9911796707
TMI Blog2014 (1) TMI 1805X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Assessing Officer in respect of the amount of the amortization of premium on investment debited to the profit and loss account. 2. The facts which are revealed from the record as under. The Assessing Officer has observed that as per the Master Circular issued by the RBI dated 17-07-2004, all the Co-operative Bank are required to classified their entire investment portfolios in three categories i.e. (i) Held to Maturity (HTM), (ii) Available for Sale (AFS) and (iii) Held for Trading (HFT). As noted by the Assessing Officer, the securities classified by AFS and HFT securities are in the nature of stock in trade while the HTM securities are in the nature of capital assets. He has further noted that for the purpose of Income-tax, for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per the norms of the RBI. As per the "Significant Accounting Policies" given in schedule 17 attached with the Balance Sheet every year, the fact that all investments are stock in trade has been clarified in the case of the Assessee. It does not mean the securities kept in category of HTM cannot be sold before the maturity. The HTM has been sold in subsequent year and Income/loss treated as business income/loss and not as capital gain/loss at all. 18. All income/loss whatever arising on account of investment(stock in trade) Interest loss/profits or diminishing of investment including securities held under HTM category has been treated as business income/loss and always has been treated by department as business and assessed accordingly in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee has further filed a copy of CBDT Instruction No.17 dated 26/11/2008 Published in 220 CTR (Statute Pages 41 to 44). The CBDT in para (VII) of this instruction has stated that in the cases of banks where RBI had issued guidelines for allowing deduction of amortization premium paid on securities under HTM category. The relevant portion of Instruction is as under: "As per RBI guidelines dated 16th October, 2000, the investment portfolio of the banks is required to be classified under three categories viz. Held to Maturity (HTM), Held for trading (HFT) and Available for sale (AFS). Investments classified under HTM category need not be marked to marked and are carried at acquisition cost unless these are more than the face value, in which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on in the value of investments. The method of valuation followed by the assessee Bank was to value investments at cost or market value whichever was lower. The assessee had claimed the depreciation to the tune of Rs. 11,82,35,007/- and the said depreciation was claimed as a deduction which was disallowed by the A.O, but the assessee Bank succeeded before the CIT(A). The Tribunal confirmed the order of the CIT(A). The Revenue carried the issue before the Hon'ble High Court. The core issue was the method of valuation adopted by the assessee Bank for valuing the stock of the Securities. The Hon'ble High Court followed the decision of Hon'ble Supreme Court in the case of United Commercial Bank (Supra). 15. In the case of United Commercial Ban ..... X X X X Extracts X X X X X X X X Extracts X X X X
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