIEW. IN THE LIGHT OF THE ABOVE DISCUSSION AND THE CASE LAWS DISCUSSED SUPRA, TAKING INTO ACCOUNT THE TOTALITY O F THE FACTS AND MATERIALS, 10 ITA NOS.146 & 224/BANG/11 WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE IS ENTITLED TO CLAIM THIS DEDUCTION AND HENCE WE ALLOW THE GROUNDS OF THE ASS ESSEE RELATING TO THIS ISSUE. RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN THE CASE OF SIR M. VISHVESWARAYA CO-OPERATIVE BANK LTD. (SUPRA), WE HOLD THAT THE AS SESSEE IS ENTITLED TO DEDUCTION ON ACCOUNT OF AMORTIZATION OF PREMIUM ON GOVT. SECURIT IES AND THEREFORE NO INTERFERENCE IS CALLED FOR IN THE ORDER OF THE LEARNED CIT(A). CONSEQUENTLY, THE GROUNDS RAISED BY REVENUE ON THIS ISSUE ARE DISMISSED. 8. IN THE RESULT, THE ASSESSEES APPEAL IS ALLO WED AND REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH JUNE, 2012. SD/- SD/- (N.V. VASUDEVAN) (JASON P BOAZ) JUDICIAL MEMBER ACCOUNTANT MEMB ER BANGALORE, DATED: 15.06.2012. *REDDY GP COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, - B BENCH. 6. GUARD FILE. (TRUE COPY ) BY ORDER SR. PRIVATE SECRETARY, ITAT, BANGALORE