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The Commissioner of Income Tax (Large Tax Payer Unit) Versus M/s Union Bank of India

Loss on revaluation of investments - valuation of stock in trade - ITAT allowed the claim - Held that:- We find that the issue as raised before us is no more res integra. This Court had an occasion to deal with identical question in the case of Commissioner of Income Tax Vs. HDFC Bank, reported in [2014 (8)119 - BOMBAY HIGH COURT ] and held the assessee has maintained the accounts in terms of the RBI Regulations and he has shown it as investment. But consistently for more than two decades it has .....

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they are entitled to deductions and it cannot be denied by the authorities under the pretext that it is shown as investment in the balance-sheet.

Thus, the view that the securities of the Banks are investment and have to be valued at costs or market price, whichever is less. - for the purposes of income tax, what has to be taxed is a real income and not necessarily the income on the basis of the manner in which the accounts are prepared. Thus, the issue is settled issue. - Decided ag .....

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pect of question nos. 4, 5 and 7 while question nos. 1, 2 and 3 were dismissed. However, question no.6 as formulated by the Revenue in its memo of appeal could not be dealt with on 1st December, 2015 for the following reasons as recorded in the order dated 1st December, 2015. "6. Regarding question no. (6) (a) The impugned order of the Tribunal dismissed the revenue's appeal following its order for the Assessment Years 2005-06 and 2006-07 which in turn had followed the order for the Ass .....

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for the Assessment Years 2005-06 and 2006-07 had been admitted. However, while admitting that appeal, the present question has not been considered as it does not state whether it admits or rejects the above questions. Thus it is submitted that this question is still open in the earlier appeals for Assessment Year 2005-06 and 2006-07 bearing Income Tax Appeal Nos. 152 of 2012 and 176 of 2012. Therefore this question could be considered at the final hearing of this appeal alongwith the two appeals .....

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t assessee on the last occasion, while adjourning the appeal, the bench (one of us i.e. M.S.Sanklecha J. was a member of that Bench) had indicated that this question would be considered alongwith Income Tax Appeal nos.152 of 2012 and 176 of 2012. Further in terms of the above observation he has informed his clients i.e. Revenue. We understand his submissions therefore the dismissal of this question at this stage would cause embarrassment. (e) It may be pointed out that (one common member - M.S.S .....

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and to communicate such observations to their clients, thereby creating an impression that such observations are conclusions or orders made by the Court. In this case, observations, if any, were admittedly at the stage when the case papers were no before us and only motion for adjournment was being considered. (g) At one stage, we were inclined to adjourn this question for consideration at the final hearing of the appeal. However on further thought it appears to us that it may not be advisable, .....

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cumstances, that question no.6 raised by the Revenue in the present appeal, which reads as under, had been deferred for consideration. "(6) Whether on the facts and in the circumstances of case and in law, the Tribunal is right in allowing the claim of the assessee in respect of loss on revaluation of investments amounting to ₹ 359,93,42,619 ?" 3. The respondent assessee had for Assessment Year 200708 claimed a loss of ₹ 476 crores on revaluation of investment i.e. deprecia .....

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er securities while for the purpose of payment of tax, the respondent assessee has been claiming gross depreciation that is without netting of the appreciation in other securities held as a part of investment. In the aforesaid circumstances, the Assessing Officer was of the view that the the netting basis for valuation as adopted in its books of accounts should be followed even for the payment of tax by the respondent assessee. Further, support for this was on the basis of CBDT Circular No.665 d .....

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the facts and circumstances of each case as to whether any particular security constitutes stock-in-trade or investment taking into account the guidelines issued by the Reserve Bank of India in this regard from time to time." In the circumstances, the set off on account of appreciation in some other securities being allowed, an amount of ₹ 359 Crores claimed as a loss, was disallowed. Thus added to the income of the Respondent-Assessee. 4. In appeal, the Commissioner of Income Tax (A .....

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sence of specific provisions in the Act. In this behalf, attention was drawn to Sections 43(D) and 36(1)(viia) of the Act, mandating computation keeping in view the guidelines of the Reserve Bank of India. 5. Being aggrieved, the Revenue carried the issue in appeal to the Tribunal. By the impugned order, the Tribunal dismissed the Revenue's appeal, holding that the issue stands covered by the decisions of the Tribunal on the same issue in respect of the same respondent assessee for the Asses .....

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ondent assessee being Income Tax Appeal Nos. 152 of 2012 and 176 of 2012, were not entertained in respect of question no.6 raised herein inasmuch as no question in respect thereof was admitted. However, the Revenue wanted to urge this issue on the ground that this question was not considered by this Court while admitting the Income Tax Appeal No.152 of 2012 and 176 of 2012. 6. In support of the appeal, Mr. Malhotra, learned Counsel for the Revenue places reliance upon the CBDT Circular No.665 da .....

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t in view of the RBI guidelines, it is not open for the assessee to apply the well accepted norm of valuing investments at costs or market price whichever is less. In the above view, it is submitted that question No.6 as formulated should be admitted for consideration along with Question Nos.4,5 and 7 as admitted on 1st December, 2015. 7. We find that the issue as raised before us is no more res integra. This Court had an occasion to deal with identical question in the case of Commissioner of In .....

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ded by the Departmental authorities on the view that he should have adopted a different method of keeping the accounts or on valuation. Financial institutions like bank, are expected to maintain accounts in terms of the RBI Act and its regulations. The form in which, accounts have to be maintained is prescribed under the aforesaid legislation. Therefore, the account had to be in conformity with the said requirements. The RBI Act or the Companies Act do not deal with the permissible deductions or .....

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. The question whether the assessee is entitled to particular deduction or not will depend upon the provision of law relating thereto and not the way, in which the entries are made in the books of account. It is not decisive or conclusive in the matter. For the purpose of the Income Tax Act whichever method is adopted by the assessee, a true picture of the profits and gains, i.e. real income is to be disclosed. For determining the real income, the entries in the balance-sheet is required to be m .....

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e, the approach of the authorities in this regard is contrary to the well settled legal position as declared by the apex court. In the instant case, the assessee has maintained the accounts in terms of the RBI Regulations and he has shown it as investment. But consistently for more than two decades it has been shown as stock-in-trade and depreciation is claimed and allowed. Therefore, notwithstanding that in the balance-sheet, it is shown as investment, for the purpose of Income Tax Act, it is s .....

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