TMI Blog2016 (10) TMI 101X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioner of Income Tax (Appeals) of even date for assessment year 2011-12. The assessee has filed Cross Objections for the assessment year 2008-09. In both the appeals, the Revenue has assailed the findings of Commissioner of Income Tax (Appeals) in deleting the addition made on account of disallowance on depreciation claimed on valuation of Government Securities Held to Maturity (HTM) category. Since, the issue raised in both the appeals is identical, these appeals are taken up together for adjudication and are decided by this common order. For the sake of convenience we are extracting the facts from the appeal of the Revenue in ITA No. 837/PN/2015 for assessment year 2008-09. 2. The brief facts of the case as emanating from records are: The assessee is a Scheduled Co-op. Bank. The assessee filed its return of income for the assessment year 2008-09 showing taxable income as Nil and claimed current year loss ₹ 10,73,80,780/-. The assessment proceedings were completed in the case of assessee for assessment year 2008-09 u/s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) admitting the loss of ₹ 10,72,98,310/-. Thereafter, reassessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ket price, whichever is less does not arise. As per CBDT Circular No. 665 dated 05-10-1993 it is for the Assessing Officers to determine on 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. The ld. DR vehemently supported the findings of Assessing Officer and prayed for setting aside the impugned orders. 5. On the other hand Shri Jayesh Doshi appearing on behalf of the assessee submitted that the issue of allowability of amortization of premium on Government Securities held under HTM category has been adjudicated in favour of assessee by the Hon'ble Bombay High Court in the case of Commissioner of Income Tax Vs. HDFC Bank Ltd. reported as 366 ITR 505 (Bom). The ld. AR of the assessee further submitted that the Tribunal has been consistently holding that the Government Securities held under HTM category are stock-in-trade and allowed the amortization of premium on such Securities held under HTM category. In support of his submissions, the ld. AR placed reliance on the decision of Co-ordinate Bench of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10. Respectfully following the hon ble Bombay High Court decision in the case of CIT v. Bank of Baroda [2003 262 ITR 334 (Bom)] wherein the hon ble court held that loss debited to the profit and loss wherein the hon ble court held that loss debited to the profit and loss account due to decrease in value of securities is allowable as deduction and the hon ble Supreme Court in the case of United Commercial Bank v. CIT [1999] 240 ITR 355 (SC) where the hon'ble court reversing the decision of the High Court held that nationalised bank governed by the Banking Regulation Act. The bank is following the mercantile system of accounting both for book keeping as well as tax purposes. The bank is valuing stock-in-trade (investments) at cost in the balance-sheet in accordance with the Banking Regulation Act and valuing very same investments at cost or market value , whichever was lower, for Income-tax purposes. The method followed consistently was valid and could not be rejected. In the present case, the facts being similar to the facts reported in UCO Bank, the Assessing Officer is directed to allow the revaluation of securities. However, for the computation of depreciation allowa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the assessee and against the Revenue and confirm the order of the Commissioner of Income-tax (Appeals) on this issue. 9. The Department carried the matter in appeal before the Hon'ble Bombay High Court. One of the substantial question of law before the Hon'ble Court for adjudication was : (C) Whether the Income-tax Appellate Tribunal is right in law in holding that the assessee is entitled for deduction with respect to the diminution in value of the investment and amortization of premium on investment held to maturity on the ground of mandate by the RBI guidelines thereby ignoring the decision of the Supreme Court in the case of Southern Technologies Ltd. v. Joint CIT [2010] 320 ITR 577 (SC) ? The Hon'ble Jurisdictional High Court dismissed the substantial question of law on this issue by observing as under : As far as question (C) is concerned, we find that an identical question of law was framed and answered in favour of the assessee by this court in its judgment dated July 4, 2014, in Income Tax Appeal No. 1079 of 2012, CIT v. Lord Krishna Bank Ltd. (now merged with HDFC Bank Ltd.) [2014] 366 ITR 416 (Bom). Mr. Suresh Kumar fairly stated that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... placed his heavy reliance on the decision of the Hon'ble High Court of Bombay in the case of CIT Vs. Bank of Baroda and in the case of UCO Bank Vs. CIT, 240 ITR 355 (SC). In the case of Bank of Baroda (Supra), the issue before their Lordship was whether the assessee was entitled for deduction on account of depreciation in the value of investments. The method of valuation followed by the assessee Bank was to value investments at cost or market value whichever was lower. The assessee had claimed the depredation to the tune of ₹ 11,82,35,007/- and the said depreciation was claimed as a deduction which was disallowed by the A.O, but the assessee Bank succeeded before the CIT(A). The Tribunal confirmed the order of the CIT(A). The Revenue carried the issue before the Hon'ble High Court. The core issue was the method of valuation adopted by the assessee Bank for valuing the stock of the Securities. The Hon'ble High Court followed the decision of Hon'ble Supreme Court in the case of United Commercial Bank (Supra). 15. In the case of United Commercial Bank (Supra), even the issue of valuation of the stock in trade of the investment was before the Hon'ble Sup ..... X X X X Extracts X X X X X X X X Extracts X X X X
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