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2015 (4) TMI 786 - AT - Income TaxAddition on account of unpaid dividends - Cessation of of liability - Additions u/s 41 - Unclaimed dividend transferred to General Reserve - Department treating it as extinguishment of liability - Treatment of amortization of premium paid for acquisition of securities, Held till maturity - Held that:- We have carefully considered the rival stands and find no merit in the stand of the Revenue. Quite clearly, the dividend is paid by the bank out of tax paid profits. Dividends are declared out of such profits and is to be understood as an apportionment of income. If for any reason, the dividend so declared is not actually disbursed and were to be added back to the taxable income, it would mean a double taxation. Therefore, there is no justification for taxing unclaimed dividend as a ‘cessation’ of liability. No doubt, cessation of liability may be a taxable event but only in situations where such liability has entered the computation of taxable income on an earlier occasion. Quite clearly, the declaration of dividend does not enter the computation of taxable income as the dividend is declared out of the profits remaining after taxation. It cannot be anybody’s position that the unclaimed dividend is a receipt by the assessee in the course of its trading transactions. In-fact, the unclaimed dividend amount, does not reflect any receipt at all. Therefore, in our view, the reliance placed by the CIT(A) on the decision of the Hon’ble Supreme Court in the case of TVS Sundaram Iyengar and Sons Ltd. [1996 (9) TMI 1 - SUPREME Court] is erroneous. - Decided in favour of assessee. The issue arising in the present appeal is identical to the issue decided by the Pune Bench of the Tribunal in the case of Pune District Central Co. Operative Bank Ltd.[2015 (4) TMI 662 - ITAT PUNE]and also the Hon’ble Bombay High Court in the case of HDFC Bank Ltd. [2014 (8) TMI 119 - BOMBAY HIGH COURT],and following the same parity of reasoning, we hold that the assessee is entitled to the deduction of ₹ 11,38,000/- being the premium on Amortization of Securities. Accordingly, we hereby affirm the action of CIT(A) in deleting the disallowance of ₹ 11,38,000/- representing amortization of premium paid on Government Securities under the HTM category. Thus on this aspect, Revenue fails. - Decided against the revenue.
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