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Asst. Commissioner of Income-Tax, Circle-9 (1) , Hyderabad Versus M/s Deccan Grameen Bank And Vica-Versa

Disallowance of broken period interest - CIT(A) deleted the addition - Held that:- Issue in dispute is squarely covered by the decision of the Tribunal in assessee’s own case for AY 2010-11ssue in dispute is squarely covered by the decision of the Tribunal in assessee’s own case for AY 2010-11 [2015 (4) TMI 583 - ITAT HYDERABAD] to hold that broken period interest claimed by assessee is an allowable deduction - Decided in favour of assessee.

Addition on account of amortization of prem .....

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issue relating to allowability of deduction claimed towards amortization on premium paid on excess face value of securities held under HTM category has allowed assessee’s claim - Decided in favour of assessee.

Disallowance of deduction claimed u/s 36(1)(viia) - Held that:- Undisputedly, assessee has not made any provision for bad and doubtful debts in the books of account as required u/s 36(1)(viia). Only in computation of income filed along with return of income assessee has claimed .....

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Hon’ble P&H High Court in case of State Bank of Patiala Vs. CIT (2004 (5) TMI 12 - PUNJAB AND HARYANA High Court ) while interpreting the provisions of section 36(1)(viia) has held that unless assessee bank makes a provision for bad and doubtful debt in the books of account, no deduction is allowable. - Decided against assessee. - ITA No. 1536/Hyd/2012, ITA No. 1579/Hyd/2012 - Dated:- 12-6-2015 - P. M. Jagtap, AM And Saktijit Dey, JM,JJ. For the Appellant : Shri Ramakrishna Bandi For the Respon .....

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essee a regional rural bank is doing banking activity in the state of undivided AP. For the AY under consideration, assessee filed its return of income on 25/09/2009 declaring total income of ₹ 36,33,59,291. During the assessment proceeding, AO noticed that assessee has claimed an amount of ₹ 1,58,65,512 as broken period interest paid on purchase of securities. When AO called upon assessee to explain whether the broken period can be allowed as business expenditure, assessee submitted .....

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id not find merit in the submissions of assessee. He was of the view that the provisions of Income-tax Act will supersede not only accounting norms, but, also the circulars issued by RBI. AO, thereafter, referring to certain judicial precedents ultimately concluded that the broken period interest is not allowable as expenditure and accordingly disallowing the same added back the amount of ₹ 1,58,65,512 to income of assessee. Being aggrieved of such disallowance, assessee preferred appeal b .....

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ieved, department is before us. 6. We have considered the submissions of the parties and perused the materials on record as well as the orders of revenue authorities. Both the counsels agreed before us that the issue in dispute is squarely covered by the decision of the Tribunal in assessee s own case for AY 2010-11 in ITA No. 1742/Hyd/2014 dated 25/03/2015. On perusal of the said order of ITAT, a copy of which is placed before the Bench, it is noticed that Tribunal while deciding the issue in a .....

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enue s appeal." Respectfully following the decision of the coordinate bench in assessee s own case (supra) we hold that broken period interest claimed by assessee is an allowable deduction. Accordingly, we uphold the order of ld. CIT(A) on this issue by dismissing the ground raised. 7. In Ground No. 4 department has challenged the decision of ld. CIT(A) in deleting the addition made by AO on account of amortization of premium paid in excess of face value of securities. 8. Briefly the facts .....

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eld to maturity). The premium is bifurcated from the date of purchase till the date of maturity and the same is called amortization. AO called upon assessee to explain why the expenditure claimed should not be disallowed u/s 37(1). In response to the said query raised by AO, assessee submitted that according to AS-26 read with income-tax Act, 1961 the premium paid on government securities is an intangible asset whose life can be ascertained and accordingly the same should be amortized and writte .....

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nt securities were held as stock-in-trade and not as investment and the securities on which premium was paid even though held under the HTM (held to maturity) category, but, they were to be treated as stock-in-trade and the amortization on the HTM securities is a revenue expenditure. In support of such contention, assessee relied upon a decision of Hon ble Supreme Court in case of UCO Bank, 237 ITR 889 and the decision of Mumbai Bench of ITAT in case of ACIT Vs. Bank of Rajasthan Ltd 2011-TIOL-3 .....

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. As held by Hon ble Supreme Court in case of UCO Bank (supra), securities on which premium is paid, if held under HTM category are to be treated as stock-in-trade. ITAT Mumbai Bench in case of ACIT Vs. the Bank of Rajasthan Ltd. in ITA No. 3238/Mum/2010 and others dated 09/09/2011 while deciding the issue relating to allowability of deduction claimed towards amortization on premium paid on excess face value of securities held under HTM category has allowed assessee s claim holding as under: &qu .....

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has directed the AO to allow the premium amortized by the assessee over the period remaining to maturity holding that the same was claimed as per the relevant RBI guidelines and even the CBDT has issued instructions to allow the same. Respectfully following the said order of the Tribunal in assessee s own case for earlier years, we uphold the impugned order of the learned CIT(Appeals) giving relief to the assessee on this issue and dismiss ground No. 3 of the Revenue s appeal." Ld. DR has n .....

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are, during the assessment proceeding AO noticed that in the computation of income filed along with return of income assessee has claimed deduction of an amount of ₹ 2,94,61,564 u/s 36(1)(viia) being provision made for bad and doubtful debts of rural branches. However, on verifying the audited statement of accounts and other documents, he noticed that assessee had not made any provision for bad and doubtful debts in the books of account. Accordingly, he disallowed the deduction claimed by .....

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, the issue is covered by the decision of the Tribunal in assessee s own case for AY 2010-11 in ITA No. 1742/Hyd/14 dated 25/03/2015. 16. Ld. DR, on the other hand, submitted that the said decision has not taken into consideration the judgment of the P&H High Court in case of State Bank of Patial (supra), which is directly on the issue. 17. We have considered the submissions of the parties and perused the materials on record. Undisputedly, assessee has not made any provision for bad and doub .....

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