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TMI Blog2013 (7) TMI 987X X X X Extracts X X X X X X X X Extracts X X X X ..... estment. Law is well settled that the Securities held by the Bank are in the nature of Stock-in- Trade Addition of amortization of premium on Government Securities - Held that:- As in Sree Subramanyeswara Co-operative Bank Ltd [2012 (11) TMI 336 - ITAT, BANGALORE] identical issue in favour of the assessee as held Amortization was made as per the prudential norms of the RBI. Following the Tribunal decision in the assessee's own case and considering that the assessee bank is following consistent and regular method of accounting system, there is no justification in interfering with the order of the Commissioner of Income-tax (Appeals) on this issue of amortization of premium on government securities - ITA No. 610/PN/2011 - - - Dated:- 31-7-2013 - Shri Shailendra Kumar Yadav, Judicial Member and Shri R.K. Panda, Accountant Member Appellant by : Shri S.N. Puranik Respondent by : Shri Rajesh Kumar ORDER PER R.K. PANDA, AM : This appeal filed by the assessee is directed against the order dated 25- 03-2011 of the CIT(A), Aurangabad relating to assessment year 2007-08. 2. The assessee has taken total 8 grounds in the grounds of appeal. However, at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (HC), Solid Containers Limited vs. CIT, 308 ITR 417 (Bombay), Rajasthan Golden Transport Co. Ltd., 249 ITR 723 Rajasthan and CIT Vs. Aries Advertising Pvt. Ltd., 255 ITR 510 (Madras) show that the forfeiture of share capital is nothing but income of the assessee. The facts and circumstances of the cases cit id by the appellant are distinguishable from the facts of this case. For the reasons given above and relying on these decisions, the addition made by the A.O. is confirmed and ground No.3 is rejected. 3.4 Aggrieved with such order of the CIT(A) the assessee is in appeal before us. 3.5 The Ld. Counsel for the assessee strongly challenged the order of the CIT(A). He submitted that the decision of the Hon ble Bombay High Court in the case of Solid Containers Ltd. (Supra) relied on by the Ld. CIT(A) is not applicable to the facts of the present case. He submitted that in that case it was held that waiver of loan taken for trading activity, cash credit facility would be assessee s income subject to tax. He submitted that the Hon ble Bombay High court in the case of CIT Vs. Xylon Holding Pvt. Ltd vide Tax Appeal No.3704/2010 order dated 13-09-2012 following the decision in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are distinguishable and not applicable to the facts of the present case since in all those cases the advances received were during the course of business whereas in the instant case it is a capital receipt. We find various Benches of the Tribunal, after considering the decision of Hon ble Supreme Court in the case of T.V. Sundaram Iyenger (Supra) have held that such receipt on account of forfeiture of share money is a capital receipt. 4.2 We find the Hon ble Supreme Court in the case of Travancore Rubber and Tea Company Ltd. Vs. CIT reported in 243 ITR158 has held that forfeiture of earnest money and advance by vendor is a capital receipt. The Hon ble Bombay High Court in the case of Xylon Holding Pvt. Ltd. (Supra) after considering the decision of Mahindra Mahindra Ltd. (Supra) has held that the benefit of cessation of liability to repay a loan liability is not taxable either u/s.28(iv) or u/s.41(1) of the Income Tax Act. 4.3 We find Ahmedabad Bench of the Tribunal in the case of Brijlaxmi Leasing and Finance Ltd. (Supra) after considering the decision of the Hon ble Supreme Court in the case of T.V. Sundaram Iyenger (Supra) has held as under : We have heard the rival ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Satna during the impugned assessment year. In these circumstances, we are constrained to hold that the amount received by the assessee in lieu of issuance of NCDs which was forfeited later on account of non-payment of call money assumes the character of capital receipt which earlier was shown as a loan liability in the books of account of the assessee. If we consider this receipt to be business receipt even then it would not be taxable to tax under the provisions of section 41(1) of the Act, in as much as there was no allowance or deduction of this liability in the earlier years . In view of the above, respectfully following the aforesaid decision of the Mumbai Bench of the Tribunal we find no reason to interfere with the order of the learned Commissioner of Income-tax (Appeals). It is confirmed and the ground of appeal of the Revenue is dismissed. In the result, the appeal of the Revenue is dismissed . 4.4 Respectfully following the above decisions we hold that the Ld.CIT(A) was not justified in confirming the addition of ₹ 5,73,100/- on account of forfeited share money as taxable. The various decisions relied on by Ld.CIT(A) are distinguishable and not applicable to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant. There is delay of about 5 months in shifting the category of investment. As observed by the A.O., such shifting should be normally done at the beginning of the year. The use of word 'normally' indicates that it is not mandatory but delay of 5 months may not be considered as normal delay. It has been submitted by the appellant that there is no such provision in the Income Tax Act to disallow the depreciation. The submission of the appellant is not acceptable. The securities under the category Held to maturity are in the nature of capital asset, which has to be valued at cost only, and no part thereof can be claimed as revenue expenditure. In view of these facts, the addition made by the AO is confirmed . 5.4 Aggrieved with such order of CIT(A) the assessee is in appeal before us. 6. After hearing both the sides we find the above issue stands decided in favour of the assessee by the decision of the Pune Bench of the Tribunal in the case of Latur Urban Cooperative Bank Ltd. vide ITA No.778/PN/2011 and ITA No.792/PN/2011 for A.Y. 2007-08 order dated 31-08-2012. We find the Tribunal at Para Nos. 13 to 15 has held as under : 13. So far as Ground No. 2 is concer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities held by the Bank are in the nature of stock-in-trade. Both the authorities below has merely gone on the nomenclature of the head under which the Securities are held. In our considered view, nomenclature cannot be decisive for the assessee Bank. We, therefore, hold that the loss on the sale of the Securities is revenue in nature and same is allowable. Accordingly, Ground No. 2 is allowed. 6.1 Respectfully following the decision of the Co-ordinate Bench of the Tribunal we set aside the order of the CIT(A) and direct the AO to delete the addition. Ground of appeal No.2 by the assessee is accordingly allowed. 7. Grounds of appeal No.4 by the assessee reads as under ; 4. The Ld.CIT(A) erred in confirming addition of ₹ 1,08,000/- on account of amortization of premium on Government Securities and the same addition may please be deleted . 7.1 Facts of the case, in brief, are that the AO made an addition of ₹ 1,08,000/- on account of amortization of premium on Government Securities in the category of investment Held to Maturity (HTM). This premium represents the excess of acquisition cost over the face value of HTM securities, which is amortized by the bank o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id for securities held under HTM category amounting to ₹ 11.77 crores was claimed by the assessee as deduction in its computation of total income. The same, however, was disallowed by the AO holding that the expenditure incurred on premium paid for securities held under HTM category was a capital expenditure not allowable as deduction. He held that the said securities were in the nature of investment and not stock in trade. On appeal, the learned CIT(Appeals) deleted the disallowance made by the AO on this issue. Besides relying on his own order in assessee s own case on a similar issue for the earlier year, the learned CIT(Appeals) also relied on CBDT Instruction No.17/2008 dated 26- 11-2008 published in 220 CTR (Statute) page 41. He held that the assessee company was bound to classify its investment as per RBI guidelines dated 16-10-2010 and as per the said guidelines, investment classified under HTM category was required to be carried at acquisition cost unless it was more than the face value. He held that the premium on such investments was also required to be amortized over the period remaining to maturity. He held that the claim of the assessee thus was as per RBI guide ..... X X X X Extracts X X X X X X X X Extracts X X X X
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