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TMI Blog2017 (12) TMI 303X X X X Extracts X X X X X X X X Extracts X X X X ..... 2009 (8) TMI 858 - ITAT COCHIN) allowing amortisation of the premium paid on acquisition of HTM bonds. Provision made for fraudulent withdrawals - Held that:- Fraudulent withdrawals were committed by one of the employees of the bank in the earlier years. There was no debit to the profit and loss account during the year on this issue. The provision was made in the books of account in the earlier assessment years and no provision was made in this year. Under these circumstances we failed to understand as to how an addition can be made during the year. The A.O. on the one hand observes that the said amount is debited to the profit and loss account in the impugned assessment year 2009-10 and on the other hand makes an addition of a provision made for fraudulent withdrawals in the earlier year without any change in the facts and circumstances of the case. Such addition cannot be sustained. Hence we delete the said addition Addition for provision for gratuity - Held that:- As there is no provision in the account, Section 40A(7) of the Act has no application. Hence this addition is hereby deleted. Disallowance of interest payable on deposits borrowings etc. - Held that:- Central ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A) is completely arbitrary, unjustified and illegal. 3. For that on the facts of the case, the Ld. CIT(A) was wrong in dittoing the order of the A.O. and confirming the disallowance of expenditure amounting to ₹ 3,24,905/- on account of Baksis Tips payment, although the said expenditure is made for carrying on day to day business and revenue in nature of the assessee bank, therefore, the order passed by the Ld. CIT(A) is completely arbitrary, unjustified and illegal. 4. For that on the facts of the case, the Ld. CIT(A) was wrong in dittoing the order of the A.O. and confirming the disallowance of ₹ 3,35,526/- as provision for adjustment of amortisation which is an ascertained liability, therefore, the order passed by the Ld. CIT(A) is completely arbitrary, unjustified and illegal. 5. For that on the facts of the case, the Ld. CIT(A) was wrong in dittoing the order of the A.O. and confirming the addition ₹ 22,00,000/- shown as liability made under the head fraudulent withdrawals which is completely arbitrary, unjustified and illegal. 6. For that on the facts of the case, Ld. CIT(A) was wrong in not considering the fact that the liability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ful consideration of the facts and circumstances of the case and a perusal of the paper on record and the orders of the authorities below as well as the case law cited, we hold as follows. 5. Ground no 1 is general in nature. 6. Ground no 2 and 3 is against the disallowance of expenditure of an amount paid as Tips Baksis by the bank to casual workers on festive occasion. The assessee submits that these payments were made to casual workers like water boys, canteen boys, security staffs etc. during annual festivals like Durga Puja and Eid. It was submitted that the payment is in the nature of ex-gratia/bonus. The break-up of these payments, as made by different branches of the bank was given. These payments were authorised by appropriate resolutions of the Board of Director of the bank. The Assessing officer as well as the Ld. CIT (A) did not allow this expenditure on the ground that there was no commercial expediency behind incurring this expenditure and that the explanation is not satisfactory. The ld. Counsel for the assessee the disallowance is bad in law the assessee has produced sufficient evidence in the form of vouchers and receipts in evidence of any payment of Tips ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the bank, the depreciation / appreciation is to be aggregated scrip wise and only net depreciation, if any, is required to be provided for in the accounts. The latest guidelines of the RBI may be referred to for allowing any such claims. 13. Applying this circular of the CBDT, a similar claim was allowed by Cochin Bench of the Tribunal in the case of Catholic Syrian Bank Ltd. vs ACIT (2010) 38 SOT 553. Similar order passed by Panaji Bench of the Tribunal in the case of The Khanapur Co-op Bank Ltd. vs. ITO, ITA No. 141/PNJ/2011, dated 08.09.2011allowing amortisation of the premium paid on acquisition of HTM bonds. 14. Respectfully following the same, we allow this claim of the assessee and delete the disallowance. 15. In the result ground no 4 is allowed. 16. Ground no 5, 6 and 7 are directed against the addition of ₹ 22,00,000/-. Fraudulent withdrawals were committed by one of the employees of the bank in the earlier years. There was no debit to the profit and loss account during the year on this issue. The provision was made in the books of account in the earlier assessment years and no provision was made in this year. Under these circumstances we failed to un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her words, the pre acquisition interest as per the Ld. A.O. is cost effect position of the security and cannot be allowed as revenue expenditure. 21. The Assessing Officer took a contrary view on pre-acquisition interest received on sale of securities. He did not disturb the accounting of the assessee, wherein pre acquisition interest received on sale securities was disclosed as income being revenue in nature. 22. This action of the A.O. is contradictory and hence is not correct. If pre acquisition interest on purchase of a Govt. Security is the cost of purchase of such security, then pre acquisition interest on sale of the same security should be treated as sale price of security. Otherwise in both cases the pre acquisition interest should be treated as revenue transactions. The assessee is consistently follow the method of accounting wherein, pre-acquisition interest of security is treated as revenue expenditure and pre-acquisition interest on sale of a Govt. security is taken as income. The Central Board of direct taxes in circular no 559 dated 24.04.1999 189 ITR (ST) 126 has clarified that securities held by bank must be regarded as stock in trade and that interest paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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