Shri Mahalaxmi Co.op. Bank Ltd., Kolhapur V. Deputy Commissioner of Income-tax,

ITA 63/PUN/2014

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8532 (ITAT-PUNE)
• Duration Of Justice: 10 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 13-01-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B C MALAKAR
• Assessee Lawyers: S N DOSHI
• Keywords: Capital asset; Cost of acquisition; Bad and doubtful debts; Revenue expenditure; Capital expenditure
• Section: 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI R.S.PADVEKAR, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 63/PN/2014 (ASSESSMENT YEAR : 2010-11)) SHRI MAHALAXMI CO-OP BANK LTD., SHRI BHAVAN, 167, B-WARD, MANGALWAR PETH, KOLHAPUR-416012, MAHARASHTRA .. APPELLANT PAN NO.AAATS3679R VS. DY.CIT, CIRCLE-1, KOLHAPUR .. RESPONDENT ASSESSEE BY : SHRI S.N. DOSHI REVENUE BY : SHRI B.C. MALAKAR DATE OF HEARING : 04-12-2014 DATE OF PRONOUNCEMENT : 09-12-2014 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 22-10-2013 OF THE CIT(A), KOLHAPUR RELA TING TO ASSESSMENT YEAR 2010-11. 2. GROUND OF APPEAL NO.1 BY THE ASSESSEE READS AS U NDER : 1. THE LEARNED CIT (APPEALS) ERRED ON FACTS AND IN LAW I N RESTRICTING THE DEDUCTION TO THE EXTENT OF AMOUNT OF PROVISION MADE IN THE BOOKS, FOR BAD AND DOUBTFUL DEBT I.E. RS . 58,00,000/- AND THERE BY DISALLOWING DEDUCTION OF RS.1,07,58,930/ -. THE ACTUAL CLAIM MADE BY ASSESSEE IS CORRECT. HON CIT (APPEALS) REL IED ON THE INSTRUCTION NO. 17 OF 2008, IN WHICH CBDT INTERPRETE D THE PROVISION OF SECTION 36(1)(VIIA). INTERPRETATION OF ST ATUTORY PROVISION IS BEYOND THE POWER OF CBDT. THEREFORE DECI SION GIVEN BY HON. CIT (APPEALS) ON THE BASIS OF INSTRUCTION OF CB DT IS WRONG. THE ADDITION MADE PLEASE BE DELETED. 2 2.1 THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET SUBMITTED THAT THIS ISSUE STANDS DECIDED AGAINST THE ASSESSEE BY T HE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.Y. 2008-0 9 VIDE ITA NO.1658/PN/2011 ORDER DATED 29-10-2013 WHICH HAS BE EN FOLLOWED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN A.Y. 2009-10 VIDE ITA NO.162/PN/2013. THEREFORE, THIS GROUND HA S TO BE DECIDED AGAINST THE ASSESSEE. THE LD. DEPARTMENTAL REPRESENTATIVE HAS NO OBJECTION FOR THE ABOVE PROPO SITION. THEREFORE, FOLLOWING THE DECISION OF THE TRIBUNAL I N ASSESSEES OWN CASE FOR A.YRS. 2008-09 AND 2009-10, THE ABOVE GROUND BY THE ASSESSEE IS DISMISSED. 3. GROUND OF APPEAL NO.2 BY THE ASSESSEE READS AS U NDER : 2. HON CIT (APPEALS) ERRED ON FACTS AND LAW BY ADD ING AMOUNT OF RS.64,66,409/-ON ACCOUNT OF INTEREST ON NPA ACCOUN TS WHICH IS NOT RECOGNIZED AS INCOME. TREATMENT OF INTEREST HAS BE EN CORRECTLY MADE AS PRESCRIBED BY RBI. THIS BEING A COVE RED ISSUE, THE LEARNED CIT (A) HAS IGNORED THE JURISDICTIONAL TR IBUNAL DECISIONS ON THE ISSUE. THE ADDITION OF ABOVE AMOUNT ON THIS ACCOUNT PLEASE BE DELETED. 3.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE AO DU RING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT INTEREST RECEI VABLE OR ACCRUED ON THE NPAS HAS NOT BEEN CREDITED OR OFFERED FOR TA XATION BY THE ASSESSEE IN THE PROFIT AND LOSS ACCOUNT. THE AMOUN T OF SUCH INTEREST WAS RS.64,66,409/-. REJECTING THE VARIOUS EXPLANATIONS GIVEN BY THE ASSESSEE AND FOLLOWING CDBT GUIDELINES VIDE INSTRUCTION NO.17/2008 DATED 26-11-2008 THE AO ADDE D THE ABOVE AMOUNT TO THE TOTAL INCOME OF THE ASSESSEE. 3 3.2 IN APPEAL THE LD.CIT(A) CONFIRMED THE ADDITION MADE BY THE AO. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) TH E ASSESSEE IS IN APPEAL BEFORE US. 4. AFTER HEARING BOTH THE SIDES, WE FIND AN IDENTIC AL ISSUE HAD COME UP BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR AND THE TRIBU NAL VIDE ITA NO.384/PN/2013 ORDER DATED 16-04-2014 HAS DISMISSED THE APPEAL FILED BY THE REVENUE ON THIS ISSUE BY OBSERVING AS UNDER: 8. BRIEFLY PUT THE CONTROVERSY IN THIS APPEAL CAN BE SUMMARIZED AS FOLLOWS. THE ASSESSEE IS A CO-OPERATIVE BANK CARRYING ON BANKING BUSINESS IN TERMS OF A LICENSE ISSUED BY RESERVE BANK OF INDIA (RBI). THE ASSESSEE BEING A CO-OP ERATIVE BANK OPERATING UNDER LICENSE FROM RBI IS GOVERNED BY