2012 (10) TMI 1042 - AT - Income Tax

Summary

Issues involved: Appeal against CIT(A)'s order regarding reclassification of HTM securities as capital loss, treatment of expenditure as capital expenditure, and assessment of total income.

Reclassification of HTM securities: Assessee, a co-operative society, declared total income of Rs. 5.89 Crores, later assessed at Rs. 8.62 Crores u/s. 143(3) of the Income Tax Act, 1961. AO disallowed Rs. 2.92 Crores debited for Amortisation of Premium and Depreciation on Govt. Securities shifted to HTM, citing it as capital loss. CIT(A) allowed the write-off based on RBI guidelines, stating the loss was due to trading in Govt. securities. ITAT upheld CIT(A)'s decision, rejecting AO's grounds.

Treatment of expenditure: AO disallowed Rs. 2.22 Crores for loss on reclassification and Rs. 70.63 Lakhs for Amortisation of Premium. CIT(A) allowed both deductions, stating they were within legal bounds. ITAT upheld CIT(A)'s decision, rejecting AO's appeal.

Assessment of total income: ITAT upheld CIT(A)'s order based on RBI guidelines, stating the loss was a result of trading in Govt. securities. ITAT dismissed AO's appeal, affirming CIT(A)'s decision.