TaxTMI 
TaxTMI 
2015 (4) TMI 786
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....d unclaimed dividend. Assessee explained that the dividend is credited to dividend payable account after declaration of dividend and its approval by the general body meeting. At the end of the year, the dividend remaining undisbursed is transferred to unclaimed dividend account and if a Member does not collect dividend within three years from the date of General Body meeting, the unclaimed amounts are transferred to General Reserve. In any case, it was pointed out that even on a future date if a Member demands his dividend, the bank has to pay the same. The Assessing Officer was of the view that it reflects a cessation of liability and therefore the amount of unclaimed dividend is taxable. The CIT(A) held that unclaimed dividend is taxable since it has been foregone by the Member of the bank. The CIT(A) has also relied upon the judgement of the Hon'ble Supreme Court in the case of CIT vs. TVS Sundaram Iyengar and Sons Ltd., (1996) 222 ITR 344 (SC) in coming to the said conclusion. 3. Before us, the Ld. Representative for the assessee submitted that an identical controversy has been considered by the Pune Bench of the Tribunal in the case of ACIT vs. M/s Peoples Co-operative Bank L....
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....ental Representative appearing for the Revenue has reiterated the stand of the Revenue that once the dividend is unclaimed, it reflects extinguishment of liability, and is liable to be taxed. 5. We have carefully considered the rival stands and find no merit in the stand of the Revenue. Quite clearly, the dividend is paid by the bank out of tax paid profits. Dividends are declared out of such profits and is to be understood as an apportionment of income. If for any reason, the dividend so declared is not actually disbursed and were to be added back to the taxable income, it would mean a double taxation. Therefore, there is no justification for taxing unclaimed dividend as a 'cessation' of liability. No doubt, cessation of liability may be a taxable event but only in situations where such liability has entered the computation of taxable income on an earlier occasion. Quite clearly, the declaration of dividend does not enter the computation of taxable income as the dividend is declared out of the profits remaining after taxation. 6. In so far as, the reliance placed by the CIT(A) on the judgement of the Hon'ble Supreme Court in the case of TVS Sundaram Iyengar and Sons Ltd. (supra)....
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....11 dated 31.08.2012 wherein the similar issue has been decided in favour of the assessee. Against such a decision of the CIT(A), Revenue is in appeal before us. 12. Before us, it was a common point between the parties that similar issue of the allowability of Premium on Amortization of HTM Securities, arose before Pune Bench of the Tribunal in the case of Pune District Central Co. Operative Bank Ltd. vs. Addl.CIT in ITA No.1796/PN/2013 relating to assessment year 2009-10 vide order dated 28th November 2014, it was held as under:- "10. ...... We find that a similar issue of allowability or deduction on account of amortization of premium expenditure for HTM securities arose before Pune Bench of the Tribunal in assessee's own case in ITA No.1795/PN/2013 relating to assessment year 2008-09 vide order dated 22.09.2014 wherein, it was held as under:- "2.1 The only issue remains is with regard to disallowance made by the Assessing Officer of Rs. 2,20,68,302/- claimed by the assessee as amortization of premium expenditure for HTM securities by payment of over and above the value of such securities. The learned Authorized Representative has pointed out that this issue is covered in favou....
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.... any other bank, are lending institutions and should pay tax on their profits, Primary Agricultural Credit Societies (PACS) and Primary Cooperative Agricultural and Rural Development Bank (PCARDB) stand on a special footing and will continue to be exempt under section 80P of the Income Tax Act. However, I propose to exclude all other co-operative banks from the scope of that section". Accordingly, section 80P is to be amended to give effect to the above proposal. It is also proposed to amend section 2(24) to provide that profits and gains of business of banking (Including providing credit facilities) carried on by a co-operative society with its members shall be included in the definition of 'income' (with effect from 1st April, 2007)". 6. Cooperative bank unlike other commercial banks are subjected to dual control from both RBI as well as from state cooperative department. The accounting treatment for a cooperative bank is therefore a result of guidelines from both the controlling authorities. Ordinarily a deduction is not available to an assessee unless specifically provided under the Act. This is irrespective of accounting treatment provided by the assessee in its books....
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....soning we hold that in case of banks, the premium paid in excess of face value of investments classified under HTM category which has been amortised over the period till maturity is allowable as revenue expenditure since the claim is as per RBI Guidelines and CBDT also has directed to allow such premium. In view of above, the assessee is justified in contending that the amortization of premium in excess of face value securities as HTM, period remaining difference was found reasonable. Accordingly, the disallowance of Rs. 2,20,68,302/- made by the Assessing Officer claimed as amortization of premium expenditure for HTM securities by payment of premium over and above the face value of such securities is directed to be allowed." 11. The Hon'ble Bombay High Court in CIT Vs. HDFC Bank (supra) held that the assessee therein was entitled to deduction with respect to the diminution in the value of investments and amortization of premium on investments Held To Maturity on the ground of mandate of the RBI guidelines. The issue raised in the present appeal is identical to the issue before the Pune Bench of the Tribunal in the assessee's own case for assessment year 2008- 09 and Hon'ble Bomba....