2012 (9) TMI 774 - AT - Income Tax

Disallowance of amortization of premium on investment in government securities - Invest surplus fund in Government Securities as per RBI guidelines Though purchase made from open market at premium Premium was written off as depreciation of value of securities Held that - Following the decision in case of Catholic Syrian Bank Ltd (2009 (8) TMI 858 - ITAT COCHIN), taking into account the totality of the facts and materials, assessee is entitled to claim this deduction. Decision in favour of assessee Disallowance the claim of bad debts AO disallow the amount of claim for doubtful debts in excess of provision for doubtful debts provided in P&L Held that - As the provision for bad and doubtful debts equal to the amount mentioned in the section is a must for claiming such deduction. An amount of ₹ 36 lakhs is debited to the P&L account under the head Provision for bad and doubtful debts and however, the assessee had claimed deduction of ₹ 42,52,319- while computing the taxable income. Therefore appeal decides in favour of revenue

Summary

Issues:
1. Addition of Rs. 26,40,237 as amortization of premium on investment in government securities.
2. Disallowance of claim of bad and doubtful debts amounting to Rs. 6,52,319.
3. Confirmation of interest u/s.234B and 234C of the Act.

Amortization of Premium on Investment in Government Securities:
The assessee claimed Rs. 26,40,237 under amortization of premium on investments for the assessment year 2007-08. The Assessing Officer disallowed the claim citing the decision of the Madras High Court. The Commissioner of Income-tax (Appeals) upheld the disallowance, stating that the RBI's direction for providing non-performing assets cannot override the provisions of the Income-tax Act. The assessee argued that similar issues were allowed by other Tribunals and relied on Board's Instructions No.17 of 2008(vii). The ITAT, Bangalore, after considering various Tribunal decisions, allowed the deduction, stating that the assessee is entitled to claim it.

Disallowance of Claim of Bad and Doubtful Debts:
The assessee claimed an excess amount of Rs. 6,52,319 under provision for bad and doubtful debts. The Assessing Officer disallowed this amount based on a decision of the Punjab & Haryana High Court. The Commissioner of Income-tax (Appeals) upheld the disallowance as the provisions made in the books were only Rs. 36 lakhs, not the claimed amount. The ITAT, Bangalore, concurred with the decision of the Commissioner of Income-tax (Appeals) and dismissed the appeal on this issue.

Interest u/s.234B and 234C of the Act:
The ITAT, Bangalore, directed the Assessing Officer to give consequential effect to their order regarding interest u/s.234B and 234C of the Act. The assessee's appeal was partly allowed, and the order was pronounced on 11.05.2012.