TMI Blog2013 (5) TMI 875X X X X Extracts X X X X X X X X Extracts X X X X ..... or loss on the conversion of securities from FST category to HTM category. We, therefore, do not agree with the view taken by the Ld. CIT(A) that the securities held under HTM are capital in nature. We accordingly allow the Ground no. 1 taken by the assessee and direct the Assessing Officer to allow the claim of the assessee in light of the above discussion. U/s 14A petty expenditure which has been proved to have been incurred in relation to earning of tax free income can be disallowed and section cannot be extended to disallow even the expenditure is permitted to have been incurred for the purposes of earning tax free income. In the circumstances, the disallowance cannot be made u/s 14A of the Act. This ground is therefore, allowed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowing the same. The appellant submits that, since the facts are similar, the same be allowed as allowed by Tribunal A Bench, Pune in ITAT No. 1844/PN/05 A.Y. 2002/03 order dtd. 26the Sept. 2008, in appellant s appeal. 3. The assessing officer has erred in disallowing part of expenses as under, as personal nature on estimate basis- Telephone expenses Rs.17,500/- Vehicle expenses Rs.35,000/- Advertisement expenses Rs.12,500/- General expenses Rs.12,500/- Rs.77,500/- 2. So far as the Ground no. 1 is c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us. We have heard the parties and perused the record. 4. We find that the assessee has classified the securities in the three categories (a) Held till Maturity (HTM), (b) Available for sale (AFS) and (c) Held for trading (HFT). The Assessing Officer was of the opinion that the loss on diminution of the value of the securities cannot be charged to the profit and loss account in the case of securities held under the category of HTM. We find that the assessee bank has followed the RBI guidelines and as per the RBI guidelines the assessee has made the provision of ₹ 9.45 crores on account of diminution in value of securities. In this case, an amount of ₹ 1,48,96,027/- being amortization in respect of diminution in the value of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... find that the reservation of Ld. CIT(A) is that there is the deferment of the revenue than actual loss of revenue. We do not agree with the opinion of Ld. CIT(A). Admittedly the said method is consistently followed by the bank in the preceding years and the same has been accepted without raising any question. If at this juncture we go with the stand of the revenue then that will distort the entire picture. Admittedly whatever the expenditure is amortized the same is added back when the securities are sold. Another aspect we are to consider is that the method and practice adopted by the assessee was never changed by the Assessing Officer in past. 7. So far as the securities held under the HTM category the I.T.A.T., Pune has taken a view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the addition. The operative part of the Tribunal is as under: 12. In the assessment order, it is mentioned that the assessee had admittedly invested in bonds, shares, which yielded tax- free income of ₹ 34,68,985/- . The A.O was not agreeable to the plea made by the assessee that the entire investment in securities had been made out of surplus non-interest bearing funds, the A.O estimated the proportionate expenditure attributable to investment in tax free securities at ₹ 32,67,090/- which is 94% of the total expenses. However, the disallowance has been made by the A.O at 10% of ₹ 32,67,090/- i .e. ₹ 3,26,700/-. It was claimed that there is no provision in the Act that proportionate expenses should be disallowe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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