THE PRINCIPAL COMMISSIONER OF INCOME TAX-1 V. THE KALUPUR COMMERCIAL CO-OP BANK LTD.

TAXAP/782/2019

AI Insights

The case involves the Principal Commissioner of Income Tax-1 appealing against the Kalupur Commercial Co-Op Bank Ltd., challenging the Tribunal's decision on the amortization of a premium amounting to Rs.3,15,81,243 on government securities. The dispute centered on whether the premium paid on these securities, acquired at a rate higher than their face value, should be amortized over their remaining maturity period. The Income Tax Appellate Tribunal had ruled in favor of the bank, following the directives of the RBI and the CBDT Circular, which the High Court upheld.

• Counselvise Citation: [2020] 140 COUNSELVISE.COM (IT) 726188 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 06-01-2020
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income-tax, Rajkot-II Vs. Rajkot District Co-op. Bank Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Assessee Lawyers: MAUNA BHATT
• Keywords: Assessment Year 2014-15; Disallowance; Income Tax; Amortized Premium
• Section: 260A

Judgement Text

"C/TAXAP/782/2019 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 782 of 2019 ========================================================== THE PRINCIPAL COMMISSIONER OF INCOME TAX-1 Versus THE KALUPUR COMMERCIAL CO-OP BANK LTD. ========================================================== Appearance: MRS MAUNA M BHATT(174) for the Appellant(s) No. 1 for the Opponent(s) No. 1 ========================================================== CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA and HONOURABLE MR. JUSTICE BHARGAV D. KARIA Date : 06/01/2020 ORAL ORDER (PER : HONOURABLE MR.JUSTICE J.B.PARDIWALA) 1. This tax appeal under Section 260A of the Income Tax Act, 1961 [for short “The Act, 1961”] is at the instance of the revenue and is directed against the order passed by the Income Tax Appellate Tribunal, 'D' Bench, Ahmedabad in the ITA No.1864/AHD/2017, dated 18/06/2019 for the A.Y 2014­15. 2. The revenue has proposed the following question of law in its memorandum of the tax appeal:­ “Whether on the facts and in circumstances of the case and in law, the Appellate Tribunal was justified in deleting the addition made by the Assessing Officer on the issue of disallowance of Amortized Premium amounting to Rs.3,15,81,243/­?” 3. We take notice of the fact that the proposed question of law is no Page 1 of 3 C/TAXAP/782/2019 ORDER longer res­integra in view of the decision of this Court in the case of Commissioner of Income­tax, Rajkot­II Vs. Rajkot District Co­op. Bank Ltd. reported in [2014] 222 taxmann 240 (Gujarat), wherein this Court observed as under:­ “5. The learned counsel Shri P.G. Desai for the appellant vehemently contended that the Tribunal committed serious error in overruling the decision of the CIT (Appeals), who had given detailed reasons. He submitted that the investment was in the nature of capital investment in the hands of the assessee as held by the CIT (Appeals). The CBDT Circular dated November 26, 2008 would not apply. There were further instructions which would govern the situation. 6. On the other hand, the learned counsel Shri Tushar Hemani for the respondent placed heavy reliance on the said CBDT Circular dated November 26, 2008 and contended that the benefit of amortisation had to be granted. The assessee as a cooperative bank was bound by the RBI directives. As per such directives, the assessee had to invest certain amounts in Government securities and to hold the same till maturity. In the process of acquisition, if there was any premium paid on the face value of the security, the loss had to be amortised. Paragraph (vii) of the CBDT Circular No.17 of 2008 dated November 26, 2008 would apply. Such instruction reads as under : “(vii) As per RBI guidelines dated 16th October, 2000, the investment portfolio of the banks is required to be classified under three categories viz. Held to Maturity (HTM), Held for Trading (HFT) and Available for Sale (AFS). Investments classified under HTM category need not be marked to market and are carried at acquisition cost unless these are more than the face value, in which case the premium should be amortised over the period remaining to maturity. In the case of HFT and AFT securities forming stockintrade of the bank, the depreciation/ appreciation is to be aggregated scripwise and only net depreciation, if any, is required to be provided for in the accounts. The latest guidelines of the RBI may be referred to for allowing any such claims.” 7. The instructions clearly provide for amortisation of premium paid on acquisition of securities when the same are acquired at the rate higher than the face value. Such amortisation would have to be for the remaining period of maturity. This precisely the Tribunal had directed in the impugned order. Though contended, no contrary instructions of CBDT are brought to our notice. The instruction in question having Page 2 of 3 C/TAXAP/782/2019 ORDER been issued under section 119(2) of the Income­tax Act, 1961, would bind the Revenue. No question of law, therefore, arises.” 4. In view of the aforesaid, this appeal stands dismissed. (J. B. PARDIWALA, J) (BHARGAV D. KARIA, J) aruna Page 3 of 3 "