TMI Blog2015 (6) TMI 311X X X X Extracts X X X X X X X X Extracts X X X X ..... cific instructions of the board were not there. Circular and instruction of the CBDT being squarely applicable on facts of assessee’s case, so CIT(A) was justified in allowing the same which needs no interference from our side. - Decided in favour of assesse. Disallowance of provision for bad debts - CIT(A) deleted the addition - held that:- It is proposed to amend the Explanation to the said item (fa) in view of the amendment to the definition of "scheduled bank" as given in the explanation to clause (viia) of sub-section 36 which excludes co-operative bank from purview of the said definition. This amendment is of consequential nature. This amendment will take effect retrospectively from 1st April, 2007 and will, accordingly, apply in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bited 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 and debited the profit and loss account on account of provision for depreciation amounting to ₹ 91,03,750/- which is not allowable under the Act. 3. Matter was carried before the First Appellate Authority, wherein various contentions were raised on behalf of assessee. CIT(A) found that CBDT has issued instruction for assessment of banks vide its Instruction No. 17/2008 dated 26.11.2008 (F. No. 228/3/3008 - ITA- III). Point no. VII of the said instruction states as under: As per RBI guidelines dated 16th October 2000, the investmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 Government Securities Debited to P L Account (Amt. in Rs.) 1. 2002-03 13,55,000.00 2. 2003-04 12,44,750.00 3. 2004-05 Nil 4. 2005-06 3,30,000.00 Income Tax assessment for the above said years were completed allowing the claim of Provision for depreciation in Government Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 05-10-1993. The question whether a particular item of investment in securities constitutes stock-in-trade or a capital asset is a question of fact In fact, the banks are generally governed by the instructions of the Reserve Bank of India from time to time with regard to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly 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 value of investment held by bank was allowable as deduction more so when the loss was debited to P L A/c which was reflected as provision for liability in the balance sheet and the share and securities were valued at cost on the asset side Similar view has been taken by H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee is not allowable. Hence I make an addition of ₹ 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 assessment year 2007-08 and not from Year 2008-09 as held by Assessing Officer . This issue was clarified in Notes on Clauses to the Finance Bill, 2007 itself. The relevant portion is reproduced below: It is proposed to amend the Explanation to the said item ..... X X X X Extracts X X X X X X X X Extracts X X X X
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