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The Dy. Commissioner of Income Tax, Satara Circle, Satara Versus The Satara District Central Co-op. Bank Ltd.

2016 (3) TMI 911 - ITAT PUNE

Addition made on account of HTM securities - Held that:- The assessee is entitled to the claim of deduction on account of amortization of premium paid on Government securities held in HTM category. - Decided in favour of assessee

Addition on account of Ex-gratia payment - Held that:- 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 formu .....

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in the hands of the assessee under section 37(1) of the Act. - 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 .....

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als) 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 which is not admissible as deduction. 4. The Commissioner of Income-tax (Appeals) erred on the facts and circumstances of the case and in law in deleting the addition of ₹ 29,57,503/- on account of Ex-gratia payment which is not in accordance with the provisions of section 35DDA of the In .....

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l No.2 and 3 is against the deletion of addition made on account of HTM securities. 5. The learned Authorized Representative for the assessee at the outset pointed out that the identical issue arose before the Tribunal in assessee s own case in cross appeals vide ITA Nos.2537/PN/2012 and 2522/PN/2012, relating to assessment year 2009-10, order dated 30.12.2014. 6. Briefly, in the facts of the present case, the assessee bank was a cooperative bank. During the year under consideration, the assesse .....

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tion of premium paid on Government securities. The assessee was a co-operative bank. During the year under consideration, the assessee claimed a deduction of ₹ 31,73,359/- as amortization of premium paid on acquisition of certain securities. The assessee had purchased some securities at an acquisition cost which was higher than the face value of the securities. The said securities had been classified by the assessee as Held to Maturity (HTM Securities). These were the securities, which wer .....

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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 a .....

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. On going through the order of the CIT(Appeals) dated 28th March 2005 as well as the impugned order, we do not find that the CIT(Appeals) or the ITAT erred in holding in favour of the Assessee. In this regard, the submission of Mr Mistry, the learned Senior Counsel appearing on behalf of the Assessee, that this issue is squarely covered by a judgment of this Court in the case of Commissioner of Income Tax v/s Reliance Utilities and Power Ltd., reported in (2009) 313 ITR 340 (Bom) is well founde .....

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rse of business and therefore no part of the interest could be disallowed. It was also pointed out that the Assessee had borrowed ₹ 43.62 crores by way of issue of debentures and the said amount was utilized as capital expenditure and inter-corporate deposit. It was the Assessee s submission that no part of the interest bearing funds (viz. Issue of debentures) had gone into making investments in the said two companies. It was pointed out that the income from the operations of the Assessee .....

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e by the Assessing Officer and directed him to allow the same under the provisions of the Income Tax Act, 1961. The Revenue being aggrieved by the order preferred 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 av .....

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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 fact that the contention had not been advanced earlier it did not require to be answered. It then noted that in Woolcombers of India Ltd.'s case (19 .....

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h Court. The principle, therefore, would be that if there were funds available both interest-free and over draft and/or loans taken, then a presumption would arise that investments would be out of the interest-free funds generated or available with the company if the interest-free funds were sufficient to meet the investment. In this case this presumption is established considering the finding of fact both by the Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal. (emphas .....

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t deposits were higher than the investment in the tax-free securities. In view of this factual position, as per the judgment of this Court in the case of Reliance Utilities and Power Ltd. (supra), it would have to be presumed that the investment made by the Assessee would be out of the interest-free funds available with the Assessee. We therefore, are unable to agree with the submission of Mr Suresh Kumar that the Tribunal had erred in dismissing the Appeal of the Revenue on this ground. We do n .....

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estion (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 jud .....

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n on account of amortization of premium paid on Government securities held in HTM category. Upholding the order of CIT(A), we dismiss the grounds of appeal raised by the Revenue. 11. The last issue vide ground of appeal No.4 is against the deletion of addition of ₹ 29,57,503/- on account of Ex-gratia payment. 12. We find that the assessee during the year under consideration had claimed expenditure of ₹ 29,57,503/- under the head Staff Voluntary Payment . Before the Assessing Officer, .....

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oyees to whom the payments were made, were not in terms of any scheme formulated under section 35DDA, disallowed the said claim of the assessee. The CIT(A) allowed the claim of the assessee following the order of Pune Bench of Tribunal. 13. We find a similar issue arose before the Tribunal in assessee s own case and vide paras 21 and 22, it was held as under:- 21. We have heard the rival contention and perused the record. The assessee had debited a sum of ₹ 32,46,100/- under the head staff .....

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