CIRCULARS OF RBI RELATING TO PRUDENTIAL NORMS, INCOME RECOGNITION , ASSET CLASSIFICATION, PROVISIONING AND OTHER RELATED MATTERS. IN TERMS OF SUCH PRUDENTIAL NORMS OF RBI, ASSESSEE DID NOT ACCOUNT FO R INTEREST RELATABLE TO NPAS I.E. ADVANCES TO CUSTOMERS WH ICH WERE CLASSIFIED AS NPAS IN TERMS OF THE PRUDENTIAL NORMS OF RB I. THE ASSESSING OFFICER WAS OF THE OPINION THAT INTEREST INCOME EVEN IN RELATION TO SUCH NPAS WAS LIABLE TO BE INCLUDED HAVIN G REGARD TO THE MERCANTILE SYSTEM OF ACCOUNTING FOLLOWED BY THE A SSESSEE. AS PER THE REVENUE, THE PROVISIONS OF SECTION 43D OF THE ACT, WHICH PROVIDES THAT INTEREST INCOME RELATABLE TO NPAS CLASSIFI ED AS PER THE RBI GUIDELINES SHALL BE CHARGED TO TAX IN THE YEA R IN WHICH IT IS CREDITED OR RECEIVED BY THE ASSESSEE, WHICHEVER IS EARLI ER, WAS NOT APPLICABLE TO THE ASSESSEE, SINCE THE ASSESSEE WAS NOT A SC HEDULED BANK. NOTABLY, SECTION 43D OF THE ACT PRESCRIBES THAT IN CASE OF PUBLIC FINANCIAL INSTITUTION, OR A SCHEDULED BANK OR A STATE FINANCIAL CORPORATION OR A STATE INDUSTRIAL INVESTME NT CORPORATION, INCOME BY WAY OF INTEREST IN RELATION TO SUCH CATEGOR IES OF BAD OR DOUBTFUL DEBTS AS MAY BE PRESCRIBED HAVING REGARD TO T HE GUIDELINES ISSUED BY THE RBI OR IN CASES OF PUBLIC COMP ANIES, INCOME BAY WAY OF INTEREST IN RELATION TO SUCH CATEGO RIES OF DEBTS AS MAY BE HAVING REGARD TO THE GUIDELINES ISSUED BY THE NATIONAL HOUSING BANK SHALL BE CHARGEABLE TO TAX IN THE PREVIO US YEAR IN WHICH SUCH INCOME IS CREDITED BY THE AFORESAID PRESCRIB ED ENTITIES TO THEIR PROFIT AND LOSS ACCOUNT OR IN THE YEAR WHEN IT IS ACTUALLY RECEIVED, WHICHEVER IS EARLIER. THE ASSESSING OFFICER NO TED THAT ASSESSEE WAS NOT AN ENTITY PRESCRIBED IN SECTION 43D OF TH E ACT AND THEREFORE THE ASSESSEE HAVING FOLLOWED THE MERCANT ILE SYSTEM OF ACCOUNTING DID NOT HAVE THE OPTION OF ACCOUNTING FOR INTEREST INCOME RELATING TO NPAS ADVANCES ON RECEIPT BASIS. THE REFORE, ACCORDING TO THE ASSESSING OFFICER, INTEREST OF NPAS ACCR UED TO THE ASSESSEE AND ACCORDINGLY, HE BROUGHT TO TAX SUCH INTEREST INCOME OF RS.57,19,885/-. 4 9. THE LEARNED CIT(A) DISAGREED WITH THE ASSESSING OFFI CER, AND THUS THE REVENUE IS IN APPEAL BEFORE US. AT THE T IME OF HEARING, IT WAS A COMMON POINT BETWEEN THE PARTIES TH AT AN IDENTICAL CONTROVERSY HAS BEEN CONSIDERED BY THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. THE OMERGA JANT A SAHAKARI BANK LTD. VIDE ORDER IN ITA NO.350/PN/2013 DATED 31 .10.2013. IN THE SAID PRECEDENT THE PUNE BENCH OF THE TRIBUNAL CONSIDERED THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF M/S VASISTH CHAY VYAPAR LTD., 330 ITR 440 (DEL) AS WELL AS THE JUDGEMENT OF THE HONBLE MADRAS HIGH COURT IN THE CA SE OF CIT VS. SAKTHI FINANCE LTD., (2013) 31 TAXMANN.COM 305 (MAD RAS) WHICH WERE DIVERGENT WITH RESPECT TO THE ISSUE OF ACCRUAL OF INTEREST INCOME ON NPA ADVANCES, AND FOLLOWING THE PROPOSITION THAT IN THE ABSENCE OF ANY JUDGEMENT OF THE JURISDICTIONAL HI GH COURT, THERE BEING TWO CONTRARY JUDGEMENTS OF THE NON-JURISD ICTIONAL HIGH COURTS, A DECISION WHICH WAS FAVOURABLE TO THE A SSESSEE WAS TO BE FOLLOWED IN VIEW OF THE PARITY OF REASONING LA ID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. VEGETABL E PRODUCTS LTD., (1973) 88 ITR 192 (SC), THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE. THE RELEVANT DISCUSSION IN THE ORDER OF THE TRIBUNAL DATED 31.10.2013 (SUPRA) IS REPRODUCED AS UNDER :- 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSION S. IN SO FAR AS THE APPLICABILITY OF SECTION 43D OF THE A CT TO THE ASSESSEE IS CONCERNED, THERE IS A CONVERGENCE OF OPINION BETWEEN THE ASSESSEE AND THE REVENUE TO THE EFFECT THAT THE SAME IS NOT APPLICABLE TO THE ASSESSEE. OSTENSIBLY, ASSESSEE IS A CO-OPERATIVE BANK CARRYING ON BANKING BUSINESS IN TERMS OF A LICENSE GRANTED BY RBI AND IS NOT A SCHEDULED BANK INCLUDED IN SECOND SCHEDULE OF RBI S O AS TO FALL WITHIN THE SCOPE OF SECTION 43D OF THE ACT. NOTABLY, SECTION 43D OF THE ACT PRESCRIBES THAT INTEREST INCOME ON SUCH CATEGORIES OF BAD AND DOUBTFUL DEBTS AS PRESCRIBED BY THE RBI GUIDELINES SHALL BE CHARGEABLE TO TAX IN THE YEAR IN WHICH SUCH INTEREST INCOME IS CREDITED BY THE ASSESSEE IN THE PROFIT AND LOSS ACCOUNT OR IN THE YEAR OF ACTUAL RECEIPT, WHICHEVER IS EARLIER. SINCE ASSESSEE IS NOT AN ENTITY COVERED WITHIN THE SCOPE OF SECTION 43D OF THE ACT, T HE PRESENT CONTROVERSY CANNOT BE ADJUDICATED IN THE LIGH T OF SECTION 43D OF THE ACT, AND IT IS LIABLE TO BE DECIDE D ON GENERAL PRINCIPLES AS TO WHETHER THE IMPUGNED INCOME HAS ACCRUED TO THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. 