TaxTMI 
TaxTMI 
TaxTMI 
2016 (3) TMI 911
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....ing the fact that the HTM securities are capital assets and any premium paid towards its acquisition is capital expenditure which is not admissible as deduction. 4. The Commissioner of Income-tax (Appeals) erred on the facts and circumstances of the case and in law in deleting the addition of Rs. 29,57,503/- on account of Ex-gratia payment which is not in accordance with the provisions of section 35DDA of the Income Tax Act. 5. For this and such other reasons as may be urged at the time of hearing, the order of the Commissioner of Income-tax (Appeals) may be vacated and that of the Assessing Officer be restored. 6. The appellant craves leave to add, amend, alter or delete any of the above grounds of appeal during the course of the appellate proceedings before the ITAT. 3. The ground of appeal No.1 raised by the Revenue is general in nature, hence, the same is dismissed. 4. The issue in grounds of appeal No.2 and 3 is against the deletion of addition made on account of HTM securities. 5. The learned Authorized Representative for the assessee at the outset pointed out that the identical issue arose before the Tribunal in assessee's own case in cross appeals vide ITA Nos.....
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....e securities. The ITAT therefore held that there was no basis for deeming that the Assessee had used the borrowed funds for investment in tax free securities. On this factual aspect, the ITAT did not find any merit in the contention raised by the Revenue and therefore, accordingly answered the question in favour of the Assessee. On going through the order of the CIT(Appeals) dated 28th March 2005 as well as the impugned order, we do not find that the CIT(Appeals) or the ITAT erred in holding in favour of the Assessee. In this regard, the submission of Mr Mistry, the learned Senior Counsel appearing on behalf of the Assessee, that this issue is squarely covered by a judgment of this Court in the case of Commissioner of Income Tax v/s Reliance Utilities and Power Ltd., reported in (2009) 313 ITR 340 (Bom) is well founded. The facts of that case were that the Assessee viz. M/s Reliance Utilities and Power Ltd. had invested certain amounts in Reliance Gas Ltd. and Reliance Strategic Investments Ltd. It was the case of the Assessee that they themselves were in the business of generation of power and they had earned regular business income therefrom. The investments made by the Assessee ....
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.... noted that the argument had considerable force, but considering the fact that the contention had not been advanced earlier it did not require to be answered. It then noted that in Woolcombers of India Ltd.'s case (1982) 134 ITR 219 the Calcutta High Court had come to the conclusion that the profits were sufficient to meet the advance tax liability and the profits were deposited in the over draft account of the assessee and in such a case it should be presumed that the taxes were paid out of the profits of the year and not out of the overdraft account for the running of the business. It noted that to raise the presumption, there was sufficient material and the assessee had urged the contention before the High Court. The principle, therefore, would be that if there were funds available both interest-free and over draft and/or loans taken, then a presumption would arise that investments would be out of the interest-free funds generated or available with the company if the interest-free funds were sufficient to meet the investment. In this case this presumption is established considering the finding of fact both by the Commissioner of Income-tax (Appeals) and the Income-tax Appell....
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....equires an answer from us." 10. Following the same parity of reasoning, we hold that the assessee is entitled to the claim of deduction on account of amortization of premium paid on Government securities held in HTM category. Upholding the order of CIT(A), we dismiss the grounds of appeal raised by the Revenue. 11. The last issue vide ground of appeal No.4 is against the deletion of addition of Rs. 29,57,503/- on account of Ex-gratia payment. 12. We find that the assessee during the year under consideration had claimed expenditure of Rs. 29,57,503/- under the head 'Staff Voluntary Payment'. Before the Assessing Officer, the assessee explained that the said expenditure pertained to the ex-gratia payment made to employees of the bank who had resigned from their service. The said payment was made in recognition of their meritorious service. It was also clarified before the Assessing Officer that the said payments were not made in terms of any scheme formulated under section 35DDA of the Act, but were in the nature of profit in lieu of salary on which due TDS was deducted. The Assessing Officer noted that the employees to whom the payments were made, were not in terms of any scheme....