2015 (6) TMI 552 - AT - Income Tax

Amortization of premium paid on Govt. Securities disallowed - Held that - Amortization premium paid on Govt. Securities of ₹ 23,13,525/- debited to Profit and Loss Account, as per RBI guidelines has to be allowed being expenses incurred during the course of business of banking. See case of Nagar Urban Co-operative Bank Ltd 2015 (6) TMI 553 - ITAT PUNE and Latur Urban Coop. Bank Ltd. 2015 (3) TMI 920 - ITAT PUNE - Decided in favour of assessee

Summary

Issues:
1. Disallowance of amortization premium paid on Govt. Securities debited to P & L A/c.

Analysis:
The appeal was filed against the order of the Commissioner of Income Tax (Appeal)-I, Pune for A.Y. 2009-10. The primary contention was the disallowance of amortization premium paid on Govt. Securities amounting to &8377; 23,13,525 debited to the Profit & Loss Account. The Appellant argued that this expense should be allowed in full as it was incurred during the course of the banking business.

The only issue in question was the addition made by the Assessing Officer concerning the disallowance of the amortization premium paid on Govt. Securities. The Authorized Representative highlighted that a similar issue had been decided in favor of the assessee by the ITAT Pune Bench in the case of Latur Urban Coop. Bank Ltd. The Tribunal, in its decision, emphasized that securities held by banks are in the nature of stock-in-trade and not purely investments. Referring to previous judgments, it was established that the loss on the sale of securities is revenue in nature and thus allowable as an expense. The Tribunal set aside the CIT(A)'s order and allowed the claim of the assessee.

Furthermore, the issue was supported by decisions from other co-ordinate Benches, reinforcing the stance that the amortization premium paid on Govt. Securities should be allowed as an expense incurred during the banking business. Therefore, based on consistent reasoning and precedents, the Tribunal directed the Assessing Officer to allow the amortization premium paid on Govt. Securities of &8377; 23,13,525 debited to the Profit and Loss Account in accordance with RBI guidelines.

In conclusion, the appeal filed by the assessee was allowed, and the decision was pronounced in open court on November 27, 2013.