9911796707
TMI Blog1986 (3) TMI 109X X X X Extracts X X X X X X X X Extracts X X X X ..... be eligible for deduction and deduction has been wrongly allowed. The IAC therefore, after issuing notice under s. 1154 of the IT Act in this connection revised the total income by including the interest paid on purchase of securities as stated above. He also included in the order an amount of Rs. 20,00,000 as interest received on sale of securities on estimate subject to rectification in the absence of details furnished by the assessee in this connection. When the matter was taken in appeal by the assessee, the CIT (A) has upheld the order subject to a direction that the interest disallowable has not been correctly computed for want of necessary details and should be correctly ascertained and disallowed. He has pointed out that the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd so as to warrant a rectification under s. 154 of the IT Act as the dispute involved is highly debatable one or there can reasonably be more than one view. In this connection, he drew our attention to the decision of the Special Bench of the Tribunal in the case of American Express International Banking Corpn. vs. IAC (1984) 18 TTJ (Bom) 218 (SB) : (1983) 6 ITD 374 (Bom) (SB) and in particular to paragraphs 8, 11 and 16 of that order. It is submitted that in the case of the assessee who is a bank it holds securities as its stock-in-trade, that in the accounts the interest paid on purchase of securities is debited to the profit and loss account and in particular to paragraphs 8, 11 and 16 of that order. It is submitted that in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g a mistake committed. 4. We have carefully considered the facts and submissions of the parties and find substantial merit in the assessee's objection. It is undisputed that the assessee being a banking company, the purchase or sale of securities forms part of its regular business activity and any profit or loss which may arise on such transaction would be chargeable to tax as income from business. It is true that the interest that is received by it on the securities held on the due dates will be chargeable under the head interest on securities but that is on account of the specific provision of the statute namely the IT Act directing the charge under the particular head. For that reason it does not cease to be income from business. Norma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Reference was also made to extracts from two books, one a Handbook of Modern Accounting by Davidson & Weil (1977 edition) and the other The Modern Accountant's Handbook by Biwards & Block (1976 edition) and both these authorities on accounting principles state that the buyer of the security acquires two different assets on buying a security between two due dates for paying interest. One asset is obviously the security itself, which is on the capital account, while the other one being the interest since the last date of payment to the date of purchase is another asset which could be treated as on revenue account. It is further noticed that similar was the opinion expressed in the other standard books on accountancy, namely Accountant's Handb ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
