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TMI Blog2014 (1) TMI 1691X X X X Extracts X X X X X X X X Extracts X X X X ..... he RBI Guidelines do not override the mandatory provisions of Income-tax Act, 1961 and therefore, not binding on the Income-tax Deptt. in spite of Board Circular No. 665 of 1993 and the decision of the Hon'ble Kerala High Court in CIT v. Lord Krishna Bank Ltd. (2011) 55 DTR (Ker) 277 mentioned before him. The Ld. A.O. disallowed the claim of Amortization on Govt. securities, investments known as SLR Investments, Depreciation on Govt. Securities, provision for valuation of Non-SLR category and broken period interest. The RBI guidelines on valuation of Govt. Securities and amortization are based on theory of 'Real Income' being sine qua non for computation of taxable income under I. T. Act, 1961. 2) On the facts and in the circumstances of the case and in law the Ld. CIT(A) was not justified in confirming the disallowance made by the A.O. of the claim of depreciation on Government Securities shifted from AFS to HTM Securities of ₹ 2,46,01,000/- holding that RBI Guidelines could not override the provisions of the Income-tax Act, 1961. The CIT(A) was under obligation to honour the C.B.D.T. instructions and the judgment of the Hon'ble Kerala High Court in Lord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 40 (a)(ia) of ₹ 31,182/-. Since provisions of S. 40 (a)(i-a) are not applicable the expenditure is allowable and it be allowed accordingly. 10)On the facts and in the circumstances of the case and in law the appellant denies its liability to pay interest u/s. 234-B and 234-C of the Act and the same be deleted. 11)The appellant craves to leave, add/amend or alter any of the above grounds of appeal. 3. At the outset of hearing, the learned Authorized Representative did not press grounds of appeal Nos.1, 5, 6, 7, 8 and 9, so they are dismissed as not pressed. Similar issues in other appeals are also not pressed, so same are also dismissed as not pressed. 4. The learned Authorized Representative pointed out that the issues in ground Nos.2, 3 and 4 of assessee s appeals are covered in favour of the assessee by the order of ITAT, Pune Bench A in ITA No.449/PN/2012 vide order dated 05.08.2013 in the case of Dy.CIT Vs. Kallappanna Awade Ichalkaranji Janata Sahakari Bank Ltd., wherein, the similar issues were decided by the Pune Bench B in favour of assessee by observing as under: 10. We have considered the rival arguments made by both the sides, perused the orders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 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 apart, any permanent diminution in value shall FV shall go on to reduce cost of the investment. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities 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 . 10.1 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. 4.1 Nothing contrary was brought to our knowledge. Facts being similar, so following the same reasoning, the disallowance made by the Assessing Officer and confirmed by the CIT(A) are set aside and the Assessing Officer is directed to allow the same. Similar issue arose in other appeals of assessee. Facts being similar in other assessee s appeal, so following the same reasoning correspond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kerala High Court in Lord Krishna Bank case in this respect. The claim be allowed. 5) On the facts and circumstances of the case and in law the Ld. CIT(A) was not justified in remanding the matter to the file of the A.O. to verify the allowability of the claim of deduction of broken period of interest. The claim was based on the provisions of law only. The concerning all facts were before the Ld. CIT(A). The Ld. CIT(A) ought to have decided the matter himself in accordance with law and erred in remanding the matter to A.O. It be held accordingly. 6) On the facts and circumstances of the case and in law the Ld. CIT(A) ought to have allowed the broken period interest of ₹ 40,56,936/- claimed by the appellant being allowable deduction. It be allowed accordingly. 7) On the facts and circumstances of the case and in law the Ld. CIT(A) was not justified in confirming the addition of ₹ 30,00,000/- made by the A.O. on account of Investment Fluctuation Fund. The same being legally allowable it be allowed accordingly. 8) On the facts and circumstances of the case and in law the Ld. CIT(A) was not justified in confirming the disallowance made by A. O. of ₹ 75,00, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 34A 234B of Act which is consequential of outcome of other issue. The Assessing Officer is directed accordingly. As a result, this appeal of assessee is partly allowed. 9. In ITA No.2432/PN/2012, the assessee has raised the following grounds: 1. On the facts and circumstances of the case and in law the Ld. CIT(A) was not justified in holding that the since RBI norms and the Income-tax Act operate in different fields and such guidelines have nothing to do with the computation of taxable income. The RBI Guidelines cannot override the permissible deductions or taxable income. This finding is contrary to settled law and also CBDT Instructions No. 17/2008 dt. 26-11-2008 where the CBDT has mandated the Deptt. to refer to latest RBI Guidelines for allowing the concerned claims. 