2015 (12) TMI 1183 - HC - Income Tax

Amortization of premium on HTM securities - treating the same as revenue expenditure could not be said to be erroneous within the meaning of section 263 - Held that - We are of the view that no fault can be found with the impugned order holding that in such a case no occasion to exercise powers of Revision under Section 263 of the Act can arise as held by the Supreme Court in MALABAR INDUSTRIAL CO.LTD (2000 (2) TMI 10 - SUPREME Court). In view of the above settled position of law in regard to jurisdiction under Section 263 of the Act the impugned order of the Tribunal does not give rise to a substantial question of law.

Summary

Issues: Challenges to common order of Income Tax Appellate Tribunal under Section 260A of the Income Tax Act, 1961 regarding amortization of premium on HTM securities as revenue expenditure.

Analysis:
1. Identical Questions of Law: The revenue challenged the Tribunal's decision regarding the treatment of amortization of premium on HTM securities as revenue expenditure. The primary issue was whether the Assessing Officer's decision was erroneous under Section 263 of the Income Tax Act, 1961. The Tribunal relied on the decision in the case of Malabar Industrial Co Ltd vs CIT 243 ITR 83 (S) to support its view that the Assessing Officer's decision was a possible view and not erroneous.

2. Assessment Years 2005-06 and 2006-07: The facts for both assessment years were found to be identical except for the dates. The respondent-assessee, a banking company, filed a return of income declaring a loss for the year 2005-06. The Assessing Officer assessed the income to be higher, leading to a discrepancy in the treatment of premium on HTM securities.

3. Commissioner's Notice and Tribunal's Decision: The Commissioner of Income Tax issued a notice under Section 263 seeking to revise the assessment orders, stating that the treatment of premium on HTM securities as revenue expenditure was erroneous. The Tribunal, however, allowed the respondent-assessee's appeal for both assessment years, citing precedents like CATHOLIC SYRIAN BANK LTD VS ACIT and DY.CIT vs.HDFC BANK. The Tribunal held that if the Assessing Officer's view was a possible one, the revision under Section 263 was not applicable, in line with the decision of the Apex Court in MALABAR INDUSTRIAL CO. LTD VS CIT.

4. Arguments and Court's Decision: The revenue contended that premium on HTM securities should be treated as capital expenditure, citing the decision of the Karnataka High Court in COMMISSIONER OF INCOME TAX VS ING VYASA BANK LTD. However, the Court found that the Assessing Officer's view was a possible one, as supported by previous decisions. The Court upheld the Tribunal's decision, emphasizing that no substantial question of law arose, given the settled position of law under Section 263 of the Act.

5. Conclusion: The High Court dismissed both appeals, affirming the Tribunal's decision and emphasizing the lack of grounds for revision under Section 263. No costs were awarded in the matter.