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Income Tax Appellate Tribunal, “B” BENCH, PUNE
Before: SHRI D. KARUNAKARA RAO, AM & SHRI VIKAS AWASTHY, JM
आदेश / ORDER
PER VIKAS AWASTHY, JM :
This appeal by the Revenue is directed against the order of Commissioner of Income Tax (Appeals)-7, Pune dated 02-02-2016 for the assessment year 2011-12.
The Revenue in appeal has raised 13 grounds. In ground Nos. 1 to 7 of the appeal, the Revenue has assailed deleting the addition of
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Rs.75,43,189/- made on account of accrued interest on Non Performing Assets u/s. 43D of the Income Tax Act, 1961 (hereinafter referred to as “the Act”). In ground Nos. 8 to 11 of the appeal, the Revenue has assailed deleting the addition of Rs.66,34,639/- made on account of amortization of premium on investments. The ground Nos. 12 and 13 are general in nature.
Shri S. N. Puranik appearing on behalf of the assessee submitted at the outset that the issue raised by the Revenue in ground Nos. 1 to 7 of the appeal relating to accrued interest on Non Performing Assets is squarely covered by the decision of Tribunal in assessee‟s own case in ITA No. 1540/PN/2014 for assessment year 2009-10 decided on 28-11-2014.
3.1 The ld. AR further submitted that in ground Nos. 8 to 11 of the appeal, the Revenue has assailed deleting the addition on account of amortization of premium on investments. No such addition has been made by the Assessing Officer, therefore, the issue raised in the ground Nos. 8 to 11 does not emanate from the assessment order or the order of Commissioner of Income Tax (Appeals).
Shri Mukesh Jha representing the Department fairly admitted that in ground Nos. 1 to 7 of the appeal by the Department the issue relates to accrued interest on Non Performing Assets, similar issue had come up before the Tribunal in assessee‟s own case in appeal by the Revenue in ITA No. 1540/PN/2014 (supra). The Tribunal decided the issue against the Department.
4.1 In respect of ground Nos. 8 to 11, the ld. DR pointed that the Assessing Officer had made addition of Rs.66,34,639/- on account of
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„broken period interest‟. The assessee has agitated the issue before the Commissioner of Income Tax (Appeals) and the Commissioner of Income Tax (Appeals) has granted relief to the assessee. The ld. DR further submitted that in grounds of appeal No. 8 to 11 amortization of premium on investments in securities held under the category HTM has been inadvertently mentioned. The Department is in fact aggrieved by relief granted to the assessee by the Commissioner of Income Tax (Appeals) on account of „broken period interest‟.
We have heard the submissions made by representatives of rival sides and have perused the orders of authorities below. We have also considered the decision of Co-ordinate Bench in assessee‟s own case in ITA No. 1540/PN/2014 for the assessment year 2009-10. The assessee is a Co-operative Society engaged in the banking business. We observe that in the assessment years 2009-10 and 2010-11, the Assessing Officer had made similar additions/disallowances on account of interest accrued on Non Performing Assets and interest for the broken period. The assessee carried the matter in appeal before the First Appellate Authority. The Commissioner of Income Tax (Appeals) granted relief to the assessee in respect of disallowance of interest accrued on Non Performing Assets. Against the findings of Commissioner of Income Tax (Appeals), the Revenue carried the matter in appeal before the Tribunal. The Co-ordinate Bench of the Tribunal vide order dated 28-11-2014 by following the decision rendered in the case of ACIT Vs. The Omerga Janta Sahakari Bank Ltd. in ITA No. 350/PN/2013 dated 31-10-2013 and the decision of Hon‟ble Delhi High Court in the case of M/s. Vasisth Chay Vyapar Ltd. reported as 330 ITR 440 and the decision of Hon‟ble Madras High Court in the case of CIT Vs. Sakthi Finance Ltd. reported as 31 taxmann.com 305 dismissed the ground raised by the Revenue in respect of accrued interest on Non
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Performing Assets. The ld. DR has not placed on record any contrary decision, therefore, we find no reason to take a different view. Following the order of Co-ordinate Bench, the findings of Commissioner of Income Tax (Appeals) in deleting the addition of Rs.75,43,189/- on account of accrued interest on Non Performing Assets u/s. 43D of the Act are upheld. Accordingly, ground Nos. 1 to 7 raised in the appeal by Revenue are dismissed.
