TMI Blog2014 (1) TMI 295X X X X Extracts X X X X X X X X Extracts X X X X ..... on. - ITA No. 851/Hyd/2013 - - - Dated:- 1-1-2014 - Shri Chandra Poojari And Smt. Asha Vijayaraghavan,JJ. For the Appellant : Sri A. V. Sadasiva For the Respondent : Sri Jeevan Lal Lavadiya ORDER Per Chandra Poojari, AM: This appeal by the assessee is directed against the order of the CIT(A)-III, Hyderabad dated 18th March, 2013 for A.Y. 2008-09. 2. The assessee raised the following grounds of appeal: 1. Your appellant submits that the Commissioner of Income Tax (Appeals) erred in confirming the action of the Assessing Officer in the matter of disallowance of depreciation in the value of current investments debited to profit and loss account of Rs. 28,41,84,357/-. 2. Your appellant submits that the non-SLR investments were classified as current investments under "AFS" as per guidelines of RBI and valued scrip wise at market value as on 31st March. The Assessing Officer as well as the Commissioner of Income Tax (Appeals) have failed to appreciate that your appellant was consistently following the method of valuing the current assets at cost or market value whichever was lower. Your appellant reiterates that the non-SLR investments are stock in trade and cu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1) Investment Portfolio review note for quarter ended 31.3.2008 as filed before the RBI NABARD.- P 68-84 of the Paper Book. (2) Investment Portfolio review note for quarter ended 31.12.2007 as filed before the RBI NABARD. - P 85- 100 of the Paper Book. (3) Investment Portfolio review note for quarter ended 30.09.2007 as filed before the RBI NABARD. - P 101- 117 of the Paper Book. (4) Investment Portfolio review note for quarter ended 30.06.2007 as filed before the RBI NABARD. - P 118- 134 of the Paper Book. (5) Scrip wise details of depreciation as on 31.3.2008. - P 135-140 of the Paper Book. 4. The assessee filed a petition seeking admission of the above additional evidences, as follows: "May Your Honours Please: Your Petitioner is a Government Partnered Scheduled Bank. Your Petitioner is the state level apex co- operative credit institution for the state of Andhra Pradesh, which provide agricultural loans to farmers in the state through its affiliated District Co-operative Central Banks (DCCBs) and in turn through the Primary Agricultural Credit Societies (PACS). Your Petitioner could not produce the copies of the Reserve Bank of India letter dated 25th Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder any of the aforesaid groups is ignored. 6. He also drew our attention to page 35 relating to accounting policy of 'Investments' for the year 2006-07 is given which read as under: (c) Investments which are under current category are marked to market and valued at the market rates available on the balance sheet date. (d) The net depreciation under each group is fully provided for, whereas net appreciation under any of the aforesaid groups is ignored. 7. He submitted that the accounting policy for the year 2005-06 is given in page 39 which is exactly the same as in the above years. Pages 42 to 49 of the Paper books is a copy of circular no. 100/DOS-15/2008 dated 27-6-2008 issued by NABARD (National Bank for Agriculture and Rural Development) by its Department of Supervision. In para (2) (on page 43) of the said circular Statutory (SLR) Investments of the Bank on any day shall not be less than 25% of the Total Demand and Time Liabilities in India. Non-SLR Investments are dealt in para 12 at page 44. Annexure IV of the said circular in page 49 of the paper book gives the disclosure requirements of 'Non-SLR requirements'. In para 12.3 of the said circular at page 45 'All Non ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... permitted to be revalued at market value for income-tax purposes only - Whether for determining real income, entries in balance sheet required to be maintained in statutory form may not be decisive or conclusive - Held, yes - Whether preparation of balance sheet in accordance with statutory provision would not disentitle assessee in submitting income- tax return on real taxable income in accordance with method of accounting adopted by assessee consistently and regularly - Held, yes - Whether, therefore, disallowance was not justified - Held, yes Section 145(1) of the Income-tax Act, 1961, read with section 29 of the Banking Regulation Act, 1949 - Method of accounting - Valuation of stock - Assessment year 1982-83 - Assessee, a scheduled nationalised bank was required to prepare balance sheet in prescribed form under Banking law - It was valuing stock-in-trade (investments) at cost for purpose for statutory balance sheet in terms of section 29 of the Banking Regulation Act - For income-tax purpose, valuation was made at cost or market value, whichever was lower - Revenue had accepted said method for over last 30 years - whether preparation of balance sheet in accordance with statu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above additional evidence go to the root of the matter in deciding the issue whether the investment made by the assessee form part of SLR and/or whether the investment is current investment or long term investment. Being so, it is appropriate to remit the issue back to the file of the AO for fresh consideration to decide the diminishing in the value of investment is to be allowed or not. Accordingly, we remit the entire issue back to the file of the AO for considering the issue de novo. 14. We also direct the AO to take note of the judgement of Apex Court in the case of Southern Technologies Ltd. vs. JCIT (320 ITR 577) wherein it was observed that RBI Directions, 1998 are merely disclosure norms and or norms regarding presentation of NPA provisions in the Balance Sheet of a NBFC/Bank and, therefore, provision for NPA in terms of RBI Directions does not constitute expenses on the basis on which deduction can be claimed by NBFC/Bank u/s. 36(1)(iii) or u/s. 37(1) of the IT Act and the same has to be added back to the total income, even by applying the theory of real income. 15. In the result, appeal of the assessee is allowed for statistical purposes. Order pronounced in the op ..... X X X X Extracts X X X X X X X X Extracts X X X X
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