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TMI Blog2020 (9) TMI 493X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal while recording the finding in favour of the assessee has relied upon the decision of the Supreme Court in CITIBANK [ 2008 (8) TMI 766 - SUPREME COURT]. - Decided in favour of assessee. - I.T.A. NO.27 OF 2013 C/W I.T.A. NO.26 OF 2013 - - - Dated:- 8-9-2020 - Mr. Justice Alok Aradhe And Mr. Justice H.T. Narendra Prasad For the Appellants : Sri. K.V. Aravind, Adv. For the Respondent : Sri. Ankur Pai, Adv., A/W Sri. K.R. Vasudevan, Adv. COMMON JUDGMENT These appeals under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the Act for short) has been preferred by the revenue. The subject matter of the I.T.A.No.27/2013 pertains to the Assessment year 2000-01, whereas, the subject matter of I.T. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in holding that the broken period interest paid by the assessee should not be added to the cost of the securities purchased by including the interest in the closing stock of the securities, when the expenditure towards interest was towards the capital outlay? (ii) Whether the Tribunal was correct in holding that the expenditure incurred towards broken period interest in the earlier years is not to be treated as part of closing stock in the current year as the same was not debited to the P L account without taking into consideration that the correct valuation can be arrived at only after taking into consideration the broken period interest paid and recorded a perverse finding? (iii) Whether the Tribunal was correct in not decl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ff as expenditure against income accruing on the securities. Thereupon the Assessing officer passed an order under Section 143(3) of the Act on 31.03.2005 for assessment years 1999-00 and 2000-01 by which total income was assessed at ₹ 64,86,46,345/- for assessment year 1999-00 and ₹ 61,48,51,585/- for assessment year 2000-01. The assessee thereupon filed an appeal before Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) by an order dated 12.08.2011 directed the Assessing officer to recast the profits in respect of sale of securities after taking into account the enhancement in cost of securities purchased in addition of Broken Period Interest. Accordingly, the appeals were partly allowed. 4. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterest accrued thereon payable by the government to the bank, the purchase price comprise of issue price till the date of purchase, which is known as Broken Period Interest cannot be claimed as allowable deduction from its income. In support of aforesaid submissions, reliance has been placed on decisions of the Supreme Court in 'VIJAYA BANK LTD. VS. ADDITIONAL COMMISSIONER OF INCOME TAX', (1991) 187 ITR 541 (SC), 'BROOKE BOND INDIA LTD. VS. COMMISSIONER OF INCOME-TAX', (1997) 91 TAXMAN 26 (SC) and 'COMMISSIONER OF INCOME- TAX VS. BANK OF RAJASTHAN LTD.,', (2009) 178 TAXMAN 304 (RAJASTHAN). 6. On the other hand, learned counsel for the assessee while inviting the attention of this court to paragraph 9.3 of the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , comprising of the issue price, and accrued interest uptill the date of purchase. It is this element of interest, which is paid by the bank, at the time of purchase, for the period between the date of issue, and date of purchase, is known as Broken Period Interest . The issue, which arises for our consideration in these appeals, is about taxability of interest paid by the assessee commonly known as Broken Period Interest. In VIJAYA BANK LTD. Supra, the Supreme Court considered the issue whether in a case where the assessee purchases securities at a price determined with reference to their actual value as well as interest accrued thereon till the date of purchase, the entire price paid for them would be in the nature of capital outlay or w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to tax under the head of business under Section 28 of the Act. Therefore, the decision in Vijaya Bank Ltd.'s case did not apply to the facts of the case. Similar view was taken by High Court of Bombay in American Express International Banking Corporation supra. 9. In the light of the aforesaid well settled legal principles, the facts of the case in hand may be seen. In the instant case, the assessee bank ever since, its inception has been offering the Broken Period Interest income earned from the sale of securities as business income under Section 28 of the Act and not as income under the head 'income from other sources'. Therefore, the Broken Period Interest paid to the sellers of securities was claimed as allowable deduct ..... X X X X Extracts X X X X X X X X Extracts X X X X
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