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M/s Zorastrian Co-operative Bank Ltd. Versus The Commissioner of Income Tax-1, Mumbai

2017 (10) TMI 477 - ITAT MUMBAI

Validity of Order u/s. 263 - Treating the loss as a notional loss - Held that:- The value of the stocks being closely connected with the stock market, at the end of the financial year, while valuing the assets, necessarily the bank has to take into consideration the market value of the shares - If the market value is less than the cost price, in law, 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 - .....

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s bad in law - Decided in favour of assessee. - ITA No. 3028/MUM/2015 - Dated:- 31-5-2017 - SHRI G.S. PANNU (AM) AND SHRI RAM LAL NEGI (JM) For The Appellant : Shri K.K. Ved (AR) For The Respondent : Ms. Anupama Singla (DR) ORDER PER RAM LAL NEGI, JM The assessee has preferred the present appeal against the order dated 24/03/2015 passed by the Commissioner of Income Tax (CIT)-1, Mumbai, for the assessment year 2010-11 u/s 263 of the Income Tax Act, 1961 hereinafter referred to as the Act , where .....

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Ld. CIT noticed that the assessee had debited an amount of ₹ 4,68,65,000/- on account of loss on shifting of securities from the category Available for Sale to the category Held to Maturity . The Ld. CIT accordingly issued show cause notice u/s 263 of the Act observing that the loss has arisen to the assessee from re-categorization of securities is notional loss not arising from any actual transaction of purchase and sale, therefore not allowable. In response to the said notice the authori .....

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ections to the AO to frame the assessment order afresh taking into account the observations made in the said order. 4. Aggrieved by the order of Ld. CIT, the assessee preferred this appeal before us on the following effective grounds:- 1:0 Re: Validity of Order u/s. 263: 1:1 The Commissioner of Income-tax has erred in holding that the Order dated 12 November 2012 passed by the Assessing Officer u/s 143(3) of the Income-tax Act, 1961 was passed without application of mind and was erroneous and pr .....

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263 of the Income Tax Act, 1961 by the Commissioner of Income-tax be struck down. Without prejudice to the aforesaid: 2:0 Re: Treating the loss of ₹ 4,68,65,000/- as a notional loss. 2:1 The Commissioner of Income-tax has erred in holding that the loss of ₹ 4,68,65,000/- debited by the Appellant to its Profit and Loss Account for the year is a notional loss which cannot be allowed and in directing the Assessing Officer to redo the assessment afresh. 2:2 The Appellant submits that con .....

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HDFC Bank Ltd., 368 ITR 377 (Bom) and the identical issue has been decided by the Hon ble Court in favour of the assessee. Hence, the impugned order is liable to be set aside. 6. On the other hand, the Ld. Departmental Representative (DR) relying on the impugned order passed by the Ld. CIT submitted that since the assessee had wrongly debited the amount of ₹ 4,68,65,000/- the Ld. CIT has rightly held that the loss is notional and the same is not allowable. 7. We have heard the rival submis .....

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ion the submissions made by the assessee. Subsequently, it was noticed that the assessee had debited to the profit & loss account a sum of ₹ 87.11 lacs as a loss on account of transfer of securities from category Available for Sale to Held to Maturity which was allowed by the Assessing Officer. The Ld. CIT set aside the assessment order invoking jurisdiction u/s 263 of the Act holding that the allowance of such a notional loss was erroneous and prejudicial to the interest of the revenu .....

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issible under the provision ns of the Act, the Ld. CIT was fully justified in invoking his powers u/s 263 of the Act, therefore, the impugned order passed by the ITAT requires interference. 9. The Hon ble High Court rejected the contention of the revenue and decided the issue in favour of the assessee. The relevant portions of the judgment of the Hon ble Bombay High Court in the aforesaid case are reproduced below: 6. Being aggrieved by the order passed by the Appellant under section 263 of the .....

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ents in the case of State Bank of Mysore v. Dy. CIT [2009] 33 SOT 7 (Bang) and ACIT v. Vijaya Bank [IT Appeal No. 253/BANG/2007 dated 24th January 2008] as well as the judgment of the Kanataka High Court in the case of Karnataka Bank Ltd. (supra), held that the claim of the Assessee for the loss of ₹ 87.11 lakhs on the transfer of securities from the category Available for Sale to Held to Maturity was an allowable deduction, and therefore set aside the order passed by the Appellant under s .....

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