2. On the facts and circumstances of the case and in law the Ld. CIT(A) erred in confirming the finding of the A.O. that the RBI Guidelines are not binding on the Income-tax Department. The reliance placed on the verdict of the Hon'ble Supreme Court and High Court judgment was misplaced as they simply dealt in the issue of NBFCS concerning RBI Guidelines 1998 for write off of NPA's which did not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The claim be allowed. 7. On the facts and circumstances of the case and in law the Ld. CIT(A) was not justified in remanding the matter to the file of the A. 0. to verify the allowability of the claim of deduction of broken period of interest. The claim was based on the provisions of law only. The concerning all facts were before the Ld. CIT(A). The Ld. CIT(A) ought to have decided the matter himself in accordance with law and erred in remanding the matter to A. 0. It be held accordingly. 8. On the facts and circumstances of the case and in law the Ld. CIT(A) ought to have allowed the broken period interest of ₹ 45,75,154/- claimed by the appellant being allowable deduction. It be allowed accordingly. 9. On the facts and circumstances of the case and in law and following the ITAT Mumbai Bench decision in Dy. CIT v. Banque Indosuez Ors. (and vice versa) (2012) 19 UR (Trib) 463 (Mumbai) where it has been held that the Broken period interest was an allowable deduction. It be held accordingly. 10. On the facts and circumstances of the case and in law and following Hon'ble Bombay High Court Judgment reported as Director of Income-tax (International Taxation) v. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case and in law the Ld. CIT(A) was not justified in upholding the disallowance made by the A.O. of ₹ 52,178/- holding it as prior period expense. The claim was rightly made and it be allowed. 18. On the facts and circumstances of the case and in law the levy of interest u/s 234B and 234C is not justified and in the circumstances it be deleted. 19. The appellant craves/leave to add, amend or alter any of the above grounds of appeal. 10. At the outset of hearing, the learned Authorized Representative did not pressed the grounds of appeal Nos.1, 2, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16 and 17, so they are dismissed as not pressed. The grounds of appeal Nos.3, 4, 5 and 6 are with regard to claim of depreciation on government securities shifted from AFS to HTM Securities at the beginning of the year. This issue has been discussed and decided in ITA No.103/PN/2012 vide para 4 of this order. Facts being similar, so following the same reasoning, the issue has been decided in favour of assessee. 11. Issue in ground No.18 pertains to interest liability u/s.234B 234C of Act which is consequential of outcome of other issue. The Assessing Officer is directed accordingly. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The disallowance made by A.O. and confirmed by Ld. CIT(A) is against law and judicial precedents and therefore, without jurisdiction. The disallowance be quashed. 5) On the facts and circumstances of the case and in law the Ld. CIT(A) was not justified in confirming the disallowance of ₹ 5,00,000/-made by the A.O. stating that contingent provision was not allowable. The CIT(A) failed to appreciate the claim of deduction made. It be allowed accordingly. 6) On the facts and circumstances of the case and in law the jurisdiction to complete the assessment u/s 143(3) was assigned by JCIT, Satara, which is not according to law. The proper authority was the Commissioner of Income-tax, Pune. The TRO has assumed the jurisdiction which is invalid. The assessment completed without jurisdiction be quashed. 7) On the facts and circumstances of the case and in law the Ld. CIT(A) was not justified in confirming the disallowance of ₹ 1,96,69,614/- holding that the provision made of ₹ 2,41,69,614/- was in excess by ₹ 45,00,000/- The provision of ₹ 2,41,69,614/- having correctly made u/s 36(l)(vii-a) was allowable in view of judicial precedent /pronounced by H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Southen Technologies Ltd., 320 ITR 577 as it was distinguishable on facts and law since it pertained to NBFC's as defined in Ch. III-B of the Reserve Bank of India Act, 1934. The provisions of Ch. III-B (supra) only applied to NBFC's. The reliance of the Ld. OT(A) on Supreme Court judgment for confirming the disallowance of ₹ 1,11,21,000/- was bad in law and without jurisdiction. 4) On the facts and circumstances of the case and in law the Ld. CIT(A) erred to understand the principles of fiscal policy that are formulated by RBI to control the finances of the Nation. The policy of classification of HTM securities and transfer was at a time when banks are on the brink of exhausting the Held to maturity cap which protect them from mark to market losses and supports the government's high borrowing programme. In a way on expectation of rising yields banks had shifted bonds of HTM category to save from trading losses and therefore actions are in the interests of the banking business. The confirmation of disallowance of ₹ 1,11,21,000/- was not proper. 5) On the facts and circumstances of the case and in law the Ld. CIT(A) was not justified in confirming the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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