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TMI Blog2016 (4) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... favour of assessee - ITA No.280 & 281/PN/2015 - - - Dated:- 12-2-2016 - SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM For The Assessee : None For The Revenue : Shri Hitendra Ninawe ORDER PER VIKAS AWASTHY, JM : These two appeals have been filed by the assessee. In ITA No.280/PN/2015 the assessee has assailed the order of Commissioner of Income Tax (Appeals)-II, Pune dated 29-01-2015 for the Assessment Year 2008-09. The solitary issue raised by the assessee in the appeal is confirmation of disallowance by CIT(A) in respect of amortization of premium paid on Government Securities. 2. Brief facts of the case are; The assessee is a Cooperative Bank. The assessee is maintaining books of account as per the guidelines and circulars issued by Reserve Bank of India from time to time. During the course of scrutiny assessment the Assessing Officer made disallowance of ₹ 15,11,333/- in respect of amortization of premium paid on Government Securities held under HTM category. The AO held that HTM securities are in the nature of capital assets. Amortization of premium on HTM Securities is not allowable under the provisions of Income Tax Act, 1961, as all ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Ahmednagar Merchants Cooperative Bank Ltd. vs. JCIT (supra) and the claim of the assessee was allowed holding as under :- 18. We have heard the rival contentions and perused the record. The first issue arising in the present appeal filed by the Revenue is with regard to the allowability of amortization premium paid on HTM securities at ₹ 22,69,144/-. The Pune Bench of the Tribunal in assessee s own case in ITA No.712/PN/2013, relating to assessment year 2009-10 vide order dated 27.11.2013 had allowed the claim of assessee, in turn relying on the order of Tribunal in Nagar Urban Cooperative Bank Ltd. in ITA No.306/PN/2012, observing as under:- 2. The only issue is with regard to addition made by Assessing Officer who has disallowed the amortization premium paid on Govt. Securities of ₹ 23,13,525/-. At the outset of hearing, learned Authorized Representative pointed out that this issue is covered in favour of assessee by the order in the case of Nagar Urban Co-operative Bank Ltd., in ITA No.306/PN/2012, wherein the Tribunal has decided the issue in favour of the assessee by observing as under: 4. We have heard the parties. We find that the issue b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... treated as a purely investment. Law is well settled that the Securities held by the Bank are in the nature of Stock-in-Trade. We may like to quote here the decision of the Hon ble High Court of Kerala in the case of CIT Vs. Nedungadi Bank Ltd., 264 ITR 545. In the said case, the Hon ble High Court has held that the securities held by the Bank are in the nature of stock-in-trade. Both the authorities below have 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 . 2.1 Moreover, the said issue is also decided in favour of the assessee by other co-ordinate Bench in the following cases: i) Decision of Bangalore Bench of the Tribunal in the case of Krishna Grameena Bank Vs. Addl. CIT (ITA No. 146/Bang/2011 and 224/Bang/2011 order dated 15-6- 2012. ii) Decision of Bangalore Bench of the Tribunal in the case of National Co-op. Bank Ltd. Vs. Jt. CIT Range 3 Bangalore (ITA No. 1090/Bang/2010 and 7/Bang/2011, order dated 11-5-2012). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cheque issued and accepted which remained uncleared at the clearing house at the fag end of the financial year. The reconciliation of accounts with the banks is a continuous process. The entire amount is reconciliable and is not an income of the bank. It is an ascertained liability of the bank. The assessee furnished the details of accounts in respect of which uncleared cheques were deposited. Brushing aside the submissions of the assessee, the AO made addition of ₹ 15,50,807/-. The assessee took the matter in appeal before CIT(A). The CIT(A) after examining the details of unclaimed amounts furnished by the assessee, granted part relief by deleting the addition to the extent of ₹ 9,47,082/-. The CIT(A) confirmed the addition of ₹ 6,03,725/- in respect of unclaimed amount beyond the period of three years, being barred by limitation. 11. Shri Hitendra Ninawe representing the Department submitted that the CIT(A) has granted relief to the assessee to the extent the assessee was able to show that the amount represented the unclaimed cheques at the end of the financial year. The CIT(A) has confirmed the addition only in respect of unclaimed amount which is barred by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty on the assessee to pay the said amounts. The issue arising before us is in relation to the treatment of said liability recognized by the assessee in its books of account. Once the liability has been shown and recognized by the assessee in its books of account, then even if the liability is unclaimed and relates to earlier years, does not convert it into the income of the assessee. Support in this regard is drawn from the ratio laid down by the Hon ble Supreme Court in CIT vs. Sugauli Sugar Works (P) Ltd. (supra). However, in case where the assessee on its own motion transfers the said receipts through its Profit Loss Account, then on account of such act of the assessee itself, the amount changes its character and becomes assessee s own money and the same is to be treated as income of the assessee as per the ratio laid down by the Hon ble Supreme Court in CIT Vs. TVS Sundaram Iyengar and Sons Ltd. (supra). However, in the facts of the present case, the assessee continues to recognize the liability and once the liability has been so recognized by the assessee, there is no merit in treating the same as income of the assessee though some of the amounts may not be recoverable by ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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