TMI Blog2021 (3) TMI 466X X X X Extracts X X X X X X X X Extracts X X X X ..... rther, Hon ble Bombay High Court upheld decision of Tribunal by dismissing revenue s appeal for AY 1996-97 [ 2016 (8) TMI 963 - BOMBAY HIGH COURT] . Another fact as noted by Ld. CIT(A) is that the assessee was following same accounting policy, in this regard, for last more than 20 years. Therefore, we find no infirmity in the impugned order in deleting this disallowance. The ground raised by revenue stand dismissed. Interest on Govt. Other Securities on accrual basis instead of due basis - HELD THAT:- Tribunal s order in assessee s own case for AY 2008-09,[ 2020 (2) TMI 1350 - ITAT MUMBAI] held this ground of appeal is covered in favour of the assessee vide the aforementioned orders of the Tribunal and Bombay High Court. The right to receive interest on securities arises on due date only, which falls after the accounting year and, accordingly, it cannot be taxed in the accounting year itself. Hence, in view of the above discussion, we decided this issue in favor of assessee. Amortization on securities held under HTM category - HELD THAT:- Deduction for amortization of premium paid on purchase of securities under HTM category would be an allowable deduction in assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and in law in not appreciating that the assessee holds shares/ securities as stock in trade and not as investment and therefore rule 8D is not applicable. 1.3 The revenue s grounds read as under:- i. Whether on the facts and in the circumstances of the case and in law, Ld.CIT(A) was right in deleting the addition of ₹ 42,47,09,377/- holding that the interest on Government and other securities has to be included in the income on due basis as against the accrual basis? ii Whether on the facts and in the circumstances of the case and in law, Ld.CIT(A) was right in deleting the addition of ₹ 27,22,94,532/- on account of amortization on HTM securities without appreciating the fact that diminution in value of investment in securities under HTM category is notional loss/capital loss which can be recognized only at the time of sale of such securities? iii) Whether on the facts and in the circumstances of the case and in law, Ld.CIT(A) was right in deleting the addition of ₹ 6,50,87,061/- made on account of depreciation on securities without appreciating the finding of AO that Global basis of depreciation applicable instead of assessee's method of charg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. Broken period interest on securities ₹ 64351.48 Lacs The assessee is aggrieved by confirmation of disallowance u/s 14A wherein revenue is aggrieved by the action of Ld. CIT(A) in granting relief to the assessee on issues tabulated at serial nos. 2 to 5. Our findings and adjudication to all the issues would be as follows. 5. Disallowance u/s 14A:- 5.1 It transpired that the assessee earned tax free income aggregating to ₹ 421.18 Lacs in the form of interest on tax free bonds and dividend on shares and mutual funds. However, no disallowance was offered u/s 14A read with Rule 8D. The assessee defended its stand before Ld. AO by way of elaborate written submissions, which have already been extracted in para 2.2 of the assessment order. However, relying upon certain judicial decisions and distinguishing the decisions as relied upon by assessee, Ld. AO invoked the provisions of Rule 8D and computed aggregate disallowance of ₹ 1204.31 Lacs which comprised-off of interest disallowance u/r 8D(2)(ii) for ₹ 1112.28 Lacs and indirect expense disallowance u/r 8D(2)(iii) for ₹ 92.03 Lacs. Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is remanded back to the file of the AO. Since the facts are shown to be identical this year, in principle, we hold that interest disallowance u/s 14A r.w.r. 8D(2)(ii) would not be sustainable subject to verification by Ld. AO that assessee s own funds far exceed the investments made by the assessee. The issue of expense disallowance in terms of Rule 8D(2)(iii) would stand restored back to the file of Ld. AO with similar directions. The ground, thus raised before us, stands allowed for statistical purposes. Since this is the only issue in assessee s appeal, the appeal stand allowed for statistical purposes. 