The Income Tax Appellate Tribunal (ITAT), New Delhi Bench deleted disallowance of Rupees 1 Lakh on account of democratization of premium of government securities.
The assessee, Ram Garhia Co-operative Bank Ltd is a co-operative society carrying on the business of providing credit and deposits facilities. The assessee filed return of income declaring the total income of Rs. 1,76,68,630. The case of the assessee was selected for scrutiny, assessment proceedings have to been initiated. The Assessing Officer passed the assessment order passed by computing the incomes of the assessee.
As against the assessment order, the assessee preferred an Appeal before the CIT(A), the CIT(A) confirmed the disallowance of Rs. 1,72,27,362, out of total disallowance of Rs. 6,36,024,81 made by the A.O on account of non-deduction of the tax on interest paid on various depositions invoking provisions of Section 40(a)(ia) of the Income Tax Act. Further the CIT(A) also confirmed the addition of Rs. 52,209,14 on account of interest on Non-Performing Asset and also confirmed the disallowance of an amount of Rs. 19,20,41 on account of amortization of premium on government securities.
The said fact of the deletion of the disallowance of amortization premium for the Assessments Year 2010-11 and 2011-12 has been mentioned by the A.O in the Assessment order, but has not followed the consistency. Apart from the same as per the RBI Guidelines dated 16/10/2000, the investment portfolio of the bank is required to be classified under three categories viz. Held to Maturity (HTM), held for Trading (HFT) and Available for Sales (AFS).
Investments classified under HTM category need not be marked to market and are carried at acquisition cost unless these are more than the face value, in which case the premium should be amortized over the period remaining to maturity. In the case of HFT and AFS securities forming stock in trade of t he bank, the depreciation/appreciation is to be aggregated scrip wise and only net depreciation, if any, is required to be provided for in the accounts.
A Division Bench consisting of Dr BRR Kumar, Accountant Member and Yogesh Kumar US, Judicial Member held that “Therefore, by considering the facts and circumstances of the case, in our opinion, the disallowance of Rs. 1,92,041/- on account of democratization of premium of government securities is deserves to be deleted.”
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