2015 (6) TMI 973 - AT - Income Tax

Tribunal upholds CIT(A)'s decision on premium expenses, citing accounting principles and RBI guidelines.

Asstt. Commissioner of Income Tax, Versus Dena Gujarat Gramin Bank,

The Tribunal upheld the CIT(A)'s decision to delete the disallowance of expenses amounting to Rs. 1,30,19,855 related to premium paid on SLR investments ... Disallowance on account of expenses being premium paid on SLR (Statutory Liquidity Ratio) investments - CIT(A) deleted the disallowance - Held that:- Amortization of premium is allowable in accounting practice. As per RBI’s guidelines, amortization of premium in case of assets treated as HTM (Held to Maturity) (Investments) is to be amortized divided equally over the period which is remaining for their maturity. Same has been done by assesse. Amortization of expenses has been recognized in similar circumstances in case of premium of debentures, which was also held as investments in different judgments including that of Hon’ble Supreme Court in case of Madras Industrial Investment Corp. Ltd. Vs. CIT(A) (1997 (4) TMI 5 - SUPREME Court) relied by assesse. In view of this, CIT(A) allowed the claim of assesse. The order of CIT(A) is also supported by the decision of The Ahmednagar Merchants Co-op Bank Ltd. Vs. ACIT [2015 (6) TMI 552 - ITAT PUNE ]. In view of above decision, we are not inclined to interfere in the finding of CIT(A) who has deleted the disallowance made on account of expenses being premium paid on SLR (Statutory Liquidity Ratio) investments. - Decided in favour of assessee. Issues involved:Disallowance of expenses - premium paid on SLR investmentsAnalysis:The appeal was filed by the Revenue against the order of CIT(A), Gandhinagar, for the assessment year 2008-09, specifically challenging the deletion of disallowance of Rs. 1,30,19,855 made on account of expenses being premium paid on SLR investments. The Assessing Officer had disallowed the assessee's claim for deduction in respect of amortization of premium of investments, treating it as capital in nature.During the proceedings before the First Appellate Authority, various contentions were raised on behalf of the assessee, leading to the CIT(A) allowing the claim. The Revenue opposed this decision, with the Departmental Representative supporting the Assessing Officer's order, while the Authorized Representative backed the CIT(A)'s decision.Upon reviewing the submissions and material on record, the Tribunal found that amortization of premium is an allowable practice in accounting. Referring to RBI guidelines, it was noted that amortization of premium for assets treated as Held to Maturity investments should be spread equally over the remaining period until maturity, a practice followed by the assessee. The Tribunal cited previous judgments, including one from the Hon'ble Supreme Court, to support the recognition of amortization of expenses in similar circumstances. The decision of CIT(A) was further bolstered by a ruling from ITAT, Pune 'B' Bench, for another assessment year in a similar case.Consequently, the Tribunal declined to interfere with the CIT(A)'s decision to delete the disallowance of Rs. 1,30,19,855 made on account of expenses related to premium paid on SLR investments, upholding the same. As a result, the Revenue's appeal was dismissed, and the decision was pronounced in open court on the 5th day of June 2015.