TMI Blog2009 (7) TMI 1210X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Hon'ble Supreme Court, this Court has clearly held that the assessee is entitled to change the method of valuation of Government securities to market value from cost and claim depreciation on the difference in the diminution of value. The Tribunal also rightly pointed out the above ruling and held that the securities are trading assets of the bank and the loss arising on its sale is an allowable deduction. The loss on sale of securities is a revenue loss considering that the securities are trading assets and not investments. Hence, this question of law is answered in favour of the assessee and against the Revenue. Whether the Tribunal was right in law in holding that the interest paid on charge of investment is allowable as revenue expenditure disregarding the principle that the interest paid on charge of investments categorized as 'permanent' are to be treated as capital expenditure and not as revenue expenditure - HELD THAT:- Whatever expenses incurred or interest paid therein on such shares was only revenue expenditure and not a capital expenditure in nature and the Tribunal by following the decision of this Court in [ 2004 (7) TMI 52 - MADRAS HIGH COURT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he purpose of removal of any restriction or obstruction or disability would be on revenue account, provided the expenditure does not acquire any capital asset. Payments made for removal of restriction, obstruction or disability may result in acquiring benefits to the business, but that by itself would not acquire any capital asset. Hence, the finding of the Tribunal is correct in law. We do not find any other reason to interfere with the order passed by the Tribunal. Accordingly, the appeal is dismissed. - F. M. IBRAHIM KALIFULLA AND B. RAJENDRAN, JJ. N. Muralikumaran, for the Appellant K. Subramaniam, for the Respondent JUDGMENT B. Rajendran, J.- The assessee, the Karur Vysya Bank Ltd., originally challenged the orders of the AO in respect of various disallowances including the bad debts claims of the assessee relating to non-rural branches, which according to the assessee were made without appreciating the provisions of s. 36(1)(viia) of the Act in its proper perspective, which was allowed by the Tribunal. Aggrieved against the said order of the Tribunal, the Revenue has come forward with the present appeal with the below-mentioned questions of law : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or market value whichever is lower ? 2. In the balance sheet, if the securities and shares are valued at cost but from that no firm conclusion can be drawn. A taxpayer is free to employ for the purpose of his trade, his own method of keeping accounts, and for that purpose, to value stock-in-trade either at cost or market price. 3. 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 accounts or of valuation. 4. The concept of real income is certainly applicable in judging whether there has been income or not, but, in every case, it must be applied with care and within their recognized limits. 5. Whether the income has really accrued or arisen to the assessee must be judged in the light of the reality of the situation. 3. Following the principles laid down by the Hon'ble Supreme Court, this Court has clearly held that the assessee is entitled to change the method of valuation of Government securities to market value from cost and claim depreciation on the difference in the dim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon'ble Supreme Court decision reported in (1999) 156 CTR (SC) 380: (1999) 240 ITR 355(SC) (supra) has arrived at the conclusion that the interest paid will not be a capital expenditure and only a revenue expenditure. Hence, we hold that the Tribunal's finding is legal, valid and correct. Therefore, this question is also answered against the Revenue and in favour of the assessee following the above decisions of this Court and the Hon'ble Supreme Court. 5. The third question of law raised by the Revenue is whether the Tribunal was right in holding that the loss on sale of security incurred by the assessee bank was allowable as revenue loss ignoring the fact that loss on sale of securities categorised as 'permanent assets' 'cannot be treated as business loss . As far as this question of law is concerned, here again, the question arises in respect of the sale made by the bank in respect of Government securities and if any loss is sustained by bank, such transfer would be treated as capital loss or revenue expenditure. Now applying the principle as enunciated in the ruling viz., (2005) 273 ITR 510(Mad) (supra), when once the Government securities have alread ..... X X X X Extracts X X X X X X X X Extracts X X X X
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