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Income Tax Appellate Tribunal, AHMEDABAD “ B ” BENCH
Before: Smt. Annapurna Gupta & Shri T.R. Senthil Kumar
xplanation
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “ B ” BENCH Before: Smt. Annapurna Gupta, Accountant Member And Shri T.R. Senthil Kumar, Judicial Member ITA No.124/Ahd/2024 Assessment Year: 2017-18 The A.C.I.T, The Gujarat State Co-operative Circle-1(1)(1), Bank Ltd., Vejalpur. Vs Sardar Vallabh Bhai Patel, Near Shastringar BRTS Bus Stop, Naranpura Vistar S.O, Ahmedabad-380013. PAN: AAAAT9774F (Appellant) (Respondent) Revenue Represented: Shri Prateek Sharma, Sr-DR Assessee Represented: Shri Tushar Hemani,Sr.Advocate with Shri Parimalsinh B Parmar, AR Date of hearing : 04-07-2024 Date of pronouncement : 15-07-2024 आदेश/ORDER PER T.R. SENTHIL KUMAR, JUDICIAL MEMBER This appeal is filed by the Revenue as against the appellate order dated 13.11.2024 passed by the National Faceless Appeal Centre, Delhi, arising out of the assessment order passed under section 143(3) of the Income-tax Act, 1961 [hereinafter referred to as ‘the Act’] relating to the Asst. Year 2017-18.
The solitary issue raised by the Revenue is that Ld.CIT(A) erred in deleting the disallowance of premium paid on Government securities of Rs.3,76,31,284/- made by the AO.
ITA No.124/Ahd/2024 ACIT vs Gujarat State Co-operative Bank Page No.2 Asst.Year 2017-18
At the outset, it was stated by both the parties that this issue is covered in favour of the assessee in its own case for the Assessment Year 2014-15 by the Co-ordinate Bench of this Tribunal vide its decision dated 04.06.2019 in ITA No.701/Ahd/2018 which was followed by Ld.CIT(A) in his order.
The Sr.DR could not place on record any contrary view taken by the Higher Forum on the above order of the Co-ordinate Bench of this Tribunal.
We have heard the respective submission and perused the materials available on record. The brief fact is appellant is Co- operative Bank filed its Return of Income for Asst. Year 2017-18 declaring total income of Rs.72,85,72,000/-. The Return was taken for scrutiny assessment and AO made the disallowance of premium amortization of Government securities of Rs.3,76,31,284/- as the income of the assessee. As per the prudential norms of the Reserve Bank of India, every bank is required to make investments in the Government Securities based on definite percentage of the deposits and required to maintain Statutory Liquidity Ratio (SLR). The assesse had amortization premium of Rs.3,76,31,284/- as per the prudential norms of the RBI and sustained regular method of accounting adopted by the assessee’s bank. However, the AO disallowed the amortization premium and held that the investment under Held To Maturity (HTM) category is capital investment of the bank and hence expenditure of the premium amortization of Rs.3,76,31,284/- is a capital expenditure which is a disallowable expenditure u/s.37 of the Act. Whereas the Co-ordinate Bench of this Tribunal in assessee’s own case for the earlier Asstt. Year 2014-
ITA No.124/Ahd/2024 ACIT vs Gujarat State Co-operative Bank Page No.3 Asst.Year 2017-18
15 following the judgement of the Jurisdictional High Court in the case CIT vs. Rajkot Dist. Co-operative Bank Ltd. dismissed the Revenue appeal by observing as follows:
“…When the appeal was called out for hearing, learned representative fairly agreed that the above issue is fully covered, in favour of the assessee, by the decision dated 27.09.2018 of the co-ordinate bench is assessee’s own case for the immediately preceding assessment year. Vide the aforesaid order, the co-ordinate bench has, inter alia, observed as follows:- 3. Learned representative fairly agree that the above issue is now covered, in favour of the assessee, by Hon'ble jurisdictional High Court's judgment in the case of CIT vs. Rajkot Dist. Co-operative Bank Ltd (Tax Appeal No.56 of 2013: judgment dated 10.02.2014) wherein Their Lordships have, inter alia, observed as follows:- 5. The learned counsel Shri P.G. Desai for the appellant vehemently contended that the Tribunal committed serious error in overruling the decision of the CIT (Appeals), who had given detailed reasons. He submitted that the investment was In the nature of capital investment in the hands of the assessee as held by the CIT (Appeals). The CBDT Circular dated November 26, 2008 would not apply. There were further instructions which would govern the situation.
On the other hand, the learned counsel Shri Tushar Hemani for the respondent placed heavy reliance on the said CBDT Circular dated November 26, 2008 and contended that the benefit of amortisation had to be granted. The assessee as a cooperative bank by the RBI directives. As per such directives, the Assessee had to invest certain amounts in Government securities and to hold the same till maturity. In the process of acquisition, if there was any premium paid on the face value of the security, the loss had to be amortised. Paragraph (vii) of the CBDT Circular No. 17 of 2008 doled November 26, 2008 would apply. Such instruction reads under: (vii) 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 amortised over the period remaining to maturity. In the case of HFT and AFT securities forming 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
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in the accounts. The latest guidelines of the RBI may be referred to for allowing any such claims." 7. The instructions clearly provide for amortisation of premium paid on acquisition of securities when the same are acquired at the rate higher than the face value. Such amortisation would have to be for the remaining period of maturity. This precisely the Tribunal had directed in the Impugned order Though contended, no contrary Instructions of CBDT are brought to our notice. The instruction in question having been issued under section 119(2) of the Income- tax Act, 1961, would bind the Revenue. No question of law. therefore, arises." 4 Respectfully following the judgment of Hon'ble jurisdictional High Court (supra), we approve the conclusions arrived at by the learned CIT(A) and declined to interfere in the matter 3. We see no reasons to take any other view of the matter than the view so taken by the co-ordinate bench. Respectfully following the co-ordinate bench decision in assessee's own case for the immediately preceding assessment year, we approve the conclusions arrived at by the learned CIT(A) and decline to interfere in the matter…”
Respectfully following the above judicial precedent, the ground raised by the Revenue is devoid of merits and liable to be dismissed.
In the result, the appeal filed by the Revenue is hereby dismissed.
Order pronounced in the open court on 15/07/2024
Sd/- Sd/- (ANNAPURNA GUPTA) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER (True Copy) Ahmedabad : Dated 15/07/2024 Manish