Appellate Tribunal disallows premium paid by assessee, adding it to income. Issue remitted for further examination.

The Appellate Tribunal upheld the decision to disallow the premium paid by the assessee as an allowable expenditure, adding it to the assessee's income under "income from other sources." The Tribunal remitted the issue of treating the premium as the purchase cost of the bond back to the Assessing Officer for further examination. The appeal was partly allowed for statistical purposes, with the Tribunal's order pronounced on 3.2.2016.

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Issues Involved:
Confirmation of disallowance of premium paid and treatment of premium as purchase cost of the bond.

Confirmation of Disallowance of Premium Paid:
The appeal was against the order of the Commissioner of Income Tax (Appeals) regarding the disallowance of the premium paid of Rs. 20,35,000. The assessee argued that the premium should be treated as the purchase cost of the bond and deducted from the maturity value. The Assessing Officer observed that the assessee purchased bonds from an intermediary holder on a cum-interest price basis. The difference in purchase value included accrued interest and premium on the bonds. The Assessing Officer calculated the income based on the interest received by the assessee on the maturity date minus the interest paid on the purchase date. The ICICI Ltd. deducted tax at source on the maturity value minus face value without recognizing the purchase price of the assessee. The Assessing Officer added Rs. 20,35,000 to the assessee's income under "income from other sources." The Commissioner upheld this decision, stating that the premium paid should not be considered an allowable expenditure. The Tribunal found no issue with the Commissioner's order and dismissed the assessee's appeal.

Treatment of Premium as Purchase Cost of the Bond:
The assessee also raised an alternative plea to treat the premium paid as the purchase cost of the bond and deduct it from the maturity value. This issue was not raised before the lower authorities. The Tribunal remitted this issue to the Assessing Officer for examination and decision in accordance with the law, providing an opportunity for the assessee to be heard. The appeal was partly allowed for statistical purposes. The Tribunal's order was pronounced on 3.2.2016.

This detailed analysis covers the confirmation of disallowance of premium paid and the treatment of premium as the purchase cost of the bond, as discussed in the legal judgment by the Appellate Tribunal ITAT CHENNAI.

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