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M/s South Indian Bank Ltd. Versus Assistant Commissioner of Income Tax., Cir. 1 (1) Thrissur

2012 (9) TMI 974 - ITAT COCHIN

Disallowance of loss on revaluation of the securities - when the taxpayer valued the securities on the basis of the realizable value could it be allowed as loss in the absence of the copies of the balance-sheet of the respective company? - Held that:- The RBI issued guidelines to value to unsecured shares on the basis of YTM, i.e. yield to maturity method adopted for valuation of securities. The Kerala High Court has also found that YTM rates have been put out by the PDAI / FIMMDA at periodical .....

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nd circumstances, this Tribunal is of the considered opinion that the law laid down by the jurisdictional High Court in the cases of Nedungadi Bank Ltd (2002 (11) TMI 29 - KERALA High Court) and Lord Krishna Bank Ltd (2010 (10) TMI 860 - Kerala High Court) is applicable in the case of the present tax payer also. Directed to allow the notional loss claimed by the taxpayer on revaluation of the securities as deduction while computing the total income. - I.T.A No. 09 & 10/Coch/2011 & I.T.A No. 149 .....

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an Pulickal, the ld.representative for the taxpayer submitted that the only issue arises for consideration is disallowance of loss on revaluation of the securities. The ld.representative for the taxpayer submitted that the taxpayer banking company invested funds in the securities. During the year under consideration the securities were revalued as per the norms prescribed by Reserve Bank of India (RBI) and the loss was claimed as deduction. However, the assessing officer disallowed the claim of .....

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s where investments were made. The assessing officer placed his reliance on the orders of this Tribunal in the case of Catholic Syrian Bank Ltd in ITA Nos 284 & 381(Coch)/2006 dated 14-03-2008. Referring to the judgment of the Kerala High Court in Commissioner of Income-tax vs Lord Krishna Bank Ltd I.T.A. No.234 of 2009 dated 07-10-2010, the ld.representative submitted that the High Court has approved the revaluation of the securities on the basis of the guidelines prescribed by the RBI. The .....

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s the realisable value of the securities. 3. On the contrary, Ms. Veni Raj, the ld.DR submitted that the taxpayer has not filed the copies of the balance-sheet of the respective companies to establish the valuation of the securities. According to the ld.representative, in the absence of balance-sheet of the respective companies, the taxpayer cannot claim any loss. 4. We have considered the rival submissions and also perused the material available on record. The only question arises for considera .....

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s deduction in computing the taxable profit. In view of this judgment of the Kerala High Court, the loss suffered by the taxpayer in revaluation of the securities has to be allowed as deduction. 5. In the case before us, the taxing authority disallowed the claim of the taxpayer on the ground that the balance-sheet of the respective companies was not filed to establish the valuation. The contention of the taxpayer is that the valuation was made on the basis of the guideline issued by RBI taking i .....

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r valued the securities on the basis of the realizable value could it be allowed as loss in the absence of the copies of the balance-sheet of the respective company. Admittedly, the assessing authority has not suggested any formula for valuation of the unquoted shares. On identical situation the Kerala High Court in the case of Lord Krishna Bank Ltd (supra) examined the issue in the light of the law laid down by the Kerala High Court in Nedungadi Bank Ltd (supra) and observed as follows: &hellip .....

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fit or loss in respect of the unsecured securities. Senior counsel appearing for the assessee ITA No.234/2009 produced RBI guidelines before us wherein the RBI has suggested Banks to value unquoted Central Government securities on the basis of the prices / YTM rates put out by the PDAI / FIMMJDA at periodical intervals. YTM is the yield to maturity method adopted for valuation of securities. It is seen that the Tribunal accepted the assessee s valuation which is based on RBI guidelines. RBI bein .....

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