2015 (11) TMI 1386 - AT - Income Tax

Disallowance of amortization of premium on investment in Government Securities Held to Maturity (HTM) - CIT(A) allowed claim - whether the securities under the categories of HTM are in the nature of capital asset and hence premium paid thereon is also a capital expenditure and therefore is not allowable revenue expenditure? - Held that - As held in the case of Catholic Syrian Bank Ltd. Vs. ACIT 2013 (1) TMI 129 - ITAT COCHIN that amortization on purchase of Government securities was made as per prudential norms of the RBI and same was allowable deduction. The issue regarding amortization of premium on investment in Government Securities Held to Maturity (HTM) has been repeatedly raised and the Tribunal has been consistently deciding the issue in favour of the assessee. No infirmity in the order of the Ld.CIT(A) deleting the addition - Decide against revenue.

Summary

Issues Involved:
- Allowability of amortization of premium on investment in Government Securities Held to Maturity (HTM)

Analysis:
1. Background: The appeal by the Revenue challenges the order of the Commissioner of Income Tax (Appeals) for the assessment year 2010-11, specifically regarding the amortization of premium on investment in Government Securities Held to Maturity (HTM).

2. Facts of the Case: The assessee, a Co-operative Bank, filed its return of income for the relevant year, which was scrutinized by the Assessing Officer resulting in an addition on account of amortization on Government Securities Held to Maturity (HTM).

3. Appeal Process: The Commissioner of Income Tax (Appeals) allowed the appeal of the assessee based on precedents from the Pune and Mumbai Benches of the Tribunal. The Revenue then appealed against this decision.

4. Arguments: The assessee's representative highlighted that the issue raised by the Revenue was previously decided in favor of the assessee by the Tribunal in a previous assessment year. The Departmental Representative, after initially supporting the Assessing Officer's findings, acknowledged the previous favorable decision for the assessee.

5. Tribunal's Decision: The Tribunal noted that the issue raised in the appeal had already been adjudicated in favor of the assessee in a previous case. The Tribunal cited relevant excerpts from the earlier decision, emphasizing the classification and valuation norms of investments, particularly those under the HTM category.

6. CBDT Instruction & Precedents: The Tribunal referred to a CBDT instruction and previous judgments, including the case of ACIT vs. The Bank of Rajasthan Ltd., to support the allowance of amortization of premium on investments under the HTM category. The Tribunal upheld the decision of the Commissioner of Income Tax (Appeals) based on these precedents and the RBI guidelines.

7. Final Decision: Given the consistent rulings in favor of the assessee on the issue of amortization of premium on investments in Government Securities Held to Maturity (HTM), the Tribunal dismissed the appeal of the Revenue, upholding the decision of the Commissioner of Income Tax (Appeals).

In conclusion, the Tribunal's decision reiterated the allowance of amortization of premium on investments in Government Securities Held to Maturity (HTM) based on established legal principles and precedents, ultimately leading to the dismissal of the Revenue's appeal.