| The Tax Publishers2019 TaxPub(DT) 8304 (Del-Trib) INCOME TAX ACT, 1961
Section 32(1)
If the market value secutities was less than the cost price, in law, assessee was entitled to deductions and it could not be denied by the authorities under the pretext that it was shown as investment in the balance sheet. Thus, order passed by the authorities holding that in view of the RBI guidelines, the assessee was estopped from treating the investment as stock-in-trade was to be set aside. Hence, the disallowance made by AO was deleted and, consequently penalty levied under section 271(1) (c) was also deleted.
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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 and had also levied penalty under section 271(1)(c). 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: The assessee had maintained the accounts in terms of the RBI Regulations and had shown its securities as investment. But, consistently for more than two decades it had 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 and it could not be denied by the authorities under the pretext that it was shown as investment in the balance sheet. Thus, order passed by the authorities holding that in view of the RBI guidelines, the assessee was estopped from treating the investment as stock-in-trade was to be set-aside. Accordingly, the disallowance made by AO was deleted and, consequently penalty levied under section 271(1) (c) was also deleted.
Followed:The Karnataka Bank Ltd. v. Asstt. CIT (2013) 356 ITR 549 (Karn) : 2013 TaxPub(DT) 1881 (Karn-HC)
REFERRED : CIT v. ING Vysya Bank Ltd. (2013) 356 ITR 532 (Kar.) : 2013 TaxPub(DT) 2102 (Karn-HC),CIT v. Bank of Baroda (2003) 262 ITR 334 (Bom) : 2003 TaxPub(DT) 1105 (Bom-HC)m,q v. Addl. CIT [ITA No. 6795 & 6796/Del./2013, 242 & 243/Del./2014, dt. 27-12-2016],Oriental Bank of Commerce v. Addl. CIT [ITA No. 1937/Del/2011, ITA No. 1961/Del/2011, dt. 4-11-2015], CIT v. HDFC Bank Ltd. (2014) 368 ITR 377 (Bom) : 2014 TaxPub(DT) 3352 (Bom-HC), Southern Technologies Ltd. v. Joint CIT (2010) 320 ITR 577 (SC) : 2010 TaxPub(DT) 1302 (SC),United Commercial Bank v. CIT (1999) 240 ITR 355 (SC) : 1999 TaxPub(DT) 1437 (SC),Oriental Bank of Commerce v. Additional CIT (2018) 304 CTR 0981 : 2018 TaxPub(DT) 2487 (Del-HC)
FAVOUR : In assessee's favour
A.Y. : 2008-09
INCOME TAX ACT, 1961
Section 37(1)
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