2015 (1) TMI 1270 - AT - Income Tax

Addition on account of amortization of premium paid on Government Securities which fall in the category of held to maturity - Held that - The assessee is entitled to the claim of deduction on account of amortization of premium paid on Government securities held in HTM category. See Commissioner of Income Tax-2, Mumbai Versus HDFC Bank Ltd. 2014 (8) TMI 119 - BOMBAY HIGH COURT - Decided in favour of assessee

Summary

Issues:
Disallowance of amortization of premium on Government Securities claimed by the assessee.

Analysis:
The appeal was filed against the order of the CIT(A)-III, Pune relating to Assessment Year 2010-11. The only effective ground raised by the assessee was regarding the disallowance of deduction claimed on account of amortization of premium paid on Government Securities. The Assessing Officer disallowed the claimed amount, stating that the premium paid on Government securities is part of the capital cost and can only be determined when the asset is sold. The AO relied on a decision of the Hon'ble Supreme Court and disallowed the amount. The CIT(A) upheld the AO's decision, leading to the assessee appealing to the ITAT Pune.

During the proceedings, the assessee argued that they followed prudential norms prescribed by the RBI and claimed amortization of premium on HTM securities as a deduction. The assessee cited various decisions but was not successful in convincing the CIT(A) to overturn the disallowance made by the AO. The ITAT Pune was then approached by the assessee, challenging the decision of the CIT(A).

The ITAT Pune considered the arguments of both sides and focused on the disallowance of amortization of premium on Government securities. The AO had disallowed the deduction based on a CBDT Instruction and a Supreme Court decision. However, the ITAT Pune referred to a decision of the Hon'ble Bombay High Court and a previous Tribunal decision that favored the assessee's claim. The ITAT Pune ultimately set aside the CIT(A)'s order and directed the AO to delete the disallowance, allowing the ground raised by the assessee.

In conclusion, the ITAT Pune allowed the appeal filed by the assessee, emphasizing the entitlement of the assessee to the deduction for amortization of premium on investment held to maturity, based on relevant legal precedents and decisions.