TMI Blog2016 (3) TMI 911X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. - Decided in favour of assessee - ITA No.922/PN/2015 - - - Dated:- 10-2-2016 - MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA, AM For The Appellant : Shri M.K. Biju, JCIT For The Respondent : Shri M.K. Kulkarni ORDER PER SUSHMA CHOWLA, JM: This appeal filed by the Revenue is against the order of CIT(A)-4, Pune, dated 18.03.2015 relating to assessment year 2010-11 against order passed under section 143(3) of the Income-tax Act, 1961 (in short the Act ). 2. The Revenue has raised the following grounds of appeal:- 1. The order of the Commissioner of Income-tax (Appeals) is contrary to law and to the facts and circumstances of the case. 2. The Commissioner of Income-tax (Appeals) erred on the facts and circumstances of the case and in law in deleting the addition of ₹ 31,73,359/- on account of Amortisation of Premium paid on purchase of Government securities held under HTM categories. 3. The Commissioner of Income-tax (Appeals) erred on the facts and circumstances of the case and in law in not appreciating the fact that the HTM securities are capital assets and any premium paid towards its acquisition is capital expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turity of the securities. The amount in excess of the face value paid by the assessee was amortized over the life of the securities and proportionate claim was made during the year under consideration. The Assessing Officer disallowed the claim of the assessee. In appeal, the CIT(A) had allowed the claim of assessee by following the orders of Tribunal. 9. We find that the similar issue arose before the Tribunal in ACIT Vs. Alibagh Co-operative Urban Bank Ltd., in ITA No.2173/ PN/2012 relating to assessment year 2009-10, order dated 23.09.2013 and in ITA No.698/PN/2014, relating to assessment year 2010-11, order dated 31.08.2015. The Tribunal had allowed the deduction claimed by the assessee, in turn following the ratio laid down by the Tribunal in earlier years. Further, the Hon ble Bombay High Court in CIT Vs. HDFC Bank Ltd. in Income Tax Appeal No.330 of 2012, judgment dated 23.07.2014 has held as under:- 4. We do not agree. In the case at hand, as recorded by the ITAT, undisputedly the Assessee s own funds and other non-interest bearing funds were more than the investment in the tax free securities. The ITAT therefore held that there was no basis for deeming that the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred an Appeal before the ITAT who upheld the order of the CIT (Appeals) and dismissed the Appeal of the Revenue. From the order of the ITAT, the Revenue approached this Court by way of an Appeal. After examining the entire factual matrix of the matter and the law on the subject, this Court held as under:- If there be interest-free funds available to an assessee sufficient to meet its investments and at the same time the assessee had raised a loan it can be presumed that the investments were from the interest-free funds available. In our opinion, the Supreme Court in East India Pharmaceutical Works Ltd. v. CIT (1997) 224 ITR 627 had the occasion to consider the decision of the Calcutta High Court in Woolcombers of India Ltd. (1982) 134 ITR 219 where a similar issue had arisen. Before the Supreme Court it was argued that it should have been presumed that in essence and true character the taxes were paid out of the profits of the relevant year and not out of the overdraft account for the running of the business and in these circumstances the appellant was entitled to claim the deductions. The Supreme Court noted that the argument had considerable force, but considering the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this issue, CIT (Appeals) and the ITAT have merely followed the judgment of this Court in the case of American Express International Banking Corporation v/s Commissioner of Income Tax, reported in (2002) 258 ITR 601. On going through the said judgment, we find that question (B) reproduced above and projected as substantial by Mr Suresh Kumar is squarely answered by the judgment of this Court in the case of American Express International Banking Corporation (supra). In view thereof, we do not find that even question (B) gives rise to any substantial question of law that needs to be answered by this Court. 7. As far as question (C) is concerned, we find that an identical question of law was framed and answered in favour of the Assessee by this Court in its judgement dated 4th July, 2014 in Income Tax Appeal No.1079 of 2012, Commissioner of Income Tax-2 v/s M/s Lord Krishna Bank Ltd. (now merged with HDFC Bank Ltd.). Mr Suresh Kumar fairly stated that question (C) reproduced above is covered by the said order. In view thereof, we are of the view that even question (C) does not raise any substantial question of law that requires an answer from us. 10. Following the same pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... term benefit to the assessee and hence was not allowable as revenue expenditure under section 37(1). 22. In the facts and circumstances of the case, where the assessee in recognition of the services provided to its retiring employees make certain exgratia payments in recognition of their services, which are not based on any scheme or instruction formulated by the employer assessee, then the same partakes the nature of profit in lieu of salary. The relationship between the assessee and retiring employees was admittedly as of employer and employee and the remuneration paid to such employees is part of the salary due to the said employee. Even the ex-gratia payment made by the assessee over and above the remuneration due to the employees partakes the character of profits in lieu of salary to such employee and is duly allowable as an expenditure in the hands of the assessee under section 37(1) of the Act. We find no merit in the stand of the CIT(A) that such expenditure is capital in nature. Reversing the order of the CIT(A), we direct the Assessing Officer to allow the expenditure of ₹ 32,46,180/-. The Ground no.3, is thus allowed. 14. Following the same parity of re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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