Court upholds Income Tax Appellate Tribunal decision on amortized premium disallowance

The Revenue filed a tax appeal under Section 260A of the Income Tax Act, 1961, challenging the disallowance of Amortized Premium amounting to Rs. 3,15,81,243 for A.Y 2014-15. The Court, relying on precedent and RBI directives, upheld the Income Tax Appellate Tribunal's decision to allow the amortization in accordance with CBDT Circular No.17 of 2008. As there were no conflicting instructions, the Court concluded that the Revenue was bound by the CBDT Circular and dismissed the appeal.

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Issues:
1. Appeal under Section 260A of the Income Tax Act, 1961 by revenue against ITAT order for A.Y 2014-15.
2. Disallowance of Amortized Premium amounting to Rs. 3,15,81,243.

Analysis:
1. The tax appeal was filed by the revenue under Section 260A of the Income Tax Act, 1961, challenging the order passed by the Income Tax Appellate Tribunal for the Assessment Year 2014-15. The primary issue raised in the appeal was the disallowance of Amortized Premium worth Rs. 3,15,81,243 by the Assessing Officer.

2. The Court observed that the question of law proposed by the revenue was no longer res-integra based on a previous decision. Referring to the decision in the case of Commissioner of Income-tax, Rajkot-II Vs. Rajkot District Co-op. Bank Ltd., the Court noted the arguments presented by both parties regarding the amortization of premium paid on acquisition of securities. The respondent, a cooperative bank, was bound by RBI directives to invest in Government securities and amortize any premium paid over the remaining period of maturity as per CBDT Circular No.17 of 2008.

3. The CBDT Circular dated November 26, 2008, provided clear instructions for amortization of premium paid on securities acquired at a rate higher than the face value. The Court emphasized that the Tribunal had correctly directed the amortization in line with the RBI guidelines and CBDT Circular. As no contrary instructions were presented, the Court held that the instruction issued under section 119(2) of the Income-tax Act, 1961, would bind the Revenue. Consequently, the appeal was dismissed based on the aforementioned grounds.

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