9. IN THIS CONNECTION, WE FIND THAT THE VISAKHAPATNAM BENCH OF THE TRIBUNAL IN THE CASE OF THE DURGA COOPE RATIVE URBAN BANK LTD. (SUPRA) HAS CONSIDERED AN IDENTICAL CONTROVERSY. THE ASSESSEE BEFORE THE VISAKHAPATNAM BENCH WAS A CO-OPERATIVE BANK OPERATING UNDER A LICE NSE ISSUED BY RBI BUT WAS NOT A SCHEDULED BANK SO AS TO FAL L WITHIN THE SCOPE OF SECTION 43D OF THE ACT. THE ISSU E RELATED TO TAXABILITY OF INTEREST INCOME RELATING TO NPAS, WHICH AS PER THE REVENUE WAS LIABLE TO BE TAXED ON AC CRUAL BASIS IN LINE WITH MERCANTILE SYSTEM OF ACCOUNTING ADOP TED BY THE ASSESSEE THEREIN. THE ASSESSEE, ON THE OTHER HAND, CONTENDED THAT HAVING REGARD TO THE GUIDELINES ISSUED BY RBI REGARDING ACCOUNTING OF INTEREST ON NPAS, NO INTE REST 5 INCOME ACCRUED IN RESPECT OF NPAS AND THAT THE SAME W AS TO BE TAXED ONLY ON RECEIPT BASIS. THE TRIBUNAL OBSE RVED THAT THE QUESTION OF TAXABILITY OF INTEREST ON NPAS CL ASSIFIED BY RBI, WAS CONSIDERED BY THE HONBLE DELHI HIGH COUR T IN THE CASE OF M/S VASISTH CHAY VYAPAR LTD. (SUPRA) WHEREI N AFTER CONSIDERING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF SOUTHERN TECHNOLOGIES LTD. (SUPRA ) IT WAS HELD THAT INTEREST INCOME RELATABLE TO NPAS WAS NO T INCLUDIBLE IN TOTAL INCOME ON ACCRUAL BASIS SINCE THE SAME DID NOT ACCRUE TO THE ASSESSEE. THE FOLLOWING DISCUSSION BY THE VISAKHAPATNAM BENCH OF THE TRIBUNAL IN THE CASE O F THE DURGA COOPERATIVE URBAN BANK LTD. (SUPRA) IS WORTHY O F NOTICE :- 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFULL Y PERUSED THE RECORD. THE QUESTION OF TAXABILITY OF INT EREST ON NPAS HAS BEEN CONSIDERED BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF M/S VASISTH CHAY VYAPAR LTD (SUPRA ); WHEREIN THE HON'BLE DELHI HIGH COURT TOOK INTO ACCO UNT THE DECISION RENDERED BY THE HON'BLE SUPREME COURT IN TH E CASE OF SOUTHERN TECHNOLOGIES LTD (SUPRA). IN THE CAS E OF M/S VASISTH CHAY VYAPAR LTD, THE ASSESSEE THEREIN WAS A NON BANKING FINANCIAL COMPANY AND IT WAS ALSO BOUND B Y THE PRUDENTIAL NORMS DIRECTIONS ISSUED BY THE RESERVE BANK OF INDIA FOR INCOME RECOGNITION AND ASSET CLASSIFICATION. THE ASSESSEE DID NOT INCLUDE THE INTERES T INCOME RELATABLE TO NPA ASSETS IN ITS TOTAL INCOME. THE ASSESSING OFFICER, HOWEVER, ADDED THE SAID INTEREST AS TH E INCOME OF THE ASSESSEE BY HOLDING THAT IT HAD ACCRUED TO THE ASSESSEE EVEN IT WAS NOT REALIZED AS THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. THE LEARNE D CIT (A) AFFIRMED THE ORDER OF THE ASSESSING OFFICER. HOWEVE R, THE ITAT DELETED THE AFORESAID INCOME. HENCE THE REV ENUE PREFERRED APPEAL BEFORE THE HON'BLE DELHI HIGH COUR T. 8.1 AFTER HEARING THE RIVAL SUBMISSIONS, THE HON'BLE DELHI HIGH COURT TOOK NOTE OF SEC.45Q OF RESERVE BAN K OF INDIA ACT WHICH READS AS UNDER: CHAPTER IIIB TO OVERRIDE OTHER LAWS. 45Q. THE PROVISIONS OF THIS CHAPTER SHALL HAVE EFFECT NOTWITHSTANDING ANYTHING INCONSISTENT THEREWITH CONTAINED IN ANY OTHER LAW FOR THE TIME BEING IN FORCE OR ANY INSTRUMENT HAVING EFFECT BY VIRTUE OF ANY SUCH LAW. THE HIGH COURT TOOK NOTE OF THE FACT THAT THE PROVI SION OF 45Q OF RESERVE BANK OF INDIA HAS OVERRIDING EFFECT OV ER ANY OTHER LAW. THEN THE HON'BLE HIGH COURT ALSO CONSIDERE D ACCOUNTING STANDARD AS-9 ON REVENUE RECOGNITION AND ALSO EXTRACTED FOLLOWING RELEVANT PORTION FROM THE S AID ACCOUNTING STANDARD: 6 9. EFFECT OF UNCERTAINTIES ON REVENUE RECOGNITION 9.1 RECOGNITION OF REVENUE REQUIRES THAT REVENUE IS A MEASURABLE AND THAT AT THE TIME OF SALE OR THE RENDER ING OF THE SERVICE, IT WOULD NOT BE UNREASONABLE TO EXPECT ULTIMATE COLLECTION. 