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2016 (4) TMI 33 - AT - Income TaxDisallowance in respect of amortization of premium paid on Government Securities - Held that - Identical issue had come up before the Tribunal in assessee s own case in an appeal filed by the Revenue wherein the order of the CIT(A) upheld in allowing the deduction on account of amortization of premium paid on HTM securities and hold that amortization premium paid on Govt. Securities debited to Profit and Loss Account, as per RBI guidelines has to be allowed being expenses incurred during the course of business of banking - Decided in favour of assessee Addition on account of unclaimed liabilities - CIT(A) allowed part relief - Held that - We find that the issue raised in the present appeal is identical to the issue raised by assessee in aforesaid appeal for A.Y. 2010-11 wherein held the assessee continues to recognize the liability and once the liability has been so recognized by the assessee, there is no merit in treating the same as income of the assessee though some of the amounts may not be recoverable by application of provisions of Limitation Act. - Decided in favour of assessee
Issues Involved:
1. Disallowance of amortization of premium paid on Government Securities. 2. Addition on account of unclaimed liabilities. Detailed Analysis: 1. Disallowance of Amortization of Premium Paid on Government Securities: The assessee, a Cooperative Bank, challenged the disallowance of Rs. 15,11,333/- related to the amortization of premium paid on Government Securities categorized under HTM (Held to Maturity) by the Assessing Officer (AO). The AO treated HTM securities as capital assets, asserting that amortization of premium on such securities is not allowable under the Income Tax Act, 1961, as capital assets must be valued at cost without any part being claimed as revenue expenditure. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's decision, leading the assessee to appeal to the Tribunal. Despite the absence of representation from the assessee, the Tribunal, after hearing the Departmental Representative and reviewing the material on record, noted that the issue had been previously decided in favor of the assessee in its own case for A.Y. 2010-11. The Tribunal cited the precedent where amortization of premium paid on HTM securities was allowed as a deductible expense, referencing decisions in similar cases like The Ahmednagar Merchants Cooperative Bank Ltd. vs. JCIT and Nagar Urban Cooperative Bank Ltd. The Tribunal concluded that the amortization premium paid on Government Securities should be allowed as an expense incurred during the course of banking business, directing the AO to delete the addition of Rs. 15,11,333/-. Thus, the appeal on this issue was allowed. 2. Addition on Account of Unclaimed Liabilities: For A.Y. 2011-12, the assessee contested the partial relief granted by the CIT(A) regarding the addition of Rs. 15,50,807/- made by the AO on account of unclaimed liabilities. The CIT(A) confirmed the addition to the extent of Rs. 6,03,725/-, which represented unclaimed amounts beyond the period of three years, deemed barred by limitation. The AO observed an unclaimed amount of Rs. 45,09,479/- under 'Sundry Liabilities' in the assessee's balance sheet, which the assessee explained as reconciliable amounts due to uncleared cheques at the financial year's end. Despite this explanation, the AO added Rs. 15,50,807/- to the income. Upon appeal, the CIT(A) granted partial relief by deleting Rs. 9,47,082/- but upheld the addition of Rs. 6,03,725/-. The Tribunal, considering the submissions and previous decisions, found that the issue was identical to one previously decided in favor of the assessee for A.Y. 2010-11. It was established that unclaimed liabilities recognized in the books of account should not be treated as income, even if they are not recoverable due to the Limitation Act, unless the assessee itself transfers these amounts through the Profit & Loss Account. Citing the Supreme Court's decision in CIT vs. Sugauli Sugar Works (P) Ltd. and other relevant cases, the Tribunal directed the AO to delete the addition of Rs. 6,03,725/-. In conclusion, the Tribunal allowed both appeals of the assessee, setting aside the impugned orders. The judgment was pronounced on February 12, 2016.
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