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Income Tax Appellate Tribunal, “J ”, BENCH MUMBAI
Before: SHRI R.C.SHARMA, AM & SHRI PAWAN SINGH, JM
आदेश / O R D E R PER R.C.SHARMA (A.M):
This is an appeal filed by assessee against the order of CIT(A)-2, Mumbai dated 25/07/2014 for A.Y.2011-12 in the matter of order passed u/s.143(3) of the IT Act. 2. Following grounds have been taken by the assessee:-
1. On the facts and circumstances of the Appellant's case and in law the Learned Commissioner of Income Tax (Appeals) CIT(A) erred in disallowing the deduction of Rs. 26,55,846/- claimed on account of premium paid on investment classified as Held to Maturity (HTM) Category amounting to Rs 13,14,816/- and premium paid on investments held as Available For Sale category (AFS) amounting to Rs 13,41,030/-.
2. On the facts and circumstances of the appellants case and in Law the Ld. CIT(A) erred in not giving directions to allow amortisation of premium paid on HTM Securities amounting to Rs. 13,14,816/- over the The Jain Sahakari Bank Ltd., life of investment averaging to Rs 1,09,5687- from AY 2010-11 to AY 2021-22 (12 years).
3. On the facts and circumstances of the appellants case and in law the Learned CIT(A) erred in not admitting the deduction allowable as per order of the Ld. C1T(A) for the AY 2009-10 in respect of HTM premium disallowed in the AY 2009-10 (Rs. 35,66,780/-) to be amortised over the life of investment from AY 2009-10 to 2015-16), of which sum of Rs. 4,47,141/- falls due in AY 2011-12.
4. On the facts and circumstances case and in law the Ld. CIT(A) erred in not granting the loss on account of valuation of investment held in AFS category derived by Mark to Market Value.
5. On the facts and circumstances case and in law the Ld. CIT(A) erred in not granting the loss on account of premium on investment held in AFS category transferred /matured during the AY 2011-12.
6. On the facts and circumstances of the assessee's case and in law the Learned CIT(A) erred in confirming the disallowance in respect of Provision for Leave Encashment amounting to Rs.40,95,542/-.
Rival contentions have been heard and record perused. Facts in brief are that the assessee is a bank. As per the statutory requirement of the Reserve Bank of India, the assessee has to maintain the Statutory Liquidity Ratio (SLR) as per the prescribed norms. In order to maintain SLR, the assessee has to invest in Government Securities. The investment made in Government Securities is normally interest bearing and traded in open market through stock exchanges. During the year under consideration the assessee has claimed amortization of the premium amounting to Rs. 26,55,846/-. The Ld. AO has disallowed the premium of Rs. 26,55,846/-. The Ld. CIT(A) has allowed to amortize premium of Rs. 13,14,816/- being premium paid on securities classified as HTM over the balance period of investments and hence, accordingly The Jain Sahakari Bank Ltd., allowed sum of Rs. 1,09,568/- against the total premium claimed amounting to Rs. 26,55,846/-. Assessee is in further appeal before us.
We have considered rival contentions and gone through the orders of the authorities below. From the record we found that the assessee has claimed premiums amounting to Rs.26,55,846/-. Out of the total premium sum of Rs. 13,14,816/- pertains to premium paid on investments classified as HTM and balance Rs. 13,41,030/-pertains to premium paid on investment classified as AFS. 5. As per CBDT Instruction No. 17/2008 dated 26.11.2008 read with CBDT Circular 665/05-10-1993 and RBI Guidelines for Classification and Valuation of Investments by banks No DBOD No. BP. BC. 32/21.04.048/2000-2001, the bank is required to amortize premium paid on investment in respect of securities held as HTM over the remaining period of balance life of investment i.e. upto the date of maturity. This proposition is upheld by the decision of Hon'ble co-ordinate ITAT Mumbai Bench in the case of DCIT vs Bank of Rajasthan Ltd in for AY 2007-08 wherein it was held that premium paid on securities under HTM category be amortized over the period remaining to maturity.
We also found that similar issue had arise in the A.Y.2009-10 wherein disallowance of premium of Rs.35,66,780/- in respect of securities held as HTM was made. The Ld. CIT(A) following the CBDT instructions and RVI guidelines has allowed the premium paid under HTM The Jain Sahakari Bank Ltd., category to be amortized over the period of life of investment upto maturity. The Ld. CIT(A) therefore allowed an amount of Rs 14,36,141/- for the AY 2009-10. However, the Ld. CIT(A) did not give direction to grant deduction of balance premium over the life of the securities in subsequent years. Accordingly, we direct the AO to allow balance premium over the life of the securities in the subsequent years.
The assessee as per the Ground No. 3 has claimed that the part of premium amounting to Rs. 4,47,1417- pertains to the assessment year under consideration and hence the same be allowed and further to give direction to allow the balance premium as per page number 14 of the Ld. CITA's order for the AY 2009-10. 8. The assessee has further claimed amortization of premium in respect of Securities held as AFS for AY 2011-12 amounting to Rs 13,41,030/- raised as per Ground number 4 and 5. As per the RBI guidelines and CBDT Instruction No. 17/2008 dated 26.11.2008, the bank is required to recognize the total cost of securities on the date of purchase including premium. The said investment classified as AFS is to be valued on the reporting date on Mark to Market basis. The loss, if any can be claimed as deduction. The same is the method of valuation of stock in trade. Accordingly, the loss incurred amounting to Rs.9,43,540/- as per details placed on record as per page number 3 of Paper Book is directed to be allowed. 9. Further, the assessee has purchased and sold part of the investment classified as AFS, the details of which is placed on record as The Jain Sahakari Bank Ltd., per page number 6A and 6B of Paper Book, and claimed premium of Rs. 3,00,000/-. The investment sold is 10.25% GDI 2021 and 12.30% GOI 2016. On sale of investment the profit of Rs 9,27,8507- arising there from has been offered for taxation. The details are placed on record as per page no.6A and 6B of the Paper Book. The net gain that has accrued to the assessee is Rs. 6,27,850/- (Rs.9,27,850/- - Rs.3,00,000). The assessee instead of showing the net gain has claimed premium amounting to Rs. 3,00,000/- and has disclosed income of Rs. 9,27,850/-. The resultant net effect being same. The Ld. AO has disallowed the loss whereas he has accepted the income of Rs.9,27,850/-. Accordingly, we direct the AO to allow loss of Rs.3 lakhs.
During the year under consideration, the assessee has made a provision of Leave Encashment amounting to Rs 40,95,542/-. The Ld. AO and CIT(A) has disallowed the same in the pretext that the same has not been paid and as per provision of section 43B the same is to be disallowed.
On an identical issue, the Hon'ble Apex Court has stayed the judgement delivered by Calcutta High Court passed in the case of Exide Industries Limited vs UOI 292 ITR 470. Further, the Coordinate bench of tribunal in the case of Birla Sunlife Asset Management Company Ltd vs DCIT 5457/M/2013 has statistically allowed the appeal of the assessee stating as under: