2020 (11) TMI 945 - HC - Income Tax

Amortisation and brokerage expenses with respect to securities of (held to maturity) HTM category - Allowable revenue expenses or not? - whether loss on sale of securities of (held to maturity) category is allowable as a deduction? - HELD THAT - The finding of fact is to the effect that securities are held as stock-in-trade and that the income from sale there from is offered to tax as revenue. In the light of the admitted facts as seen from the order of the authorities, the expenditure incurred by the assessee towards broken 4 period is liable to be allowed as revenue expenditure. There is no infirmity in the order of the Tribunal in this regard. The question stands answered in favour of the assessee, following the judgment of the Bombay High Court in American Express International Banking Corporation Vs. CIT 2002 (9) TMI 96 - BOMBAY HIGH COURT - Decided against revenue.

Summary

Issues:
1. Challenge to order under Section 260A of the Income Tax Act, 1961 for the assessment year 2004-05.
2. Allowability of amortisation expenses for securities of HTM category as revenue expenditure.
3. Allowability of brokerage expenses for securities of HTM category as revenue expenditure.
4. Allowability of loss on sale of securities of HTM category as a deduction.
5. Treatment of broken period interest as revenue expenditure.

Analysis:
The appeal was filed challenging the order made by the Income Tax Appellate Tribunal for the assessment year 2004-05. The substantial questions of law raised included the allowability of amortisation expenses, brokerage expenses, and loss on sale of securities of HTM category as revenue expenditure. The court considered previous judgments and noted that identical questions were addressed in a previous case, where the court ruled in favor of the assessee against the Revenue. The court admitted the question regarding broken period interest as a substantial question of law for consideration. The court found that the securities were held as stock-in-trade and the income from sale was offered for tax as revenue, thus allowing the expenditure towards broken period as revenue expenditure based on the facts presented in the order of the authorities.

The court referred to previous decisions and rulings, including the judgment of the Bombay High Court in American Express International Banking Corporation Vs. CIT, to support their decision. The Tribunal also considered the decision of the court in the case of CIT Vs. Karur Vysya Bank Ltd. Based on the precedents and decisions cited, the court dismissed the tax case appeal filed by the Revenue and answered the substantial questions of law against the Revenue. The judgment concluded by dismissing the appeal and the connected CMP without costs.