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Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE
Before: SHRI D.KARUNAKARA RAO, AM & SHRI VIKAS AWASTHY, JM
आदेश आदेश / ORDER आदेश आदेश
PER D. KARUNAKARA RAO, AM :
This appeal is filed by the Revenue against the order of CIT(A)-7, Pune, dated 01-04-2016 for the Assessment Year 2012-13.
Revenue raised total 13 grounds. All these grounds revolve around couple of issues. Ground Nos. 1 to 7 relate to the issue of deletion of addition by the CIT(A) on account of interest accrued on Non-Performing Assets u/s.43D of the I.T. Act, 1961. Further, the Ground Nos. 8 to 11 relate to deletion of addition by the CIT(A) on account of amortization of premium on investments under the category Held to Maturity (HTM).
At the outset, before us, Ld. Counsel for the assessee argues that provisions of section 43D of the Act apply to all the banks including the
cooperative banks. On the other hand, Revenue holds that these
provisions are applicable only to the scheduled banks.
Regarding the first issue, i.e. addition on account of interest
accrued on NPA, Ld. Counsel for the assessee submitted that the issue
stands now covered in favour of the assessee by the order of the
Tribunal in assessee’s own case vide ITA No.875/PN/2014,
C.O.No.100/PN/2014 for the A.Y. 2009-10 and ITA No.1354/PN/2014,
dated 28-11-2014 for the A.Y. 2010-11.
Ld. DR for the Revenue relied on the order of the AO.
We heard both the parties and perused the orders of the Revenue
and the decisions relied on by the Ld. Counsel for the assessee on this
issue of NPA. We find the CIT(A) discussed the issue in Para Nos. 6 to
6.4 of his order and allowed the ground relating to interest accrued on
NPA amounting to Rs.67,84,906/-. While doing so, he explained the
provisions of section 43D of the Act and relied on the judgment of
Hon’ble Supreme Court in the case of Southern Technologies Ltd. Vs.
JCIT (Coimbatore) 320 ITR 577 (SC), judgment of Hon’ble Delhi High
Court in the case of M/s. Vasisth Chay Vyapar Ltd. 330 ITR 440 (Delhi)
and the decisions of the Tribunal in assessee’s own case for the A.Yrs.
2009-10 and 2010-11 vide ITA Nos. 875/PN/2014 &
C.O.No.100/PN/2014, dated 28-11-2014. Eventually, the CIT(A)
allowed the claim of the assessee in his favour. On perusing the finding
given by the CIT(A) we find it relevant to extract the operational paras
and the same read as under :
“6.2.3 The above analysis shows that, whether amount has become NPA or not is to be decided first then treatment of the interest thereon is to be considered for offering to Income Tax on the basis of accrual or receipt basis.
6.3 From the facts of the case, it is apparent from the record that appellant has not shown the amount received as interest after recovery from NPA. 6.4 Respectfully following the decision of ITAT Pune in the case of appellant for A.Y. 2009-10 and 2011-12 the amount of Rs.67,84,906/- claimed as NPA is not to be taxed in the year under consideration. Therefore, the ground No.1 of the appeal is allowed.
Considering the settled nature of issue relating to taxation of
interest accrued on NPAs, we find the order of the CIT(A) is a well
reasoned one and therefore does not warrant any adverse view on this
issue. We therefore direct the AO to delete the addition. Accordingly,
ground Nos. 1 to 7 raised by the Revenue are dismissed.
Now coming to the second issue raised by the Revenue vide
Ground Nos. 8 to 11, brief facts relevant to the issue are that assessee
debited an amount of Rs.1,55,037/- towards amortization of premium
on securities. Assessee submitted that as on 31-03-2012 it holds
Rs.23,75,16,951/- in Govt of India securities and all such investment is
held for maturity – HTM category. Assessee stated that when these
securities are purchased, the entire premium paid on purchase of
securities is not booked to expenditure account as it is required to be
amortized over the period until the maturity of securities. However, the
AO after analysing the investment portfolio of the banks came to the
conclusion that these securities are into three categories namely (1)
Held to Maturity, (2) Available for Sale and (3) Held for Trading. AO
opined that ‘AFS’ and ‘HFT’ are in the nature of stock in trade while the
‘HTM’ securities are in the nature of capital assets. For the purpose of
income-tax, the valuation in respect of ‘AFS’ and ‘HFT’ securities are to
be valued at cost or market whichever is less whereas ‘HTM’ securities
have to be valued at cost only and not at cost of market whichever is
less and thus disallowed the claim on amortization of premium
amounting to Rs.1,55,037/-.
