Tribunal allows appeal, orders deletion of disallowed expenses & amortization of premium

The Tribunal allowed the appeal of the assessee, directing the deletion of disallowed expenses under section 14A of the Income Tax Act and the amortization of premium paid at the time of purchase of securities. The decision was made on 25th October 2021 after a Virtual Hearing attended by both parties.

---

---

Issues:
1. Disallowance of expenses under section 14A of the Income Tax Act
2. Disallowance of amortization of premium paid at the time of purchase of securities

Issue 1: Disallowance of expenses under section 14A of the Income Tax Act:
The appeal was filed against the order of Ld. CIT(A) regarding disallowance under section 14A of the Act. The Assessing Officer made additions for disallowance of expenses amounting to &8377; 97,84,459 under section 14A, which was sustained by Ld. CIT(A). However, the Tribunal found in favor of the assessee. The Tribunal noted that the investment in shares and securities by a banking company is a regular business activity, and if made out of own surplus funds, disallowance of interest expenditure is not warranted. Referring to judgments, including one by the Hon'ble Supreme Court, the Tribunal directed the Assessing Officer to delete the addition of the disallowed expenses.

Issue 2: Disallowance of amortization of premium paid at the time of purchase of securities:
The appeal contested the disallowance of &8377; 62,06,818 confirmed in respect of amortization of premium paid at the time of purchase of securities. The assessee, a banking company, argued that the premium spread over the period of holding is a revenue expenditure and allowable. The Tribunal referred to a Co-ordinate Bench decision and held that the claim towards amortization of security premium should be accepted. Consequently, the Tribunal directed the Assessing Officer to delete the addition in this regard.

In conclusion, the Tribunal allowed the appeal of the assessee, directing the deletion of the disallowed expenses under section 14A and the amortization of premium paid at the time of purchase of securities. The decision was pronounced on 25th October, 2021, after a Virtual Hearing attended by both parties.

---