2020 (1) TMI 697 - HC - Income Tax

Disallowance of Amortized Premium - Tribunal deleted the addition - HELD THAT - As decided in Rajkot District Co-op. Bank Ltd. 2014 (3) TMI 110 - GUJARAT HIGH COURT the instructions clearly provide for amortisation of premium paid on acquisition of securities when the same are acquired at the rate higher than the face value. Such amortisation would have to be for the remaining period of maturity. This precisely the Tribunal had directed in the impugned order. Though contended, no contrary instructions of CBDT are brought to our notice. The instruction in question having been issued under section 119(2) of the Income-tax Act, 1961, would bind the Revenue. No question of law, therefore, arises. - Decided against revenue

Summary

Issues:
1. Appeal under Section 260A of the Income Tax Act, 1961 by revenue against ITAT order for A.Y 2014-15.
2. Disallowance of Amortized Premium amounting to ?3,15,81,243.

Analysis:
1. The tax appeal was filed by the revenue under Section 260A of the Income Tax Act, 1961, challenging the order passed by the Income Tax Appellate Tribunal for the Assessment Year 2014-15. The primary issue raised in the appeal was the disallowance of Amortized Premium worth ?3,15,81,243 by the Assessing Officer.

2. The Court observed that the question of law proposed by the revenue was no longer res-integra based on a previous decision. Referring to the decision in the case of Commissioner of Income-tax, Rajkot-II Vs. Rajkot District Co-op. Bank Ltd., the Court noted the arguments presented by both parties regarding the amortization of premium paid on acquisition of securities. The respondent, a cooperative bank, was bound by RBI directives to invest in Government securities and amortize any premium paid over the remaining period of maturity as per CBDT Circular No.17 of 2008.

3. The CBDT Circular dated November 26, 2008, provided clear instructions for amortization of premium paid on securities acquired at a rate higher than the face value. The Court emphasized that the Tribunal had correctly directed the amortization in line with the RBI guidelines and CBDT Circular. As no contrary instructions were presented, the Court held that the instruction issued under section 119(2) of the Income-tax Act, 1961, would bind the Revenue. Consequently, the appeal was dismissed based on the aforementioned grounds.