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TMI Blog2013 (9) TMI 1058X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 24,57,800/- has been debited in the profit and loss account on account of amortisation on Government Securities. The deduction claimed for amortisation Amortization of Premium on Investment in Govt. Securities (Held to Maturity HTM) represents the excess of acquisition cost over the face value of HTM securities which is amortised by the banks as per the directives of Reserve Bank of India. 3.1 The Assessing Officer noted that the RBI has issued guidelines in respect of investment portfolio of the banks vide Master Circular Prudential norms for classification, valuation and operation of investment portfolio by banks vide RBI No.2004-05/51 DBOD No. BP.BC.11/21.04.141/2004-05 dated 17/07/2004. He came to the conclusion that the Available For Sale (AFS) and Held for Trading (HFT) securities are in the nature of stock in trade while the HTM securities are in the nature of capital assets . Hence, for the purpose of income tax, for their valuation at year end, the AFS and HFT securities are to be valued at cost or market, whichever is less principle, whereas the HTM securities which represent investments in capital asset have to be valued at cost only and not at cost or mar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to indicate that the interest income thereon has not been shown as business income or on maturity of such securities the assessee has claimed capital loss after availing the benefit on indexation. Since the investment in the Government Securities of HTM category is made in the normal course of business of banking and particularly to comply with the requirement of SLR, I hold that the Government Securities purchased on premium by the appellant are in the nature of stock-in-trade. 4.1 It is also noticed that investment in the Government Securities of HTM category is in accordance with the guidelines issued by RBI from time to time and as per the latest guidelines in this regard issued vide master circular No. DBOD.BP.BC.15/21.04. 141/2007-08 dt. 2nd July, 2007. Para 3 of this circular, which is in respect of valuation of HTM category, is reproduced as under: 3. Valuation 3.1 Held to Maturity ii) Investments classified under HTM need not be marked to market and will be carried at acquisition cost, unless it is more than the face value, in which case the premium should be amortised over the period remaining to maturity. The banks should reflect the amortised a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enue is in appeal before us with the following grounds : 1. On the facts and circumstances of the case and in law, the Ld.CIT(A)-I, Thane has erred in appreciating the fact that the securities under the categories of HTM are in the nature of capital asset and hence premium paid thereon is not allowable expenditure. 2. The appellant prays the order of the Ld.CIT(A)-I, Thane, may be vacated and that of the Assessing Officer be restored. 3. The appellant craves leave to add, amend, or alter any ground/grounds, which may be necessary . 6. We have considered the arguments made by the Ld. Departmental Representative and perused the orders of the Assessing Officer and the CIT(A). We find an identical issue had come up before the Pune Bench of the Tribunal in the case of ACIT Vs. Pune Peoples Cooperative Bank Ltd. We find the Tribunal vide ITA No.1413/PN/2011 order dated 08- 08-2013 has rejected the appeal filed by the Revenue wherein the CIT(A) had allowed the claim of the assessee on account of amortization of premium on investments to the tune of ₹ 45,67,178/-. The relevant observations of the Tribunal read as under : 8. We have considered the rival argu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esult of guidelines from both the controlling authorities. Ordinarily a deduction is not available to an assessee unless specifically provided under the Act. This is irrespective of accounting treatment provided by the assessee in its books of accounts. But at the same time it was well settled that deduction expressly mentioned under the Act are not exhaustive and profit is to be derived according to ordinary commercial principles. As per the extant RBI guidelines dated 01-07-2009 the investment portfolio of the banks is required to be classified under 3 categories viz., Held the maturity HTM), Held for Trading (HFT) and Available for Sale (AFS). The value of each kind of investment is to be done in the following manner: Sr. No. Classification Valuation Norms of Investment. 1. HTM These are carried at acquisition cost unless the cost is more than the face value, in which case the premium should be amortised over the period remaining to maturity. The premium is required to be amortised over the period remaining to maturity. This apar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the RBI and same was allowable deduction. In view of above, assessee was justified in contending for amortization of premium paid in excess of face value of securities held to maturity (HTM) category or period remaining till maturity was found reasonable by the CIT(A). Accordingly addition of ₹ 17,91,659/- made by the Assessing Officer by disallowing amount towards amortization of Government Securities (HMT) was deleted. This reasoned factual and legal finding of the CIT(A) needs no interference from our side. We uphold the same. 9. As a result, the appeal filed by the Revenue is dismissed . 8.1 Respectfully following the decision of the Coordinate Bench of the Tribunal and in absence of any contrary material brought to our notice against the above cited decision we find no infirmity in the order of the Ld.CIT(A) deleting the addition. Accordingly, the order of the Ld.CIT(A) is upheld and the grounds raised by the Revenue are dismissed. 6.1 Respectfully following the decision of the Coordinate Bench of the Tribunal and in absence of any contrary material brought to our notice by the Ld. Departmental Representative we find no infirmity in the order of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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