9.2 WHERE THE ABILITY TO ASSESS THE ULTIMATE COLLECTION WITH REASONABLE CERTAINTY IS LACKING AT THE TIME OF R AISING ANY CLAIM, E.G., FOR ESCALATION OF PRICE, EXPORT INC ENTIVES, INTEREST ETC., REVENUE RECOGNITION IS POSTPONED TO TH E EXTENT OF UNCERTAINTY INVOLVED. IN SUCH CASES, IT MAY BE APPROPRIATE TO RECOGNIZE REVENUE ONLY WHEN IT IS REASONABLY CERTAIN THAT THE ULTIMATE COLLECTION WILL BE MADE. WHERE THERE IS NO UNCERTAINTY AS TO ULTIMATE COLLECTION, REVENUE IS RECOGNIZED AT THE TIME OF SALE OR RENDERING OF SERVICE EVEN THOUGH PAYMENTS ARE MADE BY INSTALMENTS. 9.3 WHEN THE UNCERTAINTY RELATING TO COLLECTABILITY ARISES SUBSEQUENT TO THE TIME OF SALE OR THE RENDERING O F THE SERVICE, IT IS MORE APPROPRIATE TO MAKE A SEPARATE PROVISION TO REFLECT THE UNCERTAINTY RATHER THAN TO ADJUST THE AMOUNT OF REVENUE ORIGINALLY RECORDED. 9.4 AN ESSENTIAL CRITERION FOR THE RECOGNITION OF REV ENUE IS THAT THE CONSIDERATION RECEIVABLE FOR THE SALE OF G OODS, THE RENDERING OF SERVICES OR FROM THE USE OF OTHERS OF ENTERPRISE RESOURCES IS REASONABLY DETERMINABLE. WHEN SUCH CONSIDERATION IS NOT DETERMINABLE WITHIN REASONABL E LIMITS, THE RECOGNITION OF REVENUE IS POSTPONED. 9.5 WHEN RECOGNITION OF REVENUE IS POSTPONED DUE TO THE EFFECT OF UNCERTAINTIES, IT IS CONSIDERED AS REVEN UE OF THE PERIOD IN WHICH IT IS PROPERLY RECOGNIZED. 8.2 THE DELHI HIGH COURT ALSO CONSIDERED THE DECISION RENDERED IN THE FOLLOWING CASES: I) CIT VS. ELGI FINANCE LTD., 293 ITR 357 (MAD) II) CIT VS. KKM INVESTMENTS (CAL) SLP DISMISSED BY SUPREME COURT (310 ITR 4) III) CIT VS. MOTOR CREDIT CO (P) LTD., 127 ITR 572 (MAD) IV) UCO BANK VS. CIT 237 ITR 889 (SC) V) CIT VS. SHOORJI VALLABHDAS & CO 46 ITR 144 (SC) VI) GODHRA ELECTRICITY CO. LTD., VS.CIT 225 ITR 746 VII) CIT VS. GOYAL M G GASES (P) LTD., 303 ITR 159 (DEL) VIII) CIT VS. EICHER LTD., ITA NO.431/2009 DATED 15.7.2009 (DEL) 8.3 AFTER CONSIDERING THE ACCOUNTING STANDARD 9 AND THE VARIOUS CASE LAW LISTED ABOVE, THE HON'BLE DELHI H IGH COURT HELD THAT THE INTEREST ON NPA ADVANCE CANNOT B E TREATED AS ACCRUED TO THE ASSESSEE. 7 8.4 BEFORE THE DELHI HIGH COURT, THE REVENUE TOOK SUPPORT OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF SOUTHERN TECHNOLOGIES LTD (SUPRA). THE DE LHI HIGH COURT CONSIDERED THE SAID DECISION OF HON'BLE APE X COURT AND EXPLAINED THE SAME AS UNDER: WE HAVE ALREADY HELD THAT EVEN UNDER THE INCOME TAX ACT, INTEREST INCOME HAD NOT ACCRUED. MOREOVER, THIS SUBMISSION OF MR. SABHARWAL IS BASED ENTIRELY ON THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF SOUTHERN TECHNOLOGY (SUPRA). NO DOUBT, IN FIRST BLUSH, READING OF THE JUDGMENT GIVES AN INDICATION THAT THE COURT HAS HELD THAT RESERVE BANK OF INDIA ACT DOES NOT OVERRIDE THE PROVISIONS OF THE INCOME TAX ACT. HOWEVER, WHEN WE EXAMINE THE ISSUE INVOLVED THEREIN MINUTELY AND DEEPLY IN THE CONTEXT IN WHICH THAT HAD ARISEN AND CERTAIN OBSERVATIONS OF THE APEX COURT CONTAINED IN THAT VERY JUDGMENT, WE FIND THAT THE PROPOSITION ADVANCED BY MR.SABHARWAL MAY NOT BE ENTIRELY CORRECT. IN THE CASE BEFORE THE SUPREME COURT, THE ASSESSEE A NBFC DEBITED RS.81,68,516 AS PROVISION AGAINST NPA IN THE PROFIT AND LOSS ACCOUNT, WHICH WAS CLAIMED AS DEDUCTION IN TERMS OF SECTION 36(1) (VII) OF THE ACT. THE ASSESSING OFFICER DID NOT ALLOW THE DEDUCTION CLAIMED AS AFORESAID ON THE GROUND THAT THE PROVISION OF NPA WAS NOT IN THE NATURE OF EXPENDITURE OR LOSS BUT MORE IN THE NATURE OF A RESERVE, AND THUS NOT DEDUCTIBLE UNDER SECTION 36(I)(VII) OF THE ACT. THE ASSESSING OFFICER, HOWEVER, DID NOT BRING TO TAX RS.20,34,605/- AS INCOME (BEING INCOME ACCRUED UNDER THE MERCANTILE SYSTEM OF ACCOUNTING). THE DISPUTE BEFORE THE APEX COURT CENTERED AROUND DEDUCTIBILITY OF PROVISION FOR NPA. AFTER ANALYZING THE PROVISIONS OF THE RESERVE BANK OF INDIA ACT, THEIR LORDSHIPS OF THE APEX COURT OBSERVED THAT IN SO FAR AS THE PERMISSIBLE DEDUCTIONS OR EXCLUSIONS UNDER THE ACT ARE CONCERNED, THE SAME ARE ADMISSIBLE ONLY IF SUCH DEDUCTIONS/EXCLUSIONS SATISFY THE RELEVANT CONDITIONS STIPULATED THEREFORE UNDER THE ACT. TO THAT EXTENT, IT WAS OBSERVED THAT THE PRUDENTIAL NORMS DO NOT OVERRIDE THE PROVISIONS OF THE ACT. HOWEVER, THE APEX COURT MADE A DISTINCTION WITH REGARD TO