TMI Blog2022 (5) TMI 624X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore uphold the order of the Ld. AO on this ground. Loss incurred by the sale of Government Securities - Investments classified under HTM category need not be marked to market and are carried at acquisition cost unless there are more than the face value, in which case the premium should be amortized over the period remaining to maturity - HELD THAT:- In the instant case, the impugned loss arose on sale of Government securities emanated from the investments which were classified under AFS category. In view of that, we find merit in the claim of the assessee that the loss arising out of sale of Government Securities is of trading loss notwithstanding the securities are grouped under the head investment owing to the prescribed format of the RBI. We find that the order of the Ld. CIT(A) is in consonance with the CBDT instructions as well as the facts of the case and does not require any interference. Accordingly, grounds raised by the Revenue on this aspect are dismissed. - I.T.A. No.384/Viz/2018, C.O. No.108/Viz/2019, I.T.A. No.384/Viz/2018 - - - Dated:- 11-5-2022 - Shri Duvvuru Rl Reddy, Hon ble Judicial Member And Shri S Balakrishnan, Hon ble Accountant Member For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The CIT(A) erred in deleting the addition of Rs. 5,66,869/- made by the AO on account of loss on sale of Govt. Securities. 6. The CIT(A) ought to have appreciated the fact that the transactions pertaining to purchase and sale of government securities were not passed through the profit and loss account and as such, the said loss is not an allowable deduction. 7. The CIT(A) ought to have considered that, the motive of the assessee in purchase and sale of government securities was not to earn profit, but to derive income by way of dividends/capital gains and as such, the loss on sale of Government securities is not business loss, but capital loss. 8. Though the tax effect is below monetary limit prescribed by CBDT for filing Revenue Appeal, the case is covered by exception 8(c) of CBDT Circular No.21/2015, dated 10/12/2015. 9. The appellant craves leave to add or amend or alter or delete any ground at the time of hearing of the appeal. 10. For these grounds an any other ground that may be urged at the time of appeal hearing before the ITAT, it is prayed that the additions made by the AO on the aforesaid issues be restored. 5. The brief facts of the case a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eing a bank incorporated by or under the laws of a country outside India or a non-scheduled bank or a co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank], an amount not exceeding 42[eight and one-half per cent] of the total income (computed before making any deduction under this clause and Chapter VIA) and an amount not exceeding ten per cent of the aggregate average advances made by the rural branches of such bank computed in the prescribed manner : Provided that a scheduled bank or a non-scheduled bank referred to in this sub-clause shall, at its option, be allowed in any of the relevant assessment years, deduction in respect of any provision made by it for any assets classified by the Reserve Bank of India as doubtful assets or loss assets in accordance with the guidelines issued by it in this behalf, for an amount not exceeding five per cent of the amount of such assets shown in the books of account of the bank on the last day of the previous year: Provided further that for the relevant assessment years com-mencing on or after the 1st day of April, 2003 and ending before the 1st day of A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e now = Rs. 94,421 10. The Ld. AR conceded that the provision towards standard assets is not liable for deduction under the Income Tax Act, 1961. The Ld. AR also submitted that the Government Securities were held under the category of Available For Sale and hence the loss after adjustment of the reserves already created in the earlier years is being debited to the P L Account of the current year. 11. We have heard both the sides and perused the materials available on record and the orders of the authorities below. We find that the issue of eligible deduction under the First proviso was not raised before the Ld. AO. We have also noted that this option of claiming deduction under the first proviso was exercised by the assessee only before the Ld. CIT(A). The relevant sub-clause (a) to section 36(1)(viia) is extracted herein below for reference: 36(1)(viia) in respect of any provision for bad and doubtful debts made by- (a) a scheduled bank [not being a bank incorporated by or under the laws of a country outside India or a non-scheduled bank or a co-operative bank other than a primary agricultural credit society or a prima ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in the case of GIT vs. Bank of Baroda (2003) 262 ITR 334 held that the banks are required as per RBI s guidelines to show these in the balance sheet as investments would not affect the nature of the asset. The banks by the very nature of the business may have to park surplus trading funds in securities and although intended to be trading assets may have to keep them for longer periods if funds are not required. The treatment of securities of AFS categories has to be seen in contradiction and contrast with securities of HTM category which are purchased and held for the purpose of investment only. The Circular and Instruction of the CBDT being squarely applicable, leaves no doubt on the allowability of the assessee s claim. 15. In the instant case, the impugned loss arose on sale of Government securities emanated from the investments which were classified under AFS category. In view of that, we find merit in the claim of the assessee that the loss arising out of sale of Government Securities is of trading loss notwithstanding the securities are grouped under the head investment owing to the prescribed format of the RBI. We find that the order of the Ld. CIT(A) is in consonan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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