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2015 (11) TMI 581 - AT - Income TaxDeduction claimed by the assessee on account of amortization of premium paid on purchase of securities, classified under the category ‘Held to Maturity’ - Held that:- Pertinently, assessee’s claim for amortization of premium paid on the purchase of Government securities classified as HTM is consistent with the prudential norms issued by the RBI. It is also undeniable that the acquisition of the Government securities under the HTM categories has been undertaken by the assessee in the course of carrying on the ‘banking business’ under the mandate of RBI. Ostensibly, the predominant motive to purchase securities is to maintain the statutory liquidity ratio prescribed by the RBI. The Central Board of Direct Taxes vide its circular No.665 dated 5/10/1995 also provides that the question as to whether any particular securities constitute stock-in-trade or investment in the case of a bank shall be determined, inter-alia, having regard to the guidelines issued by RBI from time to time. The assessee is entitled for deduction on account of the amortization of premium paid on purchase of securities classified under HTM category. - Decided against revenue. Loss suffered by the assessee on compulsory redemption of Sardar Sarovar Narmada Nigam Ltd.(SSNNL) Bonds - Held that:- The bank is obliged to pay interest to its depositors, which it generates by way of interest receipts from loans advanced and earnings from investments made in various securities and other incomes received during the course of banking activities. In this context, assessee explained before the lower authorities that the investment in the bonds of SSNNL was with the predominant objective of earning interest so as to service the burden of interest payments to the depositors. The assessee also explained that the bonds were traded on stock exchanges and that they were available as a source of liquidity, if required. It was, therefore, contended that such investment was a ‘stock-in-trade’ and any loss suffered therefrom is a revenue loss. In our considered opinion, the business of banking includes in its fold making of investments for the purpose of generating incomes which would service bank’s requirement of paying interest to its depositors. The assessee has consistently explained the rationale for making the impugned investment, and the same has been merely brushed aside by the lower authorities. The characterization of such investments as an activity carried out in the course of the banking business cannot be doubted and, therefore, it would constitute assessee’s stock-in-trade of the business of banking. As a consequence, any loss suffered on sale of such stock-in-trade would be an allowable deduction while computing the business income. - Decided against revenue.
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