In ACIT v. Rajkot Nagrik Sahkari Bank Ltd., the ITAT Rajkot allowed the assessees’ claim towards amortization of security premium “Held To Maturity (HTM) Category” on the basis of the decision of the jurisdictional High Court.
Assessee, a Co-operative Society engaged in banking business and other activities, claimed deduction towards amortization of security premium “Held To Maturity (HTM) Category”. However, AO denied the claim on ground that it is not permissible as the bank cannot sell the securities marked under HTM category and it is ordinarily required be held by the bank till its maturity. He observed that a loss if any can be crystallized only on its maturity. Therefore, the difference between the market value in the securities held to maturity (HTM) and their cost owing to its diminution cannot be allowed as deduction in computing the business income of the assessee.
On appeal, the first appellate authority deleted the assessment order. Aggrieved by this, the revenue approached the Tribunal contending that the order of the first appellate authority was without considering the fact that the assessee has ignored the discounted amount in case of HTM (Held to Maturity) securities while arriving at the ‘loss figure’ for amortization.
Before the Tribunal, assessee submitted that the High Court has already disposed the issue in favour of the assessee and allowed the claim of amortization of security premium.
In the light of the above decision, the Tribunal concurred with the order of the first appellate authority and held that the disallowance of loss debited as a result of amortization of loss of government securities is not justified.
Read the full text of the Order below.
