INCOME TAX ACT,1961

Section 32(1)

Depreciation - Allowability - Treatment of investment as stock-in-trade -

Assessee, a banking institution treated securities as stock-in-trade and claimed depreciation on book value after valuing the securities at lowest of cost or market value. Revenue disallowed depreciation claim on the ground that the real income of the bank had to be computed on the basis of the RBI Guidelines as per which it had been shown as investment. Assessee contended that the classification was relevant only for the purpose of actual provisions in the accounts and not for the purpose of computing the taxable income and requested that depreciation in the value of investments be allowed as that was claimed consistently and allowed as such in the income-tax assessment during the last more than two decades. Held: Assessee maintained the accounts in terms of the RBI Regulations and it had shown it as investment. But, consistently for more than two decades it has been shown as stock-in-trade and depreciation was claimed and allowed. Therefore, notwithstanding that in the balance sheet, it was shown as investment, for the purpose of IT Act, it was shown as stock-in-trade. Therefore, if the market value was less than the cost price, in law, assessee was entitled to deductions.

Followed:The Karnataka Bank Ltd. v. Asstt. CIT Mangalore (2013) 356 ITR 549 (Karn): 2013 TaxPub(DT) 1881 (Karn-HC)

REFERRED :

FAVOUR : In assessee's favour

A.Y. :

INCOME TAX ACT, 1961

Section 14A

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