2015 (3) TMI 1324

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....ining to the assessment year 2008-09. 2. In this appeal, the solitary dispute raised by the Revenue is with regard to a disallowance of Rs. 11,38,171/- made by the Assessing Officer on account of amortization of premium paid for acquisition of securities categorized as Held to Maturity (HTM), which has since been deleted by the CIT(A). 3. In brief, the relevant facts are that the assessee is a Co-operative Bank registered under the Maharashtra Co-operative Societies Act, 1960 and is carrying on the business of banking in terms of a license issued by the Reserve Bank of India (RBI). Assessee claimed deduction for amortization of premium paid on acquisition of securities categorized as HTM, which was disallowed by the Assessing Officer ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....bay High Court in the case of CIT Vs. HDFC Bank Ltd. (2014) 366 ITR 505 (Bom), wherein the Hon'ble Bombay High Court on similar issue, held as under: "As far as question (C) is concerned, we find that an identical question of law was framed and answered in favour of the assessee by this court in its judgment dated July 4, 2014, in Income Tax Appeal No.1079 of 2012, CIT v. Lord Krishna Bank Ltd. (now merged with HDFC Bank Ltd.) (2014) 366 ITR 416 (Bom). Mr. Suresh Kumar fairly stated that question (C) reproduced above is covered by the said order. In view thereof, we are of the view that even question (C) does not arise any substantial question of law that requires an answer from us." And a similar view has been taken by IT....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....The intention of the provision may be derived more precisely from relevant Para 166 of the budget speech which stated that : "Cooperative banks, like 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 facil....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....35-ITAT-Mumbai, has held 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. It has also been held in the case of Catholic Syrian Bank Ltd. Vs. ACIT that amortization on purchase of Government securities was made as per prudential norms of the RBI and same was allowable deduction. In view of above, assessee was justified in contending for amortization of premium paid in excess of face value of securities held to maturity (HTM) category or period remaining till maturity was found reasonable by the CIT(A). A....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....r 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 Bombay High Court in CIT Vs. HDFC Bank (supra). We hold that amortization of premium expenditure for securities Held To Maturity in view of RBI guidelines are allowable business expenditure in the case of asses....