2013 (11) TMI 1735 - AT - Income Tax

Summary

Issues involved: Disallowance of amortization of premium paid on Govt. Securities under HTM category as capital expenditure.

Summary:
The appeal was filed by the assessee against the order of Commissioner of Income Tax (Appeal)-I, Pune, for A.Y. 2009-10. The main issue was the disallowance of Rs. 13,50,000 on account of amortization of premium paid on Government Securities held under HTM Category, categorized as capital expenditure. The Authorized Representative pointed out that a similar issue was decided in favor of the assessee by ITAT, Pune Bench in another case. The Tribunal observed that cooperative banks are now required to be assessed as normal banking companies due to changes in section 80P. The RBI guidelines mandate the classification of investment portfolios into HTM, HFT, and AFS categories, with specific valuation norms for each category. The CBDT instruction clarified the treatment of investments under different categories. Previous ITAT decisions supported the allowance of premium amortization as revenue expenditure for banks. Consequently, the disallowance made by the Assessing Officer was deleted, and the appeal filed by the Revenue was dismissed. The Assessing Officer was directed to allow Rs. 13,50,000 on account of amortization premium paid on Govt. Securities held under HTM category based on similar reasoning.

In conclusion, the appeal filed by the assessee was allowed, and the decision was pronounced on November 27, 2013.