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2021 (1) TMI 403 - AT - Income TaxDisallowance of expenditure on premium paid on investment amortized - HELD THAT - As decided in own case 2019 (11) TMI 643 - ITAT AHMEDABAD deduction of amortized expenditure on premium on Government Securities is allowable as expenditure. Amortization expenditure on government securities held as HTM are allowable as deduction. - Decided in favour of assessee. Non deduction of TDS u/s 194J - Disallowance of processing charges for MICR paid to State Bank of India - HELD THAT - Once the recipient has offered the amount for taxation, no disallowance at the hand of payee. Therefore, we direct the ld.AO to verify the fact if the SBI have paid the tax on MICR charges paid by the assessee, the disallowance is made in case of assessee be deleted. In the result, ground no.2 is allowed for statistical purposes.
Issues Involved:
1. Disallowance of expenditure on premium paid on investment amortized. 2. Disallowance of expenditure on processing charges for MICR due to non-deduction of tax at source. Detailed Analysis: Issue 1: Disallowance of Expenditure on Premium Paid on Investment Amortized The appellant, a Co-operative Bank, contested the disallowance of ?79,05,467/- related to the premium paid on investment amortized. The assessee argued that this issue was previously resolved in their favor by the Tribunal for assessment years 2010-11 and 2012-13, where similar disallowances were deleted by the CIT(A) and upheld by the Tribunal. The Tribunal referenced the case of ACIT v. Chanasma Nagrik Sahkari Bank Ltd., where it was established that investment activities for banks are considered normal banking activities and should be treated as banking stock in trade. The Tribunal emphasized that as per RBI guidelines and CBDT instructions, investments classified under "Held to Maturity" (HTM) need not be marked to market but should be carried at acquisition cost, with any premium paid over face value amortized over the remaining period to maturity. The Tribunal concluded that the amortization expenditure on government securities held as HTM is allowable as a deduction, dismissing the Revenue's appeal on this ground and allowing the assessee's appeal. Issue 2: Disallowance of Processing Charges for MICR The second issue involved the disallowance of ?34,75,188/- for MICR processing charges paid to the State Bank of India (SBI) due to non-deduction of tax at source under section 194J. The assessee contended that MICR processing does not involve human action and is not covered under professional or managerial fees as described in section 194J. They supported their argument with decisions from the Ahmedabad Tribunal in Karnavati Cooperative Bank Ltd. vs. Dy.CIT and the Apex Court in CIT vs. Kotak Services Limited. Alternatively, the assessee argued that since SBI had included these charges in their income and paid tax on them, no disallowance should be sustained. The Tribunal directed the Assessing Officer to verify whether SBI had paid tax on these MICR charges. If confirmed, the disallowance should be deleted. Consequently, this ground was allowed for statistical purposes. Conclusion: The appeal was partly allowed, with the Tribunal granting relief on the disallowance of the premium paid on investment amortized and directing verification for the disallowance of MICR processing charges. The decision was announced on 30th December 2020.
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