TMI Blog2017 (10) TMI 478X X X X Extracts X X X X X X X X Extracts X X X X ..... he town where the assessee is situated - Held that:- It is trite that ‘for the purpose of business’ contemplated under s.37 is wider in scope than the expression ‘for the purpose of earning profits’ and may comprehend many acts incidental to the carry on of a business. Thus, so long as the expenditure has been incurred on the grounds of commercial expediency and in order to directly or indirectly facilitate the carry of the business, the fact that there was no compelling necessity to incur the expenditure on which deduction is claimed is an irrelevant consideration. The expenditure in the instant case has gone irretrievably in the course of carrying on of business. The expenses incurred has potential to increase the visibility of the assessee in the public at large and thus has bearing on business acceleration. Therefore, we find considerable merit in the claim of the assessee. Consequently, claim of the assessee towards urban development expenditure allowed. Claim of amortization of securities premium - Held that:- We notice that this amount represents the excess of acquisition cost over the face value of Government securities taken under HTM category. We find that the issue i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) granted relief to the assessee and treated the loss arising of securities as business loss as per the claim of the assessee. The relevant para of the order of the CIT(A) reads as under:- 7. I have gone through the facts of the case, the returns of the appellant for the assessment year under appeal and accounts for three earlier years, the Assessment order the submissions of the appellant and the remand report. Before going into the legal aspect and deciding the case, I Would like to innumerate the important facts and the accounting method and how the assessee had been disclosing the income. These are: i. The assessee's all securities are being held as AFS (Available For Sale) and HTM (Held to Maturity). No securities are being held as Held for Trading' i.e., HFT ii. None of the HTM (Held to Maturity) securities held have been sold during the year. The premium has been amortized and charged to P L Account and claimed as expense with respect to these. iii. Only securities classified as 'AFS (Available For Sale) had been sold and traded during the year. These were already being held as AFS and no change in classification took place. iv. Al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of India in this regard from time to time. CBDT has further issued instruction for the assessment of banks vide its Instruction No. 17/2008 dated 26.11.2008 (F. No. 228/3/3008 - ITA- III). Point no. VII of the said instructionITA As per RBI guidelines dated 16th October 2000, the Investment portfolio of the banks is required to be classified under three categories viz. Held to Maturity (HTM), Held for Trading (HFT) and Available for Sale (AFS). Investments classified under HTM category need not be marked to market and are carried at acquisition cost unless these are more than the face value, in which case the premium should be amortized over the period remaining to maturity. In the case of HFT and AFS securities forcing stock in trade of the bank, the depreciation / appreciation is to be aggregated scrip wise and only net depreciation, if any, is required to be provided for in the accounts. The latest guidelines of the RBI may be referred to for allowing any such claims, In such circumstances, where the same method of accounting is followed and allowed from year to year, such claim has been held to be allowable by the different courts. The Hon'ble Mumbai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the CBDT being squarely applicable, leaves no doubt on the allowability of the assessee's claim. The ground of appeal is allowed to the extent that the loss is to be taken as business loss. 6. The Ld.DR relied upon the order of the AO. In furtherance the Ld.DR submitted that when the assessee itself has classified the securities held by it under the head investment , the profit/ loss arising on sale of such securities held as investment have been rightly treated to be of capital nature by the AO. 7. The Ld.AR, on the other hand, relied upon the order of the CIT(A). The Ld.AR submitted that the assessee is in peculiar business of banking which is regulated by the RBI. The RBI has prescribed a format whereby the securities held are declared under the head investment and further are classified as Held to maturity (HTM) Held for trading (HFT) and available for sale (AFS) as per Reserve Bank of India s Instruction. The Ld.AR submitted that RBI mandatorily requires the banks to classify the investment in government securities as noted above. It was submitted that assessee-company being in banking business is required to compulsorily prepare its balance-sheet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not a permissible business expenditure. 12. The CIT(A) confirmed the disallowance mainly on the ground that developing a circle in the town by installing a statue was nowhere related to the business of banking. The CIT(A) accordingly declined any relief. 13. Aggrieved, the assessee carried the matter before the Tribunal. 14. We have considered the rival submissions on the issue. We find ourselves in agreement with the contention raised on behalf of the assessee that the expenses incurred are revenue in nature and no enduring benefit can be stated to be derived by the assessee. We take notice of the plea that the property in statue also did not vest in the assessee-bank. Similarly, we observe that the expenses can be said to have been incurred for the purposes of business for the simple reason that such incurring of expenses adds to the visibility of the assessee-bank amongst its stakeholders. The expenditure thus incurred can be rationally said to have been incurred for the promotion of the assessee s ongoing business and thus an allowable business expenditure. Such incurring of expenditure would presumably enhance the brand image of the assessee. The expenditure incur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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