2010 (10) TMI 860 - KERALA HIGH COURT

Valuation of unquoted Government securities - Assessee treats unquoted Government securities as current assets and, therefore, it has to work out the profit or loss in the end of the year for the purpose of payment of tax. The assessee adopted RBI guidelines for valuation of unquoted Government securities and based on the same it claimed a substantial loss – Held that:- Tribunal accepted the assessee's valuation which is based on RBI guidelines. RBI being the apex body issuing guidelines to the Banks for valuation of unquoted Government securities, it is the rational basis which assessee was bound to adopt. The Assessing Officer also has not come out with any formula for computation of market value of unquoted securities and he has no case that the RBI guidelines for valuation is irrational. Thus Tribunal rightly upheld assessee's claim for valuation of unquoted Government securities based on RBI guidelines.

Deduction of provision for bad debts in terms of Section 36(1)(viia) - basis of classifying Branches of the Bank as Rural Branches and other Branches – Held that:- Basic unit as available for identification of rural area in the Census Report can be legitimately adopted. So much so, the above meaning of rural area contained in the Census Report wherein revenue village is treated as a unit of rural area, can be rightly adopted. So much so, "place" referred to in the above definition clause for the purpose of identifying the branch of a Bank as a rural Branch with reference to it's location is the revenue village. Therefore, the finding of the Tribunal that "place" referred to in the definition is the Ward of a local authority like Panchayat or Municipality is incorrect and a rural Branch has to be always in rural areas and the place referred can easily be taken as a Village. Several Wards may come within a village, whether it be in Corporation, Municipality or Panchayats. There can be no Village in a Municipal or Corporation area where the population is less than 10000. So much so, rural Branches are such of the Branches located in a Village where the population in the Village as a unit is less than 10000. Therefore, allow the appeal on this issue by reversing the order of the Tribunal and by restoring the assessment.