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2015 (4) TMI 726 - AT - Income TaxAmortization of premium paid for HTM securities - Provision for Investment Depreciation fund - Investment Fluctuation fund - Reversal of interest on non performing assets - Held that:- The Hon’ble Bombay High Court in the case of HDFC Bank [2014 (8) TMI 119 - BOMBAY HIGH COURT] held that the assessee therein was entitled to deduction with respect to the diminution in the value of investments and amortization of premium on investments Held To Maturity on the ground of mandate of the RBI guidelines. The issue raised in the present appeal is identical to the issue before the Pune Bench of the Tribunal in the assessee’s own case [2015 (4) TMI 662 - ITAT PUNE] for assessment year 2008-09 and Hon’ble Bombay High Court in CIT Vs. HDFC Bank [2014 (8) TMI 119 - BOMBAY HIGH COURT]. We hold that amortization of premium expenditure for securities Held To Maturity in view of RBI guidelines are allowable business expenditure in the case of assessee. The grounds of appeal No.1 and 2 raised by the assessee are thus, allowed. The plea of the assessee before us was that the said amount was booked under the provision for investment depreciation fund by mistake and was actually the depreciated value of the investments on its transfer from HTM to AFS securities. The perusal of the Profit & Loss Account English version reflects the assessee to have claimed the expenditure of ₹ 40,30,000/- on account of investment depreciation fund under Schedule 16 provisions. In the entirety of the facts and circumstances and the revised claim made by the assessee, we are of the view that the facts and issue needs to be relooked into to determine the nature of entry passed by the assessee and following the principles of natural justice, we deem it fit to restore this issue back to the file of Assessing Officer, who shall decide the issue de novo after considering the revised plea of the assessee and the relevant documents in this regard. The issue raised vide grounds of appeal No.5 to 7 is in relation to reversal of interest on performing assets amounting to ₹ 42.15 crores. The assessee during the year under consideration adopted a change in method of accounting in respect of interest income earned from certain performing assets. In the Notes to the annual accounts, the assessee declared that the interest relating to non-performing assets i.e. agricultural loans would be accounted for only on realization and interest amounting to ₹ 42.15 crores was de-reversed and de-recognized by the assessee. The explanation of the assessee for the said change in the method of accounting of interest on non performing assets was the Agricultural Waiver Scheme, 2008 issued by the Central Government under which, guidelines were issued by the RBI, that where the such interest on agricultural loans was not received by the assessee, the same was not to be credited to the Profit & Loss Account. From the details furnished by the assessee, the necessary data cannot be culled out, so in all fairness, we deem it fit to restore this issue back to the file of the Assessing Officer, who shall first determine the eligible amount which is covered under the said agricultural waiver scheme issued by the Central Government and thereafter, determine the interest relatable to such eligible amount. The assessee is directed to furnish the requisite information / details before the Assessing Officer and the Assessing Officer thereafter, shall reconcile the same with the debt waiver scheme and determine the eligible amount. Further, the assessee claims that the interest on such performing assets that are covered by agricultural waiver scheme has been written off in its books of account. The Assessing Officer is directed to verify whether the interest on agricultural loans has been written off by the assessee in its books of account. The Assessing Officer thus, shall decide the issue of allowability of the said expenditure in the hands of the assessee in line with our directions. The finding of the CIT(A) is that the contribution made by the assessee was a statutory requirement and was not application of income or appropriation out of profits. We are in conformity with the observations of CIT(A) that the provision made by the assessee cannot be said to be a provision for contingent liability because the amount was contributed by the assessee from year to year and the contribution is fixed by the State Government under the MCS Rules. Once the amount is so fixed by the State Government and the same is paid by the assessee to the said fund then, the same is to be allowed as a deduction in the hands of the assessee. Undoubtedly, the assessee during the year under consideration, had made a provision of ₹ 1,31,60,000/- but the said amount was paid in the succeeding year i.e. ₹ 1,09,92,202/- on 26.09.2009 and ₹ 1,30,19,151/- on 17.12.2009. The liability being an ascertained liability, which in turn, was discharged by the assessee by making payment in the succeeding year, is an allowable expenditure in the hands of the assessee. Upholding the order of CIT(A), we dismiss the grounds of appeal raised by the Revenue. - Appeal of revenue dismissed.
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