TMI Blog2011 (7) TMI 1115X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee in the present case is a Banking Company. Vide an assessment completed u/s 143(3) by an order dated 28-02-2007, its income for the year under consideration was computed by the AO at ₹ 1227,85,00,000/-. The records of the said assessment came to be examined by the learned CIT and on such examination, he found the assessment order passed by the AO to be erroneous as well as prejudicial to the interests of the Revenue for the following reasons : A sum of ₹ 87.11 lakhs debited by the assessee to the P L A/c. as loss on account of transfer of securities held under the category Available for Sale to Held to Maturity has been allowed. The allowance of such notional loss is incorrect in view of the Orissa High Court ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment order passed by him calling for any revision u/s 263. 3. The submissions made on behalf of the assessee before him were not found acceptable by the learned CIT. According to him, in order to make a loss deductible, the same must have actually arisen and as held in the various judicial pronouncements, notional loss was not deductible. He held that the loss of ₹ 87.11 lakhs claimed by the assessee was only a notional loss as the same had arisen on the shifting of certain securities held under Available for Sale to Held to Maturity category during the year under consideration. He held that there was no transfer of the said securities to any third person and it was only a case of reclassification of securities. He also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said case, the assessee bank had converted its securities from Available for Sale category to Held to Maturity category in the previous year relevant to assessment year 2005-06. Before conversion, the said securities were valued at market rate. As a result of the said valuation, value of the said securities got diminished and such dimintation in the value of securities on the date of conversion was claimed by the assessee as allowable business expenditure. This claim of the assessee was allowed by the Tribunal relying mainly on its earlier decision in the case of ACIT vs. Vijaya Bank rendered vide its order dated 24-01- 2008 in ITA No. 253/Bang/2007 wherein a similar issue had arisen before the Tribunal and after considering the rele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ets debited to P L account is not allowable, as directive of Reserve Bank of India may not override statutory provision. Once the Revenue is accepting that profit arising on the maturity of investment is business income, then it cannot take the stand that it is not stock-in-trade. During the course of proceedings before us, the learned AR has filed the assessment order in the case of the assessee for the asstt. Years 2000-01 to 2002-03. The depreciation claimed in all these asst. years has not been disallowed. Thus, the revenue is consistently accepting that depreciation is allowable. This Bench in the following cases has allowed such depreciation on the valuation of the securities held by the Bank: (1) Karnataka Bank Ltd. v. Jt. CIT I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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