9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2013 (4) TMI 769 - AT - Income TaxAddition on expenditure towards amortization of investment held till maturity - Held that - ITAT Mumbai Bench in the case of ACIT vs. The Bank of Rajasthan Ltd. (2010 (12) TMI 894 - ITAT Mumbai) has held 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 allowable as revenue expenditure since the claim is as per RBI Guidelines and CBDT also has directed to allow such premium. It has also been held in the case of Catholic Syrian Bank Ltd. vs. ACIT 2011 (2) TMI 1303 - ITAT COCHIN that amortisation 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 contending for amortisation of premium paid in excess of face value of securities held to maturity (HTM) category or period remaining till maturity was found reasonable by the CIT(A). Accordingly addition made by the Assessing Officer by disallowing amount towards amortisation of Government Securities (HMT) was correctly deleted. - Decided against revenue
Issues:
- Disallowance of expenditure towards amortization of investment held till maturity. - Classification of cooperative banks for deduction under section 80P(4). - Accounting treatment for cooperative banks and RBI guidelines on investment portfolio classification. Analysis: Issue 1: Disallowance of expenditure towards amortization of investment held till maturity The case involved an appeal by the Revenue and a cross objection by the assessee against the order of the CIT(A) regarding the addition of a specific amount on account of claiming expenditure towards the amortization of Government security. The assessee, a Cooperative Bank, had justified the amortization based on compliance with RBI directions and the nature of its investments. The CIT(A) allowed the claim, which was opposed by the Revenue. The ITAT upheld the CIT(A) decision, citing relevant RBI guidelines, CBDT instructions, and previous judgments supporting the amortization claim. The ITAT dismissed the Revenue's appeal, affirming the deletion of the disallowed amount. Issue 2: Classification of cooperative banks for deduction under section 80P(4) The judgment discussed the impact of section 80P(4) on cooperative banks, excluding them from certain deductions available to cooperative societies. The amendment aimed to treat cooperative banks like normal banking companies for tax purposes, as per the Finance Act, 2006. The judgment highlighted the dual control cooperative banks face from RBI and state cooperative departments, emphasizing the need for ordinary commercial principles in profit derivation. The ITAT clarified the implications of section 80P(4) and the rationale behind the amendment, ensuring cooperative banks are assessed appropriately. Issue 3: Accounting treatment for cooperative banks and RBI guidelines on investment portfolio classification The judgment detailed the accounting treatment for cooperative banks' investment portfolios as per RBI guidelines, categorizing investments into HTM, HFT, and AFS. It referenced CBDT instructions and previous case law to support the allowance of amortization on investments classified under HTM category. The ITAT relied on established principles and RBI norms to justify the assessee's claim for amortization, emphasizing the reasonableness of the period chosen for amortization. The decision upheld the CIT(A)'s ruling, dismissing the Revenue's appeal and the assessee's cross objection. Overall, the judgment provided a comprehensive analysis of the issues related to the disallowance of expenditure, the classification of cooperative banks under section 80P(4), and the accounting treatment based on RBI guidelines, ensuring clarity on tax implications for cooperative banks and upholding the assessee's justified claims.
|
