TMI Blog2016 (4) TMI 897X X X X Extracts X X X X X X X X Extracts X X X X ..... ut without any disallowance being made. Copies of the assessment orders for assessment year 2007-08 to 2009-10 form part of the records. We come to the CIT(A)’s findings under challenge alleging the assessese as not to have filed the relevant details. We are of the opinion that once the above extracted portion comprises a tabulation chart of permanent category security right from financial year 2005-06 to 2009-10, no such case of non-furnishing of relevant details can be stated to have arisen in the impugned assessment year. The CIT(A)’s reasoning is therefore not sustainable. We find that the hon’ble jurisdictional high court in CIT vs. Rajkot Dist. Central Cooperative Bank (2014 (3) TMI 110 - GUJARAT HIGH COURT) takes note of circular no. 17 dated 26-11-2008 wherein the said assessee had purchased govt. securities at a price higher than their face value for holding that the relevant premium paid thereupon has to be amortized for remaining period of maturity. - Decided in favour of assessee - ITA Nos. 3268-3269 /Ahd/2015 - - - Dated:- 26-2-2016 - Shri N.K. Billaiya, Accountant Member and Shri S. S. Godara, Judicial Member For The Revenue : Smt. Usha Shrote, Sr. D.R. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hree categories followed by its classification in HTM category need not be marked to market and are carried at acquisition cost unless these are more than the face value in which the case the premium should be amortized over the period remaining to maturity. 4. We come to the impugned assessment proceedings in this backdrop of RBI s master circular and Board s instructions hereinabove. The assessee debited the impugned sum of ₹ 2,60,99,875/- towards premium on investments right of during the year. The Assessing Officer observed in assessment order dated 22- 03-2013 that it had not sold the investments and therefore, the above stated write off would not be allowable. The assessee filed its reply inter alia stating that it had purchased its investments and when the premium is paid, the same is required to be amortized over a period of the security in question as per RBI guidelines irrespective of the fact that this investment is sold or otherwise. It quoted consistency as well by highlighting the fact that the very amortization is being consistency followed and allowed as deduction from since assessment year 2007-08 onwards. The Assessing Officer in assessment order did not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has totally failed to prove that the said claim was in respect of securities Held for Maturity . The appellant was unable to prove that it had the portfolio of the government securities under the category of Held for Maturity. 5.1. In this regard, before coming to the facts of the case, it would be necessary to go through the RBI circular dated 02/07/2007, on which the appellant relied, whereby Para 15 to 16.3 deals with the various categories of investments. For ready reference, the same are reproduced as under:- 15 Categorization of Investments 15.1 Primary (urban] co-operative banks are required to classify their entire investment portfolio (including SLR and non-SLR securities] under three categories viz. - (i) Held to Maturity (HTM) (ii) Available for Sale (AFS) (iii]Held for Trading (HFT) Banks should decide the category of the investment at the time of acquisition and the decision should be recorded on the investment proposals. 15.2 Held to Maturity 15.2.1 Securities acquired by the banks with the intention to hold them up to maturity will be classified under Held to Maturity category. 15.2.2 The investment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e accounting year. No further shifting to/from this category will be allowed during the remaining part of that accounting year. 15.5.2 Banks may shift investments from 'Available for Sale category to 'Held for Trading' category with the approval of their Board of Directors. In case of exigencies, such shifting may be done with the approval of the Chief Executive of the Bank, but should be ratified by the Board of Directors. 15.5.3 Shifting of investments from 'Held for Trading' category to 'Available for Sale' category is generally not allowed. However, it will be permitted only under exceptional circumstances such as mentioned in paragraph 15.3.2 above, subject to depreciation, if any, applicable on the date of transfer, with the approval of the Board of Directors/investment Committee. 15.5.4 Transfer of scrips from one category to another, under all circumstances, should be done at the acquisition cost/book value/market value on the date of transfer, whichever is the least, and the depreciation, if any, on such transfer should be fully provided for. 15.6 Classification of Investments in the Balance Sheet For the purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the period from F. Y. 2006-07 to F. Y. 2009-10. The summary of the same is as under:- Image No. 1 5.4. The appellant has mainly relied upon the RBI Circular and also on the decisions / judgments of various courts, stating that as per the said circulars, the amortization of the premium paid on the securities held for maturity may be granted. However, on perusal of the details and documents submitted and verifying those with the RBI Circular, it is noticed that the appellant has not complied with the various clauses of the said RBI Circular and the deficiencies / noncompliance as per the clauses of circular are discussed as under:- Non compliance of the clauses of RBI Circular dated 02/07/2007) (i) As per the clause No. 15.1, the said circular states that the bank should decide the category of the investment at the time of acquisition itself and the decision should be recorded on the investment proposals. It is worth here to mention that the appellant at the first time during the present set aside appellate proceedings has submitted the manual details of the securities Held to Maturity under the head permanent category security and the AFS and HFT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntly in F. Y. 2009-10, those were sold fully. Similarly, the investment in the so called HTM category mentioned at A.4 i.e. 6.35 GOI 2020, the investment made therein up to F. Y. 2007-08 at ₹ 25 crores were reduced in the subsequent year i.e. F. Y. 2008-09 to ₹ 10 crores. Thus, there was sale of these securities to the extent of ₹ 5 crores and the conversion of those in to current category at ₹ 10 crores (Ref. Sr. No. B-5 of table). Even this conversion of ₹ 10 crores was also sold in the subsequent year i.e. F. Y. 2009-10. Likewise, the permanent category security at SI. No. A.5 (i.e. 6.30GOI 2023), which was at ₹ 25 crores during F. Y. 2006-07 was remained at ₹ 22.50 crores in F. Y. 2007-08 and thus sold of ₹ 2.50 crores. Thereafter in F. Y. 2008-09, the balance securities were also sold. Further, with regard to the permanent category security i.e. HTM at SI. No. A.6 i.e. 6.05GOI 2019 in which the investment was at ₹ 12 crores during F. Y. 2005-06 was remained at ₹ 5 crore during F. Y. 2006-07 and the balance of ₹ 7 crore was converted into current category (Ref. B-2 in table). Thereafter, in subs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... complied with by the appellant. Thus, it was not in accordance to the CBDT Circular. 5.6. The appellant has relied to the judgement of Hon'ble Gujarat High Court in the case of CIT Vs. Rajkot District Co-operative Bank Ltd. However, on going through the same, it is found that the facts of that case are not at par with the facts of appellant. In the above cited case, there is no observation about the non - compliance of various provisions of RBi Circular, while the case of the appellant is reverse. Likewise the ratio laid down on other case laws cited by the appellant are also not applicable over the facts of the appellant's case. 5.7. In view of the aforesaid discussion, the claim of the amortization of the premium asked for by the appellant has correctly been disallowed by the AO, and therefore, the same is confirmed. 6. We have heard rival submissions. There can hardly be any dispute that the assessee has to mandatorily comply with market regular RBI s circulars issued from time to time including those dealing with the instant issue of investments in securities, their classification and other procedural aspects. There is further no dispute about the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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