INCOME RECOGNITION AND HELD THAT INCOME HAD TO BE RECOGNIZED IN TERMS OF THE PRUDENTIAL NORMS, EVEN THOUGH THE SAME DEVIATED FROM MERCANTILE SYSTEM OF ACCOUNTING AND/OR SECTION 45 (SIC. 145) OF THE INCOME TAX ACT. IT CAN B E SAID, THEREFORE, THAT THE APEX COURT APPROVED THE REAL INCOME THEORY WHICH IS ENGRAINED IN THE PRUDENTIAL NORMS FOR RECOGNITION OF REVENUE BY NBFC. 9. THE HON'BLE SUPREME COURT IN THE CASE OF M/S SOUTHERN TECHNOLOGIES LTD (SUPRA) DISSECTED THE MATTER INTO TWO PARTS VIZ., A) INCOME RECOGNITION AND B) PERMISSIBLE DEDUCTION/EXCLUSIONS UNDER THE INCOME TAX 8 ACT. IN SO FAR AS INCOME RECOGNITION IS CONCERNED, TH E HON'BLE SUPREME COURT HELD THAT SECTION 145 OF THE INCOME TAX ACT HAS NO ROLE TO PLAY AND THE ASSESSING OFFICER HA S TO FOLLOW RESERVE BANK OF INDIA DIRECTIONS 1998, SINCE BY VIRTUE OF 45Q OF THE RESERVE BANK OF INDIA ACT, AN OVERRIDING EFFECT IS GIVEN TO THE DIRECTIONS OF RESERV E BANK OF INDIA VIS--VIS INCOME RECOGNITION PRINCIPLES IN T HE COMPANIES ACT 1956. IN SO FAR AS COMPUTATION OF INCOME UNDER THE INCOME TAX ACT IS CONCERNED, (WHICH INVOLV ES DEDUCTION OF PERMISSIBLE DEDUCTIONS AND EXCLUSIONS) THE ADMISSIBILITY OF SUCH DEDUCTIONS SHALL BE GOVERNED BY TH E PROVISIONS OF THE INCOME TAX ACT. THE RELEVANT OBSERVATIONS OF THE HON'BLE SUPREME COURT ARE EXTRACT ED BELOW: APPLICABILITY OF SECTION 145 40. AT THE OUTSET, WE MAY STATE THAT IN ESSENCE RBI DIRECTIONS 1998 ARE PRUDENTIAL/PROVISIONING NORMS ISSUED BY RBI UNDER CHAPTER IIIB OF THE RBI ACT, 1934. THESE NORMS DEAL ESSENTIALLY WITH INCOME RECOGNITION. THEY FORCE THE NBFCS TO DISCLOSE THE AMOUNT OF NPA IN THEIR FINANCIAL ACCOUNTS. THEY FORCE THE NBFCS TO REFLECT TRUE AND CORRECT PROFIT S. BY VIRTUE OF SECTION 45Q, AN OVERRIDING EFFECT IS GIVEN TO THE DIRECTIONS 1998 VIS--VIS INCOME RECOGNITION PRINCIPLES IN THE COMPANIES ACT, 1956. THESE DIRECTIONS CONSTITUTE A CODE BY ITSELF. HOWEVER, THESE DIRECTIONS 1998 AND THE IT ACT OPERATE IN DIFFERENT AREAS. THESE DIRECTIONS 1998 HAVE NOTHING TO DO WITH COMPUTATION OF TAXABLE INCOME. THESE DIRECTIONS CANNOT OVERRULE THE PERMISSIBLE DEDUCTIONS OR THEIR EXCLUSION UNDER THE IT ACT. THE INCONSISTENCY BETWEEN THESE DIRECTIONS AND COMPANIES ACT IS ONLY IN THE MATTER OF INCOME RECOGNITION AND PRESENTATION OF FINANCIAL STATEMENTS. THE ACCOUNTING POLICIES ADOPTED BY AN NBFC CANNOT DETERMINE THE TAXABLE INCOME. IT IS WELL SETTLED THAT THE ACCOUNTING POLICIES FOLLOWED BY A COMPANY CAN BE CHANGED UNLESS THE AO COMES TO THE CONCLUSION THAT SUCH CHANGE WOULD RESULT IN UNDERSTATEMENT OF PROFITS. HOWEVER, HERE IS THE CASE WHERE THE AO HAS TO FOLLOW THE RESERVE BANK OF INDIA DIRECTIONS 1998 IN VIEW OF SECTION 45Q OF THE RESERVE BANK OF INDIA ACT. HENCE, AS FAR AS INCOME RECOGNITION IS CONCERNED, SECTION 145 OF THE IT ACT HAS NO ROLE TO PLAY IN THE PRESENT DISPUTE. 10. TURNING TO THE FACTS OF THE CASE BEFORE US, THE ASSESSEE HEREIN IS A COOPERATIVE BANK AND IT IS NOT IN DISPUTE THAT IT IS ALSO GOVERNED BY THE RESERVE BANK OF INDIA. HENCE THE DIRECTIONS WITH REGARD TO THE PRUDE NTIAL NORMS ISSUED BY THE RESERVE BANK OF INDIA ARE EQUALLY APPLICABLE TO THE ASSESSEE AS IT IS APPLICABLE TO THE COMPANIES REGISTERED UNDER THE COMPANIES ACT. THE HON'BLE SUPREME COURT HAS HELD IN THE CASE OF SOUTHER N TECHNOLOGIES LTD (SUPRA), THAT THE PROVISION OF 45Q O F RESERVE BANK OF INDIA ACT HAS AN OVERRIDING EFFECT VI S--VIS 9 INCOME RECOGNITION PRINCIPLE UNDER THE COMPANIES AC T. HENCE SEC.45 Q OF THE RBI ACT SHALL HAVE OVERRIDING EFFECT OVER THE INCOME RECOGNITION PRINCIPLE FOLLOWED BY COOPERATIVE BANKS ALSO. HENCE THE ASSESSING OFFICER HAS T O FOLLOW THE RESERVE BANK OF INDIA DIRECTIONS 1998, AS H ELD BY THE HON'BLE SUPREME COURT. 