TMI Blog2003 (3) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... shares and securities were valued at cost on the assets side. - For the reasons given hereinabove, we answer the abovequoted question in the affirmative, i.e., in favour of the assessee-bank and against the Department. - - - - - Dated:- 12-3-2003 - Judge(s) : S. H. KAPADIA., J. P. DEVADHAR. JUDGMENT The judgment of the court was delivered by S.H. KAPADIA J.-For the assessment year 1982-83, the Tribunal has referred the following question for our opinion under section 256(1) of the Income-tax Act, 1961, at the instance of the Department: "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee was entitled to deduction on account of depreciation in the value of investments a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Findings: We do not find any merit in this argument. In the case of Limited Commercial Bank v. CIT [1999] 240 ITR 355 (SC), the assessee-bank had submitted a return for the assessment year 1982-83 contending that there was a notional loss of Rs. 7.45 crores on account of closing stock of securities valued at market price which fell below the cost. The Income-tax Officer accepted the said loss vide assessment order dated March 19, 1985. However, the Commissioner of Income-tax intervened by order dated March 9, 1987, under section 263 of the Income-tax Act. By the said order, the Commissioner set aside the order of assessment holding that the see-bank had no right to calculate profit or loss arising out of the investment trading account as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d true income. That, merely because in the past the system followed by the assessee-bank was not questioned was no ground to say that it should be accepted for all times. Consequently, the matter came before the Supreme Court. The apex court came to the conclusion that preparation of balance-sheet by the assessee-bank was governed by the Banking Regulation Act, 1949. That, under the Third Schedule to that Act, the balance-sheet and profit and loss account have been prescribed. That, in the prescribed form, there is a column "property and assets". Item 4 provides for investments (mode of valuation, i.e., cost or market value). Note (f) in column 4 states that where the value of the investments was higher than the market value, the market val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitting income-tax returns after taking into account the market price of such shares and securities which was accepted by the Department. It was submitted that not making proper entries in the balance-sheet could hardly be a ground for not assessing the real income. The Supreme Court came to the conclusion on the above arguments that where the market value of shares and securities had fallen below the cost before the date of valuation and where on the date of valuation, the market value is less than the actual cost then the assessee was entitled to value the articles at market price and the assessee was entitled to claim the loss which the assessee would probably incur at the time of the sale of shares and securities. That, whichever met ..... X X X X Extracts X X X X X X X X Extracts X X X X
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