6. Broken period interest:- 6.1 The term Broken period interest represent interest component paid by the assessee on the interest-bearing government securities when purchased from the market. The interest on government securities is normally payable half-yearly. When the government securities are traded, the purchaser has to pay to the seller not only the purchase price of the securities, but also the interest accrued on the purchased securities from the last due date of the interest till the date of purchase of the securities. This interest is referred to as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ins / loss on securities were offered to tax as Business Income . The aforesaid treatment was accepted by Ld. AO. It was also noted that the assessee was following this consistent system of accounting for more than last 20 years which was also accepted by Hon ble Rajasthan High Court in assessee s own case for AYs 2000-01 to 2002-03 and 2005-06. The adjudication of Hon ble High Court order dated 17/05/2017 was extracted in para 4.3.3 of the impugned order wherein this issue was answered in assessee s favor. It was held that broken period interest in respect of all the three categories of securities was revenue in nature as per the system of accounting regularly followed by the assessee and also on the ground that the investments were treated as stock-in-trade for Income Tax purposes. Therefore, the disallowance was to be deleted. Aggrieved, the revenue is in further appeal before us. 6.5 We find that this issue is contained in paras-115 to 119 of Tribunal s order in assessee s own case for AY 2008-09, ITA Nos.3644/Mum/2016 4563/Mum/2016 order dated 03/02/2020 wherein a finding was rendered that similar issue stood covered in assessee s own case for AYs 1991-92 to 1994-95 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to receive interest on securities arises on due date only, which falls after the accounting year and, accordingly, it cannot be taxed in the accounting year itself. Hence, in view of the above discussion, we decided this issue in favor of assessee and accordingly, this ground of revenue s appeal is dismissed. Since no change in facts has been demonstrated before us, respectfully following the above decision of Tribunal, we dismiss this ground of revenue s appeal. 8. Amortization on securities held under HTM category:- 8.1 The assessee debited a sum of ₹ 2722.94 Lacs on account of amortization in respect of the securities held under held-to-maturity (HTM) category as per RBI guidelines. In respect of HTM securities, the bank followed two different systems which were inconsistent with each other. When the purchase price of securities is less than the face value at which the security is ultimately sold, the difference is booked as profit only in the year of sale. But when the cost price is more than the face value the loss is not booked in the year of sale but it is spread over the period of holding. The Ld. AO opined that if the securities are held as investme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder in assessee s own case for AY 2008-09 wherein the issue was found to be squarely covered in assessee s favor for AY 1995- 96 by the order of Tribunal dated 17/09/2009. This decision was followed in AY 1996-97 vide order dated 26/07/2013. Further, Hon ble Bombay High Court dismissed revenue s appeal, on this issue, for AY 1996-97. The Ld. CIT(A) has also relied upon appellate orders for earlier years. Therefore, facts being identical, we dismiss this ground of revenue s appeal. 9. Depreciation on securities under Available for sale (AFS) and Held for Trading (HFT) category:- 9.1 The assessee claimed depreciation of ₹ 650.87 Lacs on securities held under Available-for-sale (AFS) category. There was no investment under Held-for-trading (HFT) category. The opening provision was ₹ 1679.28 Lacs whereas closing provision was ₹ 1638.05 Lacs. Upon perusal of details, it transpired that the closing provision was worked out by adding net depreciation under different investment categories as tabulated below: - Category Appreciation Depreciation Net Depreciation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee s own case for AY 2008-09 wherein the issue has been concluded in assessee s favor by observing as under: - 68. The assessee also relied on the judgement of the Bombay High Court in the case of Union Bank of India dated 08.02.2016 in ITA 1977 of 2013. The assessee in this case for the purpose of its books was netting off the depreciation in its securities against appreciation in other securities while for tax purpose, the assessee has been claiming gross depreciation that is without netting of the appreciation in other securities held as a part of investment. The Bombay High Court has dismissed the appeal of the Revenue and has decided the issue in favour of the assessee. It is argued that the facts of the present case are exactly same as in the aforesaid case of Union Bank of India. This issue stands covered by the judgement of the jurisdictional High Court. The facts of the assessee s case and the facts in the decision of the Bombay High Court in the case of Harinagar Sugar Mills Ltd. vs. CIT [1994] 207 ITR 901 (Bombay), relied by the AO are different. In the aforesaid decision, the assessee had changed the method of valuing stock in the year under consideration, whe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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