10.1 BASED ON THE PRUDENTIAL NORMS, THE ASSESSEE HEREIN DID NOT ADMIT THE INTEREST RELATABLE TO NPA ADVANCES IN ITS TOTAL INCOME. THE HON'BLE DELHI HIGH COURT IN THE C ASE OF VASISTH CHAY VYAPAR LTD (SUPRA) HAS HELD THAT THE INTE REST ON NPA ASSETS CANNOT BE SAID TO HAVE ACCRUED TO THE ASSESSEE. IN THIS REGARD, THE FOLLOWING OBSERVATIONS OF HON'BLE DELHI HIGH COURT IN THE ABOVE CITED CASE ARE RELEVANT: WHAT TO TALK OF INTEREST, EVEN THE PRINCIPLE AMOUN T ITSELF HAD BECOME DOUBTFUL TO RECOVER. IN THIS SCENARIO IT WAS LEGITIMATE MOVE TO INFER THAT INTERES T INCOME THEREUPON HAS NOT ACCRUED. THE SAID DECISION OF THE HON'BLE DELHI HIGH COURT IS E QUALLY APPLICABLE TO THE ISSUE IN OUR HANDS. ACCORDINGLY WE D O NOT FIND ANY INFIRMITY WITH THE DECISION OF THE LEARNED CIT (A) IN HOLDING THAT THE INTEREST INCOME RELATABLE ON NPA ADVANCES DID NOT ACCRUE TO THE ASSESSEE. ACCORDINGLY WE UPHOLD HIS ORDER. 10. FOLLOWING THE AFORESAID DISCUSSION, WHICH HAS BEEN RENDERED ON AN IDENTICAL ISSUE UNDER SIMILAR CIRCUMSTANCES, WE FIND NO REASONS TO INTERFERE WITH THE ULTIMATE CONCLUSION OF THE CIT(A) IN DELETING THE IM PUGNED ADDITION RELATING TO INTEREST INCOME IN RESPECT OF NP AS. 11. SO, HOWEVER, THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS SUBMITTED THAT THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. SAKTHI FINANCE LTD. , (2013) 31 TAXMANN.COM 305 (MADRAS) HAS DIFFERED WITH THE JUDGEMENT OF THE HONBLE DELHI HIGH COURT IN THE CA SE OF M/S VASISTH CHAY VYAPAR LTD. (SUPRA) ON A SIMILAR ISSUE, I .E. RELATING TO INTEREST INCOME ON NPAS. THE LEARNED DEPARTMENTAL REPRESENTATIVE FURTHER POINTED OUT THA T THE HONBLE MADRAS HIGH COURT FOLLOWED THE DECISION OF TH E HONBLE SUPREME COURT IN THE CASE OF SOUTHERN TECHNOLOGIES LTD. (SUPRA) IN HOLDING THAT INTEREST ON NPAS WAS ASSESSABLE TO TAX ON ACCRUAL BASIS. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS PUT-FORTH BY THE LEARNED DEPARTMENTAL REPRESENTATIVE BASED ON THE JUDGEMENT OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF SAKTHI FINANCE LTD. (SUPRA). THE CONTROVERSY BEFORE THE HON BLE MADRAS HIGH COURT RELATED TO NON-RECOGNITION OF INTE REST INCOME ON NPAS BY THE ASSESSEE FOLLOWING THE RBI GUIDELINES. THE HONBLE MADRAS HIGH COURT TOOK THE V IEW THAT THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF SOUTHERN TECHNOLOGIES LTD. (SUPRA) ALSO APPLIE D TO THE INCOME RECOGNITION NORMS PROVIDED BY RBI AND THEREFORE IT HELD THE INTEREST INCOME ON NPAS IS LIABL E TO BE TAXED ON ACCRUAL BASIS AND NOT IN TERMS OF RBIS GUIDEL INES. BUT THE HONBLE DELHI HIGH COURT IN THE CASE OF M/S V ASISTH 10 CHAY VYAPAR LTD. (SUPRA) HAS TAKEN A VIEW THAT SOUTHE RN TECHNOLOGIES LTD. (SUPRA) CASE DID NOT APPLY TO THE IN COME RECOGNITION NORMS PRESCRIBED BY RBI. OSTENSIBLY, THER E IS DIVERGENCE OF OPINION BETWEEN THE HONBLE DELHI HIG H COURT AND THE HONBLE MADRAS HIGH COURT AS NOTED BY T HE HONBLE MADRAS HIGH COURT IN ITS ORDER. 12. IN SO FAR AS, PRESENT CASE IS CONCERNED THERE IS NO JUDGMENT OF THE JURISDICTIONAL HIGH COURT. WE ARE F ACED WITH TWO CONTRARY JUDGMENTS OF THE NON-JURISDICTIONAL HIGH COURT. IN SUCH A SITUATION, WE ARE INCLINED TO PREFE R A VIEW WHICH IS FAVOURABLE OF THE ASSESSEE FOLLOWING THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE O F CIT VS. VEGETABLE PRODUCTS LTD. (1973) 88 ITR 192 (SC). 13. THEREFORE, IN VIEW OF THE AFORESAID DISCUSSION, WE ARE INCLINED TO FOLLOW THE DECISION OF OUR CO-ORDINA TE BENCH IN THE CASE OF THE DURGA COOPERATIVE URBAN BANK LTD. (SUPRA) AND ACCORDINGLY THE ORDER OF THE CIT(A) IS LI ABLE TO THE AFFIRMED. WE HOLD SO. 14. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. 10. SINCE IT WAS A COMMON POINT BETWEEN THE PARTIES T HE FACTS AND CIRCUMSTANCES IN THE PRESENT CASE ARE IDENTICAL TO THOSE CONSIDERED BY US IN THE CASE OF THE OMERGA JANTA SAHAK ARI BANK LTD. (SUPRA) FOLLOWING THE AFORESAID PRECEDENT THE PR ESENT CLAIM OF THE ASSESSEE DESERVES TO BE UPHELD. WE HOLD SO. 4.1 FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSES SEES OWN CASE IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR A ND IN THE ABSENCE OF ANY DISTINGUISHABLE FEATURE BROUGHT ON R ECORD BY THE LD. DEPARTMENTAL REPRESENTATIVE, THE ABOVE GROUND B Y THE ASSESSEE IS ALLOWED. 