TMI Blog2016 (1) TMI 930X X X X Extracts X X X X X X X X Extracts X X X X ..... Govt. Securities - Held that:- The assessee is eligible for deduction towards amortisation of premium paid on Govt. securities as relying on case of Sir.M. Visweswaraya Co-op Bank Ltd., Vs. JCIT [2012 (9) TMI 774 - ITAT, BANGALORE] - ITA No. 1174/Bang/2014 - - - Dated:- 16-10-2015 - Vijaypal Rao, JM And G. Manjunatha, AM For the Appellant : Shri PK Srihari, Addl. CIT For the Respondent : None ORDER Per G. Manjunatha, Accountant Member This appeal filed by the Revenue is directed against the order of Commissioner of Income -tax (Appeals)-II, Bangalore dated 1/6/2014 for the assessment year 2010-11. 2. Initially, the case is posted for hearing on 19/3/2015 and none appeared for the assessee. The case is again posted for hearing on 7/7/2015 with a direction to issue notice through DR however, no response from the assessee. Finally, the case is posted for hearing on 8/10/2015 but, none appeared for the assessee. Therefore, we proceed to dispose off the appeal on merits after hearing the Departmental representative. 3. The brief facts of the case, are that the assessee is Co-operative Bank which is engaged in the business of banking, filed its return of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts are paid out of these funds for the welfare of the members. The assessee further, contended that ultimately these amounts are expenditure spent out of coffers of the assessee Society for the benefit of members, therefore, incurred wholly and exclusively for the business purpose. It was further argued that the assessee is following cash system of accounting for these expenditures and claimed as and when incurred therefore, allowable under section 37 of the income -tax Act. The CIT(A), after considering the submissions, delete the impugned additions. While doing so, the CIT(A), held that, the contributions of member s benevolent fund and death relief funds are clearly intended for the welfare of the employee s and the fund is used to provide assistance to its members therefore, allowable deduction u/s 37 of the Income -tax Act, 1961. 8. The learned Departmental representative submitted that, the CIT(A) erred in facts to state that these are the amounts contributed for the welfare of the employees, in fact from the facts it was emerged that the deduction claimed by the assessee was towards amount spent out of members benevolent fund and members death relief funds. He further su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd and members death relief fund are spent for the welfare of the members. It is also clear from the facts that these funds are created out of appropriation of profits. The Karnataka Co-Operative Society Act, 1959 mandates the Societies to appropriate certain percentage of its profit before declaration of dividends to its members but, the said two funds are not covered under the said act. Therefore, it is amply clear that the said funds are created to achieve the objects of the society through the bylaws for the welfare of the members out of the profits of the society. The Society is having liberty to create any funds for the welfare of its members within the frame work of by-laws but, the Income-tax Act does not provide for any deduction towards these expenditures under specific provisions. Further, it cannot be claimed under general category by virtue of section 37, because it is not incurred exclusively for the purpose of business and also there is an element of personal in nature, because the benefit was given to members being owners of the society. It is also admitted fact that these deductions are claimed in the statement of total income without routed through profit and loss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turity are long term investments cannot be treated as Stock in trade of the assessee like Held for trading or Available for sale therefore, any premium paid on purchase of these securities should be capitalised as part of cost of acquisition and cannot be treated as revenue expenditure. In support of his contention, he relied upon the Judgments of Hon ble Supreme Court in the case of Vijaya bank vs CIT, 187 ITR 541 (SC) and Hon ble Madras High Court decision in the case of T.N. Power Finance and Infrastructure Development Corporation Ltd vs JCIT (2006) 280 ITR 491 (Mad). 13. Aggrieved by the assessment order, the assessee preferred an appeal before CIT(A). The Ld. CIT(A) after considering the submissions of the assessee and also relied upon the Co-ordinate bench decision in ITA.No. 1122/B/2010 of Sir. M. Visweswaraya Coop Bank Ltd., Vs. JCIT, held that the assessee is eligible for deduction for amortisation of premium paid on Govt. securities. 14. The Departmental representative strongly supported the orders of the Assessing Officer and urged to set aside the order of the CIT(A) and restore the Assessment order. 15. We have heard the Ld. DR, perused the material avail ..... X X X X Extracts X X X X X X X X Extracts X X X X
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