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2020 (7) TMI 523 - AT - Income TaxDisallowance of deduction claimed on account of diminution in the market value of Government securities classified under the category ‘Held to Maturity’ - HELD THAT:- The essence of the matter is to examine as to whether a particular expenditure/loss is deductible and not whether the same is recorded in the books of account. If a particular amount is deductible as per law, the same has to be allowed as deduction irrespective of the fact that it was not recorded in the books of account. It is further noticed that the assessee did not record such diminution of value of securities to the extent of ₹ 2.65 crores in its books of account so as to satisfy the RBI norms, which provide for valuing the securities as such without any diminution in their value at the year end. RBI guidelines mandate reflection of certain transactions in a certain way and do not supersede the taxing principles. Treatment of the securities as investment or stock-in-trade - AR has relied on the judgment in Pr.CIT Vs. Bank of Maharashtra [2018 (3) TMI 316 - BOMBAY HIGH COURT] in which, in identical circumstances held that the securities held by the assessee bank as `Held till Maturity’ will not be treated as investment. No contrary point of view has been brought to our notice by the ld. DR. Respectfully following the precedent, we overturn the impugned order on this score and hold that such securities should be taken as stock-in-trade and not investments. Computation of amount of diminution value on securities - as premium on year to year basis and secondly, difference between the market value and the face value of the securities - We find that the amount of premium on investment has been separately claimed as deduction by the assessee. Such premium has been offloaded from the purchase cost to bring such securities at face value and all the subsequent calculations for valuing at the market price at the end of the year and calculation of profit at the time of sale of in a later year, have been done with reference to the face value without premium. Thus, it is clear that the amount of premium on investment has not been taken into consideration at the time of computing diminution of the value of the securities. AO has not made any separate disallowance towards write off of premium on these securities. We, therefore, order to delete the addition of ₹ 2.65 crores and odd. Thus, these three grounds are allowed. Disallowance u/s 36(1)(viia) - Amount of provision which was not made in the books of account - HELD THAT:- As decided in BANK OF MAHARASHTRA [2014 (10) TMI 210 - ITAT PUNE]Tribunal did not allow deduction u/s 36(1)(viia) of the Act in respect of the amount of provision which was not made in the books of account. Also see STATE BANK OF PATIALA VERSUS COMMISSIONER OF INCOME-TAX AND ANOTHER. [2004 (5) TMI 12 - PUNJAB AND HARYANA HIGH COURT] - Decided against assessee.
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