5. GROUND OF APPEAL NO.3 BY THE ASSESSEE READS AS U NDER : 3. HONBLE CIT (APPEALS) HAS FAILED TO GIVE DEDUCT ION OF 'PREMIUM AMORTISED ON HTM SECURITIES' WHICH WAS NOT CL AIMED AS DEDUCTION IN THE RETURN OF INCOME, BUT WAS CLAIMED DURING ASSESSMENT BEFORE LEARNED AO BY GIVING SEPARATE LETTER. HONBLE CIT (APPEALS) HAS WRONGLY STATED THAT, DETAILS REGARDING AMOUNT OF HTM SECURITY, WORKING OF PREMIUM AND DATE OF MATURITY WERE NOT PROVIDED. BUT ALL THE DETAILS WERE FURNISHED DURING APPEAL PROCEEDINGS AND THESE ARE ON THE RECORD . THIS ADDITIONAL CLAIM OF 'PREMIUM AMORTISED ON HTM SE CURITIES' OF RS.32,98,348/- PLEASE BE ALLOWED. 11 5.1 AFTER HEARING BOTH THE SIDES, WE FIND THE ASSES SEE DID NOT MAKE ANY CLAIM IN RESPECT OF THE PREMIUM AMORTISED ON HTM SECURITIES. BEFORE CIT(A) IT WAS SUBMITTED THAT TH E CLAIM WAS MADE BEFORE THE AO AT THE TIME OF ASSESSMENT BUT TH E AO DID NOT ALLOW THE CLAIM. THEREFORE, THE SAME SHOULD BE ALL OWED AT THE APPELLATE STAGE. REFERRING TO THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. PRUTHVI BROKERS A ND SHAREHOLDERS PVT. LTD., REPORTED IN 349 ITR 336 IT WAS SUBMITTED THAT THE APPELLATE AUTHORITIES ARE ENTITLED TO CONS IDER THE CLAIM MADE BEFORE THE AO WHICH WAS NOT ALLOWED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 5.2 HOWEVER, THE LD.CIT(A) REJECTED THE ABOVE GROUN D OF THE ASSESSEE OBSERVING THAT THE ASSESSEE HAS NOT FURNIS HED DETAILS OF THE EXTENT OF HTM SECURITY, THE WORKING OF THE PREM IUM AND THE DATE OF THE MATURITY OF THE SECURITIES. HE HELD TH AT IN ABSENCE OF THESE FACTS, THE CLAIM OF THE ASSESSEE CANNOT BE EX AMINED. HE ACCORDINGLY REJECTED THE ABOVE GROUND OF THE ASSESS EE. 5.3 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASS ESSEE IS IN APPEAL BEFORE US. 6. AFTER HEARING BOTH THE SIDES, WE FIND AN IDENTIC AL ISSUE HAD COME UP BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR WHERE SUCH CL AIM THOUGH NOT MADE BEFORE THE AO WAS MADE BEFORE THE CIT(A) W HO ALLOWED 12 THE CLAIM OF THE ASSESSEE. ON FURTHER APPEAL BY TH E REVENUE, THE TRIBUNAL UPHELD THE ORDER OF THE CIT(A) AND DISMISS ED THE GROUND RAISED BY THE REVENUE BY OBSERVING AS UNDER : 12. THE SECOND ISSUE RAISED BY THE REVENUE IN ITS APPEA L RELATES TO THE ACTION OF THE CIT(A) IN ALLOWING DEDU CTION OF RS.51,95,263/- REPRESENTING AMORTIZATION OF PREMIUM P AID ON GOVERNMENT SECURITIES. 13. IN THIS CONTEXT, BRIEF FACTS ARE THAT BEFORE THE CIT(A) ASSESSEE RAISED AN ADDITIONAL GROUND WHICH WAS HITHERTO N OT BEFORE THE ASSESSING OFFICER, TO THE EFFECT THAT IT WAS LIABLE TO CLAIM DEDUCTION OF RS.51,95,263/- ON ACCOUNT OF AMORTIZATI ON OF PREMIUM PAID ON GOVERNMENT SECURITIES IN THE CATEGOR Y OF INVESTMENTS HELD TO MATURITY (I.E. HTM). THE SAID PRE MIUM REPRESENTED THE EXCESS OF ACQUISITION COST OVER THE FAC E VALUE OF THE SECURITIES AND THE CLAIM OF THE ASSESSEE WAS THAT THE SAME WAS TO BE AMORTIZED OVER THE REMAINING PERIOD OF MATURI TY OF THE SECURITIES. THE CLAIM OF THE ASSESSEE WAS BASED ON THE MAS TER CIRCULAR DATED 12.07.2006 ISSUED BY THE RESERVE BANK O F INDIA. THE CIT(A) FOUND IT FIT TO ADMIT SUCH ADDITIONAL GRO UND FOLLOWING THE RATIO OF THE JUDGEMENT OF THE HONBLE BOMBAY HI GH COURT IN THE CASE OF CIT VS. PRUTHVI BROKERS & SHAREHOLDERS (P) LTD. (2012) 23 TAXMANN.COM 23 (BOM). AFTER ADMITTING SUCH ADDIT IONAL GROUND THE CIT(A) HAS ALLOWED THE SAME, AGAINST WHICH REVENUE IS IN APPEAL BEFORE US. 14. IN SO FAR AS THE ACTION OF THE CIT(A) IN ADMITTIN G THE ADDITIONAL GROUND RAISED BY THE ASSESSEE ON THE IMPUGNE D ISSUE IS CONCERNED, THE SAME IS NOT CHALLENGED BY THE REVENU E, AS IS EVIDENT FROM THE GROUNDS OF APPEAL NOS.3 & 4 RAISED B Y THE REVENUE BEFORE US, WHICH READ AS UNDER :- 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(APPEALS) ERRED IN ALLOWING AMORTIZATION OF PREMIUM PAID ON GOVERNMENT SECURITI ES BY THE ASSESSEE OF RS.51,95,263/-. 4. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(APPEALS) ERRED IN ALLOWING AMORTIZATION OF PREMIUM PAID ON GOVERNMENT SECURITI ES PURCHASED BY THE ASSESSEE. ALL CAPITAL ASSETS ARE TO BE VALUED AT COST ONLY AND NO PART THEREOF CAN BE CLAIM ED AS REVENUE EXPENDITURE IN COMPUTING TOTAL INCOME. THI S PRINCIPLE HAS BEEN UPHELD BY THE HONBLE SUPREME COU RT IN THE CASE OF VIJAY BANK LTD. VS. ADDL.CIT (187 ITR 541 ). 