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2014 (1) TMI 757 - AT - Income TaxAllowance of bad debts - Held that:- As per compliance report submitted by assessee to Reserve Bank of India, provision was made for pending entry for more than two years - This provision was made on 31-03-2008 pending reconciliation of inter branch and inter bank accounts - As per advise of Reserve Bank of India, the assessee did not take into account the said entry as income either in current year or in preceding year - Revenue authorities observed that provision is an expenditure relating to a particular account period but not falling due on date of filing financial statement - The expenditure relates to particular financial year, a provision was made against revenue generated in said accounting period failing which financial statement could not be shown free and fair view - The provision for expenditure could be allowed as deduction only if liability accrued as on date of making provision and it is not a contingent liability. Provision so made was pre-matured - It was only contingent liability or notional loss which could not be allowed as an expenditure under provisions of I.T Act - The amount in question was not actually returned as bad or business loss during the year and it was only notional provision or loss for diminution of value, if any which could not be allowed as deduction either u/s. 37 of I.T Act or u/s. 28 of I.T Act which has been rightly disallowed by Assessing Officer - Decided against assessee. Amortization of premium paid on purchase of Government Securities - Held that:- 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 market and are carried at acquisition cost unless these are more than the face value, in which case the premium should be amortised over the period remaining to maturity - In the case of HFT and AFS securities forming stock in trade of 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. Following The Catholic Syrian Bank Ltd. Versus The Addl. Commissioner of Income-tax, Range-1, Thrissur. [2013 (1) TMI 129 - ITAT COCHIN] - In case of banks, the premium paid in excess of face value of investments classified under HTM category which has been amortised over the period till maturity is allowable as revenue expenditure since the claim is as per RBI Guidelines and CBDT also has directed to allow such premium - Decided in favour of assessee.
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