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2022 (9) TMI 448 - AT - Income TaxDisallowance of depreciation claimed on securities - assessee had claimed depreciation on conversion of securities classified as Held to Maturity (HTM) to those classified as Available for Sale (AFS) - Claim disallowed by the A.O. primarily for the reason that the HTM securities were capital assets and the loss therefore was capital in nature and there was no specific provisions under the Income Tax Act allowing such loss in the case of the assessee - HELD THAT:- Having considered the regulatory framework in which the assessee cooperative Bank operates and the position of law with regard to the treatment of their activity of dealing in securities as above, we shall now deal with the facts of the present case in the above background. In the present case the assessee has converted HTM securities to AFS securities which has resulted in depreciation of their value - Clearly this conversion and its valuation is in accordance with the Guidelines issued by the RBI as reproduced above for cooperative Banks. The said guidelines also require full provision to be made for the depreciation so effected. The said valuation is approved by the ICDS issued under the Act which though applicable from AY 2017-18 is still reflective of the position of the Department/Revenue in this regard. The activity of investments by Banks being accepted by the Revenue as its Business activity and the claim of the assessee to depreciation in value on conversion of HTM securities to AFS securities, being in accordance with RBI guidelines in this regard and even the Accounting Standards recommended under the Act, the Ld.CIT(A) we hold ,has rightly held the said claim to be allowable for the purposes of computing its business income. No reason to interfere in the order of the Ld. CIT(A) allowing the claim of depreciation - Ground no. 1 raised by the Revenue is dismissed. Accrual of income - addition on account of accrued interest on NPA account as income - CIT-A deleted the addition - HELD THAT:- We find that the assessee has proved with necessary documents that the outstanding interest on bad and doubtful advances pertained to advances given to of Moviya Seva Sahakari Mandali Ltd. and also that the entire interest pertained to the period up to 30th June, 2006 accounted for as interest income of the assessee bank till them and that subsequently no interest income on this account was being accounted for on accrual basis. That it was against the outstanding interest accrued that the assessee had received an amount during the year on the recommendations of the Vaidyanathan Committee. Thus, we find that the assessee had adequately established that the interest received during the year as pertained to interest of those years when the assessee was accounting for the interest on accrual basis. - Decided in favour of assessee.
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