15. HOWEVER, IN SO FAR AS THE MERITS OF THE ACTION OF THE CIT(A) IN ALLOWING SUCH CLAIM IS CONCERNED, IT WAS A COMMON P OINT BETWEEN THE PARTIES BEFORE US THAT SIMILAR ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY MUMBAI BENCH OF THE TRIBUN AL IN THE CASE OF DCIT VS. BANK OF RAJASTHAN LTD. VIDE ITA NO.3238/MUM/2011 ORDER DATED 09.09.2011 AND ALSO THE BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF SRI SUBRAMANYESWARA COOPERATIVE BANK LTD. VS. ACIT VIDE I TA NO.488/BANG/2011 ORDER DATED 06.06.2012. NO DECISIO N TO THE 13 CONTRARY HAS BEEN BROUGHT OUT BY THE LEARNED DEPARTM ENTAL REPRESENTATIVE, THOUGH HE HAS SOUGHT TO OPPOSE THE CLAI M OF THE ASSESSEE. 16. AFTER CONSIDERING THE RIVAL STANDS, WE FIND THAT T HE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF BANK OF RAJASTHA N LTD. (SUPRA) HAS CONSIDERED AN IDENTICAL ISSUE AND THE RELEVANT DISCU SSION MADE BY THE TRIBUNAL IS AS UNDER :- 9. THE AMORTIZED AMOUNT OF PREMIUM PAID FOR SECURITIES HELD UNDER HTM CATEGORY AMOUNTING TO RS.11. 77 CRORES WAS CLAIMED BY THE ASSESSEE AS DEDUCTION IN ITS COMPUTATION OF TOTAL INCOME. THE SAME, HOWEVER, WAS DISALLOWED BY THE ASSESSING OFFICER HOLDING THAT THE EXPENDITURE INCURRED ON PREMIUM PAID FOR SECURITIES H ELD UNDER HTM CATEGORY WAS A CAPITAL EXPENDITURE NOT ALLOWABLE AS DEDUCTION. HE HELD THAT THE SAID SECURITI ES WERE IN THE NATURE OF INVESTMENT AND NOT STOCK IN TRA DE. ON APPEAL, THE LEARNED CIT(APPEALS) DELETED THE DISALLOW ANCE MADE BY THE AO ON THIS ISSUE. BESIDES RELYING ON HIS OWN ORDER IN ASSESSEE'S OWN CASE ON A SIMILAR ISSUE FOR THE EARLIER YEAR, THE LEARNED CIT(APPEALS) ALSO RELIED ON CBDT INSTRUCTION NO. 17/2008 DATED 26-11-2008 PUBLISHED IN 220 CTR (STATUTE) PAGE 41. HE HELD THAT THE ASSESSEE COMPANY WAS BOUND TO CLASSIFY ITS INVESTMENT AS PER RBI GUIDELINES DATED 16-10-2010 AND AS PER THE SAID GUIDELINES, INVESTMENT CLASSIFIED UNDER HTM CATEGORY WA S REQUIRED TO BE CARRIED AT ACQUISITION COST UNLESS IT WA S MORE THAN THE FACE VALUE. HE HELD THAT THE PREMIUM ON SUCH INVESTMENTS WAS ALSO REQUIRED TO BE AMORTIZED OVER THE PERIOD REMAINING TO MATURITY. HE HELD THAT THE CLAIM OF THE ASSESSEE THUS WAS AS PER RBI GUIDELINES AND CBDT INSTRUCTION WHICH CLARIFIED THAT PREMIUM AMORTIZED O VER THE PERIOD REMAINING TO MATURITY WAS LIABLE TO BE AL LOWED AS DEDUCTION. 10. AT THE TIME OF HEARING BEFORE US, THE LEARNED REPRESENTATIVES OF BOTH THE SIDES HAVE AGREED THAT THIS ISSUE IS ALSO SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE VARIOUS ORDERS OF THE TRIBUNAL PASSED IN ASSESSEE'S OWN CASE FOR EARLIER YEARS. COPIES OF THE SAID ORDERS ARE PL ACED ON RECORD BEFORE US AND A PERUSAL OF THE SAME SHOWS TH AT IN ONE OF SUCH ORDERS DATED 22ND DEC., 2010 PASSED IN ASSESSEE'S OWN CASE FOR ASSESSMENT YEARS 2002-03 TO 2006-07, THE COORDINATE BENCH OF THIS TRIBUNAL HAS DIRECTED THE AO TO ALLOW THE PREMIUM AMORTIZED BY T HE ASSESSEE OVER THE PERIOD REMAINING TO MATURITY HOLDING THAT THE SAME WAS CLAIMED AS PER THE RELEVANT RBI GUIDELINES AND EVEN THE CBDT HAS ISSUED INSTRUCTIONS TO ALLOW THE SAME. RESPECTFULLY FOLLOWING THE SAID ORDER OF THE TRIBUNAL IN ASSESSEE'S OWN CASE FOR EARLIER YEARS, WE UPHOLD THE IMPUGNED ORDER OF THE LEARNED CIT(APPEAL S) GIVING RELIEF TO THE ASSESSEE ON THIS ISSUE AND DISMISS GROUND NO. 3 OF THE REVENUE'S APPEAL. 17. FOLLOWING THE AFORESAID PRECEDENT WE FIND THAT THE CIT(A) MADE NO MISTAKE IN ALLOWING THE CLAIM OF THE ASSESSEE F OR DEDUCTION OF RS.51,95,263/- REPRESENTING AMORTIZATION OF 14 PREMIUM PAID ON GOVERNMENT SECURITIES UNDER THE HTM CATEGORY. THUS ON THIS GROUND ALSO, REVENUE FAILS. 6.1 RESPECTFULLY FOLLOWING THE ORDER OF THE COORDIN ATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE AND IN ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO OUR NOTICE AGAINST THE ORDER OF THE TRIBUNAL, THIS GROUND BY THE ASSESSEE IS ALLOWED. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 09-12-2014. SD/- SD/- (R.S.PADVEKAR) (R.K. P ANDA) JUDICIAL MEMBER ACCOUNTANT MEMBE R PUNE DATED: 09 TH DECEMBER, 2014 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. THE CIT(A), KOLHAPUR 4. THE CIT, KOLHAPUR 5. THE D.R, B PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // ASSISTANT REGISTRAR ITAT, PUNE BENCHES, PUNE