Pr.CIT Vs Kalupur Commercial Co-Operative Bank Ltd

Whether premium paid on acquisition of securities can be amortized, if they are acquired at a rate higher than the face value- YES: HC

– Revenue’s appeal dismissed : GUJARAT HIGH COURT

THE assessee bank filed its return for the relevant A.Y declaring total income of Rs.69,51,17,191/-, whereas, the assessment came to be framed u/s 143(3) making an addition on account of amortized premium of Rs.2,10,11,715/-. On appeal, the CIT(A) deleted the addition by relying upon an earlier decision of the CIT(A) in the assessee’s own case for A.Y 2011-12 as the facts were identical to that case. Before the CIT(A), the assessee had relied upon the decision of the Tribunal in case of DCIT v. Surat National Co-operative Bank Ltd, wherein, it was held that as per CBDT, New Delhi Instruction No.17 of 2008, investments of banks classified under ‘Held to Maturity’ category need not be marked to market and were carried at acquisition cost unless these were more than the face value, in which case, the premium should be amortized over the period remaining to maturity.

On appeal, the HC held that,

Whether premium paid on acquisition of securities can be amortized, if they are acquired at a rate higher than the face value – YES: HC

++ it is an admitted position that the controversy involved in the present case is no longer res integra as the same stands concluded by a decision of this High Court in the case of Commissioner of Income-tax, Rajkot-II v. Rajkot District Co-operative Bank Ltd. In the said decision, this court has held that: “….The instructions clearly provide for amortisation of premium paid on acquisition of securities when the same are acquired at the rate higher than the face value. Such amortisation would have to be for the remaining period of maturity. The instruction in question having been issued u/s 119(2) of Income-tax Act, would bind the Revenue….” For the reasons recorded by this court in the case of Rajkot District Co-operative Bank Ltd, no question of law can be stated to arise out of the order passed by the Tribunal.

R/Tax Appeal No. 1340 of 2018