In ground Nos. 8 to 11 the Revenue has assailed the order of Commissioner of Income Tax (Appeals) in deleting the addition of Rs.66,34,639/-. We observe that the Assessing Officer had made addition of the aforesaid amount on account of broken period interest. The Revenue has wrongly mentioned in grounds of appeal that the addition is on account of amortization of premium on investments in securities held under the category HTM. The Commissioner of Income Tax (Appeals) has granted relief to the assessee in respect of disallowance of interest for the broken period by following the order of Tribunal in assessee‟s own case in CO No. 101/PN/2014 arising out of ITA No. 1540/PN/2014 for the assessment year 2009-10 decided on 28-11-2014. The relevant extract of the order of Co-ordinate Bench reads as under : “14. In this context, relevant facts are that assessee had effected purchases of Government securities from secondary market on 28.12.2008. Ostensibly, interest accruing on such securities upto 28.12.2008 was to the account of the seller and for the balance period i.e. from 29.12.2008 to 31.03.2009 it was the income of the assessee. Assessee received interest for the total period of six months, which amounted to Rs.6,24,372/- and the interest pertaining to period upto 28.12.2008 was Rs.3,13,855/-. Considering that the interest of Rs.3,13,855/- belonged to the seller of securities, assessee had paid this amount to the seller at the time of purchase of securities. The said amount of Rs.3,13,855/- was debited to Interest Receivable Account and on receipt of interest of Rs.6,24,372/-, same was credited to the Interest Receivable Account, and the balance remaining in the said account i.e. Rs.3,10,517- was credited to the Profit & Loss Account as „income‟. In the banking parlance, the payment of Rs.3,13,855/- made by the assessee to the seller of securities on account of interest upto 28.12.2008 is commonly referred as „broken period interest‟. The Assessing Officer differed with the
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assessee with respect to the treatment of „broken period interest‟ of Rs.3,13,855/- paid on purchase of the Government securities. As per the Assessing Officer, such „broken period interest‟ formed an integral part of the cost of securities and that such composite consideration cannot be bifurcated into „broken period interest‟ and cost of securities even though the difference between the face value of the securities and the purchase price was basically on account of the „broken period interest‟. The Assessing Officer held that „broken period interest‟ cannot be segregated and claimed as deduction by the assessee bank for the reason that such expenditure was to be understood as a capital outlay. The Assessing Officer further held that such expenditure has to be dealt with at the time of sale of securities and not in the year of purchase of securities. In coming to his conclusion, the Assessing Officer relied upon the ratio of the judgement of the Hon‟ble Supreme Court in the case of Vijaya Bank Ltd. vs. CIT, 187 ITR 541 (SC) as also the judgement of the Hon‟ble Rajasthan High Court in the case of CIT vs. Bank of Rajasthan Ltd., 316 ITR 391.
The CIT(A) has also affirmed the aforesaid stand of the Assessing Officer. The CIT(A) followed the judgement of the Hon‟ble Rajasthan High Court in the case of Bank of Rajasthan Ltd. (supra), which had dissented from the judgement of the Hon‟ble Bombay High Court in the case of American Express International Banking Corporation vs. CIT, 258 ITR 601 (Bom), by relying on the Hon‟ble Supreme Court in the case of Vijaya Bank Ltd. (supra). Against such decision of the CIT(A), assessee is in appeal by way of cross objection before us.
At the time of hearing, it was a common point between the parties that that Hon‟ble Bombay High Court in the case of CIT vs. HDFC Bank Ltd., 107 DTR 140 (Bom) has held that the „broken period interest‟ is allowable as a deduction. It is also noteworthy that the Hon‟ble Bombay High Court in the case of HDFC Bank Ltd. (supra) considered the decisions of the Hon‟ble Supreme Court in the case of Vijaya Bank Ltd. (supra) as also that of the Hon‟ble Rajasthan High Court in the case of Bank of Rajasthan Ltd. (supra) and thereafter, it has upheld the stand of the assessee that „broken period interest‟ is allowable as a deduction. In view of the aforesaid authoritative pronouncement by the Hon‟ble Bombay High Court, we find no justification to uphold the stand of the income-tax authorities. Following the judgement of the Hon‟ble Bombay High Court in the case of HDFC Bank Ltd. (supra), we hereby set-aside the order of the CIT(A) and direct the Assessing Officer to delete the impugned addition.
In the result, C.O. No.101/PN/2014 in the case of Lokmangal Co-op. Bank Ltd. is allowed.”
There has been no change in the facts in the assessment year under appeal. The Revenue has not placed on record any judgment contrary to the decision of Tribunal in assessee‟s own case. We do not find any infirmity in the findings of Commissioner of Income Tax (Appeals) in
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allowing assessee‟s claim. Accordingly, ground Nos. 8 to 11 raised in the appeal by Revenue are dismissed being devoid of any merit.
The ground Nos. 12 and 13 are general in nature, hence require no adjudication.
In the result, the appeal of Revenue is dismissed.
Order pronounced on Friday, the 20th day of July, 2018.
Sd/- Sd/- (डी. करुणाकरा राव/D. Karunakara Rao) (ववकास अवस्थी / Vikas Awasthy) ऱेखा सदस्य / ACCOUNTANT MEMBER न्याययक सदस्य / JUDICIAL MEMBER ऩुणे / Pune; ददनाांक / Dated : 20th July, 2018 RK आदेश की प्रयिलऱवऩ अग्रेवषि / Copy of the Order forwarded to : अऩीऱाथी / The Appellant. 1. प्रत्यथी / The Respondent. 2. आयकर आयुक्त (अऩीऱ) / The CIT(A)-7, Pune 3. 4. The Pr. Commissioner of Income Tax-6, Pune ववभागीय प्रयतयनधध, आयकर अऩीऱीय अधधकरण, “बी” बेंच, 5. ऩुणे / DR, ITAT, “B” Bench, Pune. गाडड फ़ाइऱ / Guard File. 6. //सत्यावऩत प्रयत // True Copy// आदेशानुसार / BY ORDER,
यनजी सधचव / Private Secretary, आयकर अऩीऱीय अधधकरण, ऩुणे / ITAT, Pune