Cooperative bank deductions upheld for member interest, HTM securities premium amortisation, and gratuity-related LIC premium claims.

Interest on share capital paid by a cooperative bank to members was treated as a revenue deduction, not an appropriation of profits, following earlier year precedent. Interest paid to members on deposits was held exempt from TDS under section 194A(3)(v), so disallowance under section 40(a)(ia) was not warranted. Amortization of premium on Government securities in the HTM category was accepted because it conformed to the applicable CBDT instruction. Premium paid to LIC towards employees' gratuity liability was also allowed, as pending approval of the gratuity fund did not defeat the claim on the facts.

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Issues: (i) Whether interest on share capital paid to members of a cooperative bank is an allowable deduction or an appropriation of profits; (ii) Whether interest paid to members on deposits attracts disallowance under section 40(a)(ia) for non-deduction of tax at source in view of section 194A(3)(v); (iii) Whether amortization of premium paid on Government securities held under the HTM category is deductible; (iv) Whether premium paid to LIC towards employees' gratuity liability is allowable where the gratuity fund is pending approval.

Issue (i): Whether interest on share capital paid to members of a cooperative bank is an allowable deduction or an appropriation of profits.

Analysis: The issue had already been decided in earlier years in favour of the assessee by the coordinate bench. The payment was treated as a revenue outgoing and not as a distribution of profit, and the appellate authority had followed the earlier binding view. The Tribunal applied the doctrine of precedent and found no reason to depart from the settled position.

Conclusion: The issue is decided in favour of the assessee and the deduction is allowable.

Issue (ii): Whether interest paid to members on deposits attracts disallowance under section 40(a)(ia) for non-deduction of tax at source in view of section 194A(3)(v).

Analysis: The Tribunal followed its earlier decisions and the CBDT clarification that interest credited or paid by a cooperative bank to its members is covered by the exemption under section 194A(3)(v). In that view, the assessee was not required to deduct tax at source on such payments, and disallowance under section 40(a)(ia) was not justified.

Conclusion: The issue is decided in favour of the assessee and the disallowance is not sustainable.

Issue (iii): Whether amortization of premium paid on Government securities held under the HTM category is deductible.

Analysis: The claim was found to be in accordance with the CBDT instruction governing securities classified under the HTM category, under which premium is to be amortized over the remaining period to maturity. Since the premium had been amortized in line with that instruction, the addition was held to be untenable.

Conclusion: The issue is decided in favour of the assessee and the deduction is allowable.

Issue (iv): Whether premium paid to LIC towards employees' gratuity liability is allowable where the gratuity fund is pending approval.

Analysis: The Tribunal distinguished the Revenue's reliance on cases concerning different facts and accepted that the contribution was made towards an actuarially determined gratuity liability. Following the coordinate bench view, it held that the pending approval of the fund did not defeat the claim on the facts of the case.

Conclusion: The issue is decided in favour of the assessee and the claim is allowable.

Final Conclusion: The Tribunal upheld the appellate relief granted on all substantive issues and found no infirmity in the orders below, leaving the Revenue without merit on the contested additions.

Ratio Decidendi: Where an issue has been consistently decided in earlier years on identical facts, and where a binding CBDT clarification supports the assessee's interpretation, the coordinate view and departmental disallowance cannot be sustained.

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