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Issues: (i) Whether the amount representing salary provision paid before filing of the return was allowable as deduction; (ii) whether premium paid on government securities was revenue expenditure deductible in computing taxable income.
Issue (i): Whether the amount representing salary provision paid before filing of the return was allowable as deduction.
Analysis: The assessee had made a provision for cadre staff salary, but a substantial part of it had in fact been paid before filing of the return. Actual payment before the due date or before filing of the return was treated as satisfying the statutory requirement under section 43B(b) of the Income-tax Act, 1961, and the expenditure had already been debited in the profit and loss account. The earlier decision in the assessee's own case was followed.
Conclusion: The addition was rightly deleted and the finding was sustained in favour of the assessee.
Issue (ii): Whether premium paid on government securities was revenue expenditure deductible in computing taxable income.
Analysis: The securities were held and dealt with as part of the banking business and were connected with the statutory investment requirements of the bank. Trading in securities formed part of banking activity, and premium paid for acquiring such securities partook of the character of business expenditure. The earlier decision in the assessee's own case and the principle that such dealings are integral to banking business were followed.
Conclusion: The premium was held to be revenue expenditure and the addition was rightly deleted in favour of the assessee.
Final Conclusion: The Revenue failed on both grounds, and the relief granted by the appellate authority was maintained.
Ratio Decidendi: Amounts actually paid before the return-filing due date can be allowed under section 43B, and expenditure incurred on premium for securities held as part of banking operations is revenue in nature.
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