ITAT allows amortization claim on investments, denies bad debt; directs AO on interest calculation

The ITAT, Bangalore allowed the assessee's claim for amortization of premium on investments, overturning the disallowance by the AO and CIT(A). The ITAT held that the assessee was entitled to the deduction despite contrary decisions, citing Board's Instructions No.17 of 2008(vii). However, the claim for bad and doubtful debts was disallowed as the provisions in the books did not match the claimed amount. The ITAT directed the AO to give effect to their order on interest u/s.234B and 234C of the Act, partially allowing the assessee's appeal.

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Issues:
1. Addition of Rs. 26,40,237 as amortization of premium on investment in government securities.
2. Disallowance of claim of bad and doubtful debts amounting to Rs. 6,52,319.
3. Confirmation of interest u/s.234B and 234C of the Act.

Amortization of Premium on Investment in Government Securities:
The assessee claimed Rs. 26,40,237 under amortization of premium on investments for the assessment year 2007-08. The Assessing Officer disallowed the claim citing the decision of the Madras High Court. The Commissioner of Income-tax (Appeals) upheld the disallowance, stating that the RBI's direction for providing non-performing assets cannot override the provisions of the Income-tax Act. The assessee argued that similar issues were allowed by other Tribunals and relied on Board's Instructions No.17 of 2008(vii). The ITAT, Bangalore, after considering various Tribunal decisions, allowed the deduction, stating that the assessee is entitled to claim it.

Disallowance of Claim of Bad and Doubtful Debts:
The assessee claimed an excess amount of Rs. 6,52,319 under provision for bad and doubtful debts. The Assessing Officer disallowed this amount based on a decision of the Punjab & Haryana High Court. The Commissioner of Income-tax (Appeals) upheld the disallowance as the provisions made in the books were only Rs. 36 lakhs, not the claimed amount. The ITAT, Bangalore, concurred with the decision of the Commissioner of Income-tax (Appeals) and dismissed the appeal on this issue.

Interest u/s.234B and 234C of the Act:
The ITAT, Bangalore, directed the Assessing Officer to give consequential effect to their order regarding interest u/s.234B and 234C of the Act. The assessee's appeal was partly allowed, and the order was pronounced on 11.05.2012.

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