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Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2008 (12) TMI AT This

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2008 (12) TMI 745 - AT - Income Tax


Issues involved:
1. Disallowance of investment portfolio amounting to Rs. 5,05,73,414/- as stock-in-trade.
2. Enhancement of assessment by Rs. 16,23,122/- for depreciation in valuation of investment portfolio.

Analysis:

*Issue 1 - Disallowance of investment portfolio as stock-in-trade:*
The assessee, a bank, claimed a deduction of Rs. 5.05 Crores towards loss on valuation of its investment portfolio treated as stock-in-trade. The Assessing Officer (AO) sought details and compliance with CBDT and RBI guidelines. The bank argued for following RBI guidelines for bookkeeping but AO insisted on revised RBI guidelines for valuation. The AO disallowed the claimed depreciation, stressing the need to follow RBI guidelines. The bank's long-standing method was rejected, resulting in disallowance of Rs. 5,05,73,414/-. The CIT (A) upheld this disallowance, citing RBI circulars and judicial precedents.

*Issue 2 - Enhancement of assessment for depreciation:*
The AO allowed depreciation of Rs. 16,23,122/- per RBI guidelines but disallowed the rest. The bank's contentions, supported by various High Court and Supreme Court decisions, were presented before the ITAT. The ITAT analyzed RBI circulars permitting valuation methods for different investment categories. Referring to the Supreme Court decision in United Commercial Bank vs. CIT, the ITAT held that the bank could value investments as stock-in-trade, deleting the disallowance. This decision was also supported by a previous ITAT judgment.

In conclusion, the ITAT allowed the bank's appeal, emphasizing the right to value investments as stock-in-trade based on consistent accounting practices and in line with RBI guidelines. The decision aligned with judicial precedents and statutory provisions, ensuring the bank's entitlement to determine real taxable income.

 

 

 

 

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