In the First Appellate proceedings, the CIT(A) relying on the
decision of Tribunal in assessee’s own case for the A.Yrs. 2009-10 and
2010-11 and the decision of Pune Bench of the Tribunal in the case of
Lokmangal Co-operative Bank Ltd. – ITA No.1540/PN/2014, dated
28-11-2014 allowed the claim in favour of the assessee. Contents of
Para No.7.3 to 7.5 of the order of CIT(A) are relevant on this issue.
Aggrieved with the order of CIT(A), Revenue filed the present
appeal.
At the outset, Ld. Counsel for the assessee submitted that this
issue also is a covered issue in view of the decisions of the Pune Bench
of the Tribunal in the assessee’s own case for the A.Yrs. 2009-10 and
2010-11. Per Contra, Ld. DR for the Revenue relied on the order of the
AO dutifully.
After hearing both the parties and perusing the orders of the
Revenue and the consolidated order of the Tribunal dated 28-11-2014
where assessee is also covered in the said order, we find the issue is
decided in favour of the assessee vide Para Nos. 25 to 27 of the order.
For the sake of completeness, we reproduce the said findings of the
Tribunal here as under :
“25. The only other remaining Ground in the cross-objection is with regard to the action of the CIT(A) in confirming the disallowance of Rs.3,70,913/- representing amortization of premium paid on acquisition of Held to Maturity (HTM) securities. 26. In this context, brief facts are that before the CIT(A) assessee claimed deduction of Rs.3,70,913/- on account of amortization of premium paid on Government Securities in the category of investments Held to Maturity (i.e.HTM). The said premium represented the excess of acquisition cost over the face value of the securities and the claim of the assessee was that the same was to be amortized over the remaining period of maturity of the securities. The claim of the assessee was based on the Master Circular dated 12.07.2006 issued by the Reserve Bank of India. The CIT(A) did not accept the plea of the assessee and sustained the disallowance of Rs.3,70,913/-. Against such a decision of the CIT(A), assessee is in appeal by way of cross- objection before us.
It was a common point between the parties that the said issue is no longer res-integra and has been adjudicated ill favour of the assessee by the Hon'ble Bombay High Court in the case of HDFC Bank Ltd. (supra). The Hon'ble Bombay High Court referred to its earlier decision in the case of CIT vs. Lord Krishna Bank Ltd. (2014) 107 DTR 138 (Bom.) and decided the issue in favour of the assessee. In view of the aforesaid, the order of the CIT(A) is set-aside and the Assessing Officer is directed to delete an addition of Rs.3,70,913/- representing amortization of premium paid on HTM securities. Thus, the Ground of the assessee is allowed.”
In view of the above, we hold that the addition on account of
amortization of premium on HTM securities is allowable in favour of the
assessee. We therefore direct the AO to delete the said addition of
Rs.1,55,037/- in the hands of the assessee. Accordingly, relevant
grounds (8 to 11) raised by the Revenue are dismissed.
In the result, appeal of the Revenue is dismissed.
Order pronounced in the open court on this 09th day of May,
2018.
Sd/- Sd/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) �याियक �याियक सद�य �याियक �याियक सद�य सद�य /JUDICIAL MEMBER लेखा सद�य लेखा लेखा सद�य लेखा सद�य सद�य / ACCOUNTANT MEMBER सद�य
पुणे Pune; �दनांक Dated : 09th May, 2018 सतीश आदेश क� आदेश क� �ितिलिप �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order forwarded to : आदेश आदेश क� क� �ितिलिप �ितिलिप अ�ेिषत अ�ेिषत
अपीलाथ� / The Appellant 1. ��यथ� / The Respondent 2. 3. The CIT(A)-7, Pune 4. CIT-7, Pune िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, “B Bench” Pune; 5. गाड� फाईल / Guard file. 6.
आदेशानुसार आदेशानुसार आदेशानुसार/ BY ORDER,स आदेशानुसार
स�यािपत �ित //True Copy// //True Copy// Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune