2015 (3) TMI 919 - AT - Income Tax

Amortization of premium of investments held till maturity (HTM) by the bank - assessee is a Co-operative Society engaged in the business of banking - premium so paid was claimed as a revenue expenditure which has been disallowed by the Assessing Officer for the reason that the securities held by the bank are capital investments and not stock-in-trade as considered by the assessee - CIT(A) deleted the addition - Held that - Departmental Representative has not referred to any decision contrary to the decision of the Mumbai Bench of the Tribunal in the case Bank of Rajasthan Ltd. (2010 (12) TMI 894 - ITAT, Mumbai ) which has been relied upon by the CIT(A) in holding that the premium paid in excess of face value of investments classified under HTM category, which has been amortized over the period till maturity, is allowable as revenue expenditure . Accordingly, we affirm the order of the CIT(A) - Decided against revenue. Disallowance of employees contribution of Provident Fund - CIT(A) has deleted the disallowance - Held that - CIT(A) has deleted the disallowance following the judgement of Saleem Co-operative Spinning Mills Ltd. (2006 (2) TMI 115 - MADRAS High Court ) and AIMIL Ltd. (2009 (12) TMI 38 - DELHI HIGH COURT ) to held the said contribution was paid before the due date of filing of return of income as per Section 139(1) . No decision to the contrary has been brought to our notice and therefore the decision of the CIT(A) is hereby affirmed. - Decided against revenue. Disallowance u/s 40(a)(ia) - non deduction of TDS on interest payments - CIT(A) deleted the disallowance - Held that - Section 194A of the Act provides for deduction of tax at source on payments by way of interest other than the interest on securities. The assessee before us is a co-operative society which is inter-alia engaged in the business of banking. Section 194A(3)(v) of the Act provides that the tax shall not be required to be deducted on income which has been credited or paid by a co-operative society to a member thereof or to any other co-operative society. The claim of the assessee is that the interest payments in question have been paid/credited to its members and therefore following the provisions of Section 194A(3)(v) of the Act, no tax was required to be deducted at source. CIT(A) has concluded that assessee had credited the impugned interest to the credit of the members, and no tax was required to be deducted in view of Section 194A(3)(v) of the Act. The aforesaid finding of the CIT(A) has not been controverted by the Revenue before us on the basis of any cogent material or reasoning. In the absence of any cogent material brought out by the Revenue, we hereby affirm the aforesaid conclusion of the CIT(A). - Decided against revenue.

Summary

Issues:
1. Addition of &8377; 55,600/- for amortization of premium of investments held till maturity (HTM) by the bank.
2. Disallowance of &8377; 36,644/- representing employees' contribution of Provident Fund.
3. Disallowance of &8377; 16,71,405/- under Section 40(a)(ia) of the Act for non-deduction of TDS on interest payments.

Issue 1 - Addition for Amortization of Premium:
The first issue pertains to the addition of &8377; 55,600/- made by the Assessing Officer on account of amortization of premium of investments held till maturity (HTM) by the bank. The CIT(A) deleted the addition, relying on a decision of the Mumbai Bench of the Tribunal, stating that the premium paid in excess of face value of investments classified under HTM category and amortized till maturity qualifies as a 'revenue expenditure.' The Revenue's appeal was dismissed as no contrary decision was presented.

Issue 2 - Disallowance of Employees' Provident Fund Contribution:
The second issue concerns the disallowance of &8377; 36,644/- for employees' contribution of Provident Fund. The Assessing Officer disallowed the amount due to delayed payment beyond the due date specified under the Employees' Provident Fund Scheme, 1952. However, the CIT(A) allowed the claim, citing timely payment within the grace period and before the due date of filing income tax return. The Revenue's appeal was rejected based on the decisions of the Madras High Court and Delhi High Court.

Issue 3 - Disallowance under Section 40(a)(ia) for TDS Non-Deduction:
The third issue involves the disallowance of &8377; 16,71,405/- under Section 40(a)(ia) of the Act for not deducting TDS on interest payments. The CIT(A) overturned the disallowance, stating that as a cooperative society, the interest payments to members were exempt from TDS under Section 194A(3)(v) of the Act. The Revenue's appeal was dismissed as it failed to provide evidence contrary to the CIT(A)'s findings, affirming that no TDS was required on the interest payments to members.

In conclusion, the Appellate Tribunal upheld the CIT(A)'s decisions on all three issues, resulting in the dismissal of the Revenue's appeal. The judgments were based on legal provisions, precedents, and the specific circumstances of each case.