Tribunal affirms deduction for broken period interest paid by assessee.

The Tribunal upheld the Commissioner of Income Tax (Appeals)'s decision to allow the claim of broken period interest paid by the assessee on deposits and borrowings. The Tribunal relied on previous Tribunal orders, legal principles of accounting, and relevant circulars to support the assessee's position. Consequently, the Revenue's appeals were dismissed, affirming the allowance of broken period interest as a deduction for the assessee.

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Issues involved:
Whether the Commissioner of Income Tax (Appeals) was justified in deleting the disallowance of broken period interest paid by the assessee on deposits and borrowings.

Detailed Analysis:

1. Background and Identical Issues:
The appeals filed by the Revenue against the orders of the Commissioner of Income Tax (Appeals)-12, Kolkata involved the issue of disallowance of broken period interest paid by the assessee on deposits and borrowings. Both appeals were taken together due to identical issues.

2. Previous Tribunal Orders:
The issue was previously addressed in Assessment Years 2009-10 & 2010-11. The Appellant cited a Tribunal order for Assessment Year 2009-10 where the matter was remanded back to the Assessing Officer for examination. The Assessing Officer, in a subsequent order, allowed the claim of broken period interest on the purchase of Government securities as a deduction.

3. Agreement on Coverage:
The Appellant's representative confirmed that the issue was covered in favor of the assessee by the Tribunal's order and the Assessing Officer's decision for Assessment Year 2009-10.

4. Tribunal's Observations:
The Tribunal reviewed the Assessing Officer's actions for Assessment Year 2009-10, where the claim of broken period interest was allowed based on the matching principle of accounting. The Tribunal noted that interest paid on purchases of securities should be considered as revenue expenditure, aligning with the principle of matching income and expenses.

5. Legal Precedents and Circulars:
The Tribunal highlighted the consistency in the assessee's accounting method and referred to the Central Board of Direct Taxes circular clarifying that interest payments and receipts on securities should be treated as stock in trade. The Tribunal also mentioned the decision of the Bombay High Court supporting the assessee's position.

6. Decision and Conclusion:
The Tribunal found no infirmity in the order of the Commissioner of Income Tax (Appeals) for both appeals, as the Assessing Officer had allowed the claim of broken period interest based on previous Tribunal orders and legal principles. Consequently, the appeals of the Revenue were dismissed.

This detailed analysis of the judgment highlights the key legal arguments, precedents, and decisions that led to the dismissal of the Revenue's appeals regarding the disallowance of broken period interest paid by the assessee on deposits and borrowings.

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