Deduction for amortised premium on held-to-maturity government securities allowed under banking prudential norms and departmental instruction

Premium on Government of India bonds and government securities classified as held to maturity was treated as deductible when amortised in line with banking prudential norms. The Tribunal noted that the claim was supported by RBI directions and CBDT Instruction No. 17/2008, and that earlier coordinate Bench decisions had already allowed the same treatment for such securities. Following that settled view, the disallowance was deleted and the assessee-bank's amortisation claim was allowed.

---

---

Issues: Whether the assessee-bank was entitled to claim deduction for amortization of premium paid on investment in Government of India bonds and government securities held to maturity.

Analysis: The claim related to premium amortization on securities classified as held to maturity and was supported by RBI directions and CBDT Instruction No. 17/2008. The issue was found to be covered by earlier Tribunal decisions holding that such premium, being incurred in respect of government securities and in accordance with banking prudential norms, is allowable as a deduction. The Tribunal followed the earlier coordinate Bench view on the same point.

Conclusion: The disallowance was deleted and the assessee's claim for amortization of premium was allowed.

Ratio Decidendi: Premium paid on government securities held to maturity is allowable where it is amortized in accordance with banking prudential norms and the applicable departmental instructions.

---