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TMI Blog2019 (6) TMI 993X X X X Extracts X X X X X X X X Extracts X X X X ..... g total income of Rs. 423,93,73,750/-. In the Profit & Loss Account filed along with the said return, a sum of Rs. 61.26 crores was deducted by the assessee from interest earned as amortization of premium paid for purchase of securities. In this regard, it was explained on behalf of the assessee before the Assessing Officer that the amortization of premium amounting to Rs. 61.26 crores for purchase of HTM categories of securities was not considered in the amount of purchase as debited in the Investment Trading Account and the same was charged to the Profit & Loss Account as per the RBI guidelines by adjusting it against the interest earned. It was submitted that this expenditure actually represented the premium amount paid over and above the value of HTM categories of securities and it was amortized over the maturity period of the securities. According to the Assessing Officer, even though this expenditure was allowed as per the Master Circular of RBI, there was no provision in the Income Tax Act to allow such expenditure to be amortized over the maturity period of the securities. He accordingly disallowed the claim of the assessee for deduction on account of the said expenditure a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee for purchase of securities and the same was disallowed on the ground that the securities were held as investment. The stand taken by the revenue was that when the securities held as investment were to be transferred, the profit and loss arising therefrom would be completed after taking into account the cost of acquisition. This stand was accepted by the Tribunal and the question that arose for consideration of the Hon'ble Delhi High Court was "whether the Tribunal was correct in not allowing the deduction on account of amortization of premium paid towards purchase of securities, shown as permanent investments, spread over the remaining period of securities, particularly when the income and interest from such securities was assessed as business income"? While deciding this question, Hon'ble Delhi High Court held that the determination of nature and character of the relevant securities was relevant in this context and the final outcome of the issue would depend upon such determination. Hon'ble Delhi High Court accordingly remanded the matter back to the Assessing Officer for determining the nature and character of the relevant securities and decide the issue depending up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nation 3 thereto by the Finance Act, 2012 making section 115JB applicable even to the Banking companies, is applicable only prospectively from assessment year 2013-14. Respectfully following the said decision of the Coordinate Bench of this Tribunal, we uphold the impugned order of the ld. CIT(Appeals) giving relief to the assessee on this issue. 8. As regards the addition made by the Assessing Officer on account of disallowance under section 14A by applying Rule 8D while computing the total income of the assessee as per the normal provisions of the Act, it is observed that the disallowance of Rs. 23,35,740/- was offered by the assessee under section 14A in the computation of total income on account of expenses incurred in relation to the exempt income earned during the year under consideration amounting to Rs. 21.36 crores. The basis of the disallowance so offered was also explained by the assessee by furnishing the relevant working. The Assessing Officer, however, did not find the same to be acceptable and by applying Rule 8D of the Income Tax Rules, 1962, he worked out the disallowance to be made under section 14A at Rs. 363.13 crores. 9. On appeal, the ld. CIT(Appeals) delete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imation basis by taking into consideration the average rates of rent at which such properties could be let out. He accordingly considered the estimation of deemed rent made for the immediately preceding year, i.e. A.Y. 2011-12 and determined the annual value of the properties of the assessee for the year under consideration by increasing the same by 5%. After allowing deductions to the annual value so determined on account of Municipal taxes and under section 24(a) of the Act, the income chargeable to tax in the hands of the assessee under the head "income from house property" was determined by the Assessing Officer at Rs. 56,73,916/-. On appeal, the ld. CIT(Appeals) directed the Assessing Officer to determine the income of the assessee from house properties by taking the annual value on the basis of Municipal valuation. 11. We have heard the arguments of both the sides on this issue and also perused the relevant material available on record. In support of the Revenue's case on this issue, the ld. D.R. has relied on the decision of the Hon'ble Calcutta High Court in the case of CIT -vs.- Satya Company Limited (75 taxman 193), wherein it was held in paragraph no. 12 of the order th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee was not correct. He held that it was prudent to apportion the operating expenses in the ratio of turnover especially in the case of Bank. Accordingly he apportioned the operating expenses in the ratio of interest earned on long-term lending to total interest income earned and worked out the operating expenses apportionable to income from long-term earning at Rs. 675,41,36,332/- as against Rs. 361,92,42,632/- worked out by the assessee. The profit of the eligible business of long-term finance accordingly was re-computed by the Assessing Officer at Rs. 678,96,54,842/- and the claim of the assessee for deduction under section 36(1)(viii) was restricted by him to Rs. 135,79,30,968/- thereby making a disallowance of Rs. 62,69,78,740/- on this issue. 14. The disallowance made by the Assessing Officer on account of its claim for deduction under section 36(1)(viii) was challenged by the assessee and the following submissions were made on behalf of the assessee in support of its case on this issue before the ld. CIT(Appeals):- "The appellant bank's contention is that operating expenses are to be apportioned in the ratio of eligible business (i.e. business of providing long ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . He accordingly confirmed the disallowance made by the Assessing Officer on this issue. 15. The ld. Counsel for the assessee submitted that the basis adopted by the assessee in apportioning the operating expenses in the ratio of eligible business of providing long-term finance to total business of the Bank after taking into consideration the aggregate of advances and deposits is more fair and reasonable. He contended that the operating expenses incurred by the assessee-Bank are in relation to its entire business of granting of loans and advances and acceptance of various deposits and that also include the non-performing assets. He contended that the Bank has to manage both performing and non-performing assets and the Assessing Officer as well as the ld. CIT(Appeals) failed to appreciate this vital aspect. He contended that the formula adopted by the authorities below for apportionment of the operating expenses implies that the Bank incurred operating expenses in relation to performing assets only and since it is not factually correct, the basis adopted by them has given distorted result. He also contended that the same basis as adopted by the assessee for apportionment of operati ..... X X X X Extracts X X X X X X X X Extracts X X X X
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