TaxTMI 
TaxTMI 
2017 (9) TMI 1344
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....te which are more or less common in all these appeals are, the assessee a company is engaged in banking business. For the assessment years under dispute, the assessee had voluntarily filed its return of income within the due date provided under the Act. Assessments in regular course were also completed under section 143(3) of the Act for all these assessment years. Subsequently, the Assessing Officer having found that while completing assessment for assessment year 2010-11, deduction on account of broken period interest and depreciation on Held-To- Maturity securities were disallowed by the Assessing Officer, reopened the assessments for the impugned assessment years by exercising power under section 147 of the Act. In the course of assessment proceedings, the Assessing Officer called upon the assessee to explain why the broken period interest claimed as deduction by the assessee being a capital expenditure should not be disallowed. In response to the query raised by the Assessing Officer, it was submitted by the assessee as under:- "The Bank trades in Government and other SLR securities, as a part of its banking operations. These securities have specified dates for paymen....
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....ue expenditure. The assessee challenged the disallowance by filing appeals before the first appellate authority. 6. The learned Commissioner (Appeals) after considering the submissions of the assessee allowed assessee's claim of deduction of broken period interest holding as under:- 5.2 I have carefully considered the facts of the case and submission made by the Ld. ARs. I have also gone through the decisions relied on by the Ld. AR. The appellant has relied on the decision of the Hon'ble Tribunal in its own case for A.Y.2001-02 in ITA No.4343 and 4535/Murn/2005 dated 17.06.2011. It has also relied on the decision of the Hon'ble Bombay High Court in the case of CIT vs. HDFC Bank Ltd. in Income- tax Appeal No.330 of 2012 dated 23.07.2014. The substantial question of law before the Hon'ble Court was as under:- "(B) Whether the ITAT was correct in law in holding that the broken period interest is allowable as a deduction, inspite of the Hon'ble Supreme Court's decision in the case of CIT v/s. Vijaya Bank (187 ITR 541) and the Rajasthan High Court's decision in the case of Bank of Rajasthan (316 ITR 391)?" The Hon'ble Court in para ....
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.... has assessed the broken period interest as interest on security under section 18 of the old Act, whereas, in case of assessee the income was assessed as business income under section 28 of the Act. It is pertinent to observe, the Tribunal while deciding the issue in case of HDFC Bank Ltd., ITA no.375/Mum./2012, had held that broken period interest is allowable as revenue expenditure. The Revenue being aggrieved of the said decision of the Tribunal filed an appeal before the Hon'ble Jurisdictional High Court. The Hon'ble Jurisdictional High Court in judgment dated 23rd July 2014, in ITA no.330/2012, while deciding the said issue followed its judgment in case of American Express International Banking Corp. (supra) and upheld the decision of the Tribunal, thereby, dismissing the appeal of the Department on the said issue. Further, it is relevant to note, the Hon'ble Supreme Court in CIT v/s Citi Bank N.A., Civil Appeal no.1549/2006, date 12th August 2008, has approved the view expressed by the Hon'ble Jurisdictional High Court in American Express International Banking Corp. (supra). In fact, in assessee's own case in ITA no.4343 and 4535/Mum./2005 dated 17th June 2011....
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....t the appellant has claimed depreciation only in respect of AFS and HFT securities and has not claimed any depreciation in respect of HTM securities. The Hon'ble Bombay High Court in the case of Bank of Baroda (262 ITR 334) (Born) has held that depreciation on investments is to be allowed as deduction for banks in computing the total income. Further, the Hon'ble Bombay High Court, following the said decision, in the case of HDFC Bank (ITA No.330 of 2012) held that depreciation on securities should be allowed as deduction since securities held by the Bank constitute stock-in-trade. In the case of Yes Bank Ltd. (supra), the Hon'ble Mumbai ITAT has discussed the issue in detail and has allowed the depreciation. Respectfully following the above decisions, the depreciation on AFS and HFT securities claimed by the appellant is allowed. The ground is, accordingly allowed." 13. Learned Departmental Representative fairly submitted that the issue stands settled in favour of the assessee by virtue of the decisions referred to by the learned Commissioner (Appeals). However, he relied upon the observations of the Assessing Officer. Whereas, the learned Authorised Representative s....