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Issues: (i) Whether the amortisation of premium paid on government securities classified as held to maturity was allowable as deduction; (ii) whether the addition made solely on the basis of AIR information as unexplained investment in exchange transactions was sustainable.
Issue (i): Whether the amortisation of premium paid on government securities classified as held to maturity was allowable as deduction.
Analysis: The banking portfolio of securities was governed by RBI classification, and securities under the held to maturity category were to be carried at acquisition cost. Where such securities were acquired above face value, the premium was required to be amortised over the remaining period to maturity. The CBDT instruction issued in 2008 clarified this treatment, and the issue stood covered by judicial precedent allowing the claim as a deductible business expenditure.
Conclusion: The amortisation claim was allowable and the disallowance was rightly deleted, in favour of the assessee.
Issue (ii): Whether the addition made solely on the basis of AIR information as unexplained investment in exchange transactions was sustainable.
Analysis: The addition was founded only on AIR data without furnishing the underlying transaction details, nature of investment, or supporting material to the assessee. In the absence of such particulars and supporting evidence, the assessee could not be expected to rebut the allegation, and the addition lacked evidentiary basis.
Conclusion: The addition for unexplained investment was unsustainable and was rightly deleted, in favour of the assessee.
Final Conclusion: Both revenue appeals failed, and the relief granted by the appellate authority was sustained in full.
Ratio Decidendi: A claim for amortisation of premium on held-to-maturity government securities is allowable when supported by RBI classification norms and binding CBDT instructions, and an addition based only on AIR information without disclosure of foundational transaction details cannot stand.
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