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2022 (9) TMI 833 - AT - Income TaxTDS u/s 194A - Liability to deduct the TDS on interest paid on saving bank accounts - Non deduction of tax on interest paid on deposits by various invoking provisions of Section 40(a)(ia) - HELD THAT:- Disallowance on the ground that the same has been disallowed for the AY 2014-15, immediately succeeding assessment year under consideration. Assessee fairly submitted that the Section 40(a)(ia) was amended vide Finance Act, 2014 whereby the disallowance in respect of default in payment of TDS in case of payments to residents has been restricted to 30% instead of 100% and since the amendment is curative in nature and have been made to remove the undue hardships to the assessee, therefore, submitted that the disallowance of 100% of the expenditure may be restricted to 30%. DR has not objected for the same disallowance of 100% made by CIT(A) has been restricted to 30% in view of the amendment vide Finance Act 2014 to Section 40(a)(ia) - Accordingly, the disallowance made by the A.O in respect of defaulting payment of TDS is restricted to 30%. Ground No. 1 is partly allowed for statistical purpose. Addition on account of accrued interest on NPA - HELD THAT:- We are of the opinion that the assessee who is into banking activities has to follow RBI Guidelines and we do not find any error with the assessee in offering the interest on NPA for taxation in the assessment year relevant to such financial year of recovery. AO/CIT(A) have committed an error in disallowing Rs. 52,20,914/- on account of interest on non performing assets. Accordingly, ground of Appeal No. 2 of the assessee is allowed. Disallowance on account of amortization of premium on government securities - HELD THAT:- Disallowance of amortization premium for the Assessments Year 2010-11 and 2011-12 has been also mentioned by the A.O in the Assessment order, but has not followed the consistency. Apart from the same as per the RBI Guidelines dated 16/10/2000, the investment portfolio of the bank is required to be classified under three categories viz. Held to Maturity (HTM), held for Trading (HFT) and Available for Sales (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 amortized 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. Disallowance on account of democratization of premium of government securities is deserves to be deleted. Accordingly, we allow Ground No. 3 of the assessee.
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