9911796707
TMI Blog2015 (6) TMI 311X X X X Extracts X X X X X X X X Extracts X X X X ..... isallowance of provision for depreciation on government securities. 2. The learned CIT(Appeals) has erred in law and on facts in deleting the addition of Rs. 8,05,841/-, made on account of disallowance of provision for bad debts." 2. First issue is with regards to addition of Rs. 91,03,750/- made on account of disallowance of provision for depreciation on government securities. Assessee is engaged in activity of banking business. Assessing Officer has made disallowance basically on the following two grounds: a) that all provisions which were debited in the profits and loss account have to be disallowed and added back to the total income as per Income Tax Act. b) assessee has shown Government Securities in the Balance sheet as investment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... requent intervals. 3.2 Assessee bank is regularly following method of accounting for the valuation of securities based on the Reserve Bank Instructions/Guideline time to time and generally accepted accounting standards. Accordingly assessee bank is regularly valuing Government Securities held as AFS on mark to market (cost or market value whichever is less). The provision for depreciation is debited to profit & loss account as an expense. The method and computation has been verified and certified by Reserve Bank of India in its Inspection Report dated 5th December, 2007. Following are the year- wise provision amount for the depreciation in values of Government securities. Sr. No. Financial Year Amount of Provision for Depn. In Governmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmissions and material on record, we find that as per Section 6 read with Section 5(b) and (c) Banking Regulation Act and as per guideline issued by the Reserve Bank Of India, investment activities is normal banking activity and should be treated as banking stock in trade. The format of balance sheet has been prescribed by legislature and bank has to report their financial result in that format only. As per this format, investment in Government security though treated as banking assets (stock in trade) has to be shown in the balance sheet as investment. Further, banks are showing gain or loss arises from sale of security as business income/loss rather than capital gain. The above position has also been clarified by Circular no. 665 dated 05 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eserve Bank of India directions and CBDT instructions discussed above. The circular and the instruction of the board as quoted above are squarely applicable in this case, where the provision for depreciation on the "available for sale' category of securities has correctly been claimed. So, claim of assessee is allowable as per circular and instruction. Similar claim of depreciation and value of Government securities was made and allowed in earlier assessment year. In such circumstances, same method of accounting has been followed and disallowed from year to year. Such claim has been allowed by various judicial pronouncements. Hon'ble Mumbai High court in case of CIT vs Bank of Baroda (2003) 262 ITR 334 has held that "Depredation in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rural branches of such back computed in the prescribed manner. It is very clear that as per Finance Act.2007, for co-operative bank this is only effective from 01/04/2007 i.e. for A.Y. 2008-09, since this assessment pertains to the A. Y. 2007- 08 the claim of assessee is not allowable. Hence I make an addition of Rs. 8,05,841" 6.1 Matter was carried before First Appellate Authority, wherein various contentions were raised on behalf of assessee and having considered the same, it was observed by CIT(A) that amendment was brought in so that it was made applicable also to the Co-operative banks with effect from 01.04.2007. This provision was substantive provision therefore assessee was justified in submitting that it is applicable from a ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
