TMI Blog2014 (7) TMI 724X X X X Extracts X X X X X X X X Extracts X X X X ..... ce-sheet - THE KARNATAKA BANK LTD Versus ASSISTANT COMMISSIONER OF INCOME TAX MANGALORE [2013 (7) TMI 656 - KARNATAKA HIGH COURT] followed – there was no infirmity in the order passed by the Tribunal – no substantial question of law arises for consideration – Decided against Revenue. - Income Tax Appeal No. 250 of 2012 - - - Dated:- 17-7-2014 - S. C. Dharmadhikari And B. P. Colabawalla,JJ. For the Appellant : Mr. Suresh Kumar For the Respondent : Mr. J. D. Mistry, Sr. Counsel with Mr. Atul Jasani JUDGMENT [Per B. P. Colabawalla J. ] :- 1. By this Appeal under section 260A of the Income Tax Act 1961, challenge has been laid by the Commissioner of Income Tax-2 to the order passed by the Income Tax Appellate Tribunal (hereinafter referred to as the ITAT ) dated 15th July 2011 whereby the ITAT allowed the Appeal filed by the Assessee and set aside the order dated 23rd March 2009 passed by the Appellant invoking his powers under section 263 of the Act. 2. Mr Suresh Kumar, the learned counsel appearing on behalf of the Appellant / Revenue submitted that the ITAT has totally misdirected itself in setting aside the order passed by the Appellant under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter the requisite notices were issued to the Assessee, the Assessing Officer completed the assessment and passed his Assessment Order under section 143(3) on 28th February, 2007 determining the total income of the Assessee at ₹ 12,27,85,00,000/-. 5. Subsequently it was noticed by the Appellant that a sum of ₹ 87.11 lakhs had been debited to the profit and loss account by the Assessee, as a loss on account of transfer of securities from the category Available for Sale to Held to Maturity and the same had been allowed by the Assessing Officer. According to the Appellant, since the allowance of such a notional loss was erroneous and prejudicial to the interest of the Revenue, he invoked his powers under section 263 of the Act and passed an order dated 21st March 2009 directing the Assessing Officer to modify his Assessment Order and disallow the deduction of ₹ 87.11 lakhs. In a nutshell, the Appellant mainly held that since the Assessee Bank had not transferred the securities to any other third person but had only done a reclassification from Available for Sale to Held to Maturity categories, the said transfer did not result in any actual loss to the Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d therefore, the Assessee Bank claimed a deduction with reference to the said depreciation. This was disallowed by the Income Tax Officer. Being aggrieved, the Assessee Bank went in appeal to the CIT (Appeals) who took the view that the said investments were rightly valued at the end of the year at cost or market value whichever was lower and the difference arising as a result of this valuation had to be allowed to the Assessee as a loss. The Revenue, being aggrieved by the order of the CIT (Appeals) carried the matter further to the Tribunal who confirmed the order of the CIT (Appeals). In view thereof, the Revenue approached this Court by way of a reference. On these facts, the question of law framed by this Court was as follows :- (A) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee was entitled to deduction on account of depreciation in the value of investments and, consequently, debiting disallowance of ₹ 11,82,35,007 ? 8. This Court, in answering the aforesaid question of law in favour of the Assessee and placing reliance on the judgment of the Supreme Court in the case of United Commercial Bank v/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fresh and partly allowed the Appeal. Being aggrieved by the said order, Karnataka Bank Ltd. preferred an Appeal to the Karnataka High Court under section 260A of the Act. After discussing various judgments of the Supreme Court, the Karnataka High Court held as under :- From the aforesaid judgments of the apex court, now it is clear that a method of accounting adopted by the taxpayer consistently and regularly cannot be discarded by the Departmental authorities on the view that he should have adopted a different method of keeping the accounts or on valuation. Financial institutions like bank, are expected to maintain accounts in terms of the RBI Act and its regulations. The form in which, accounts have to be maintained is prescribed under the aforesaid legislation. Therefore, the account had to be in conformity with the said requirements. The RBI Act or the Companies Act do not deal with the permissible deductions or exclusion under the Income Tax Act. For the purpose of the Income Tax Act, if the Assessee has consistently been treating the value of investment for more than two decades the investments as stock-in-trade and claimed depreciation, it is not open to the authorities ..... X X X X Extracts X X X X X X X X Extracts X X X X
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