CIT v. ING Vysya Bank Ltd. - Taxpublishers.in

SUBSCRIBE FOR FULL CONTENT


The Tax Publishers2013 TaxPub(DT) 2102 (Karn-HC) : (2013) 356 ITR 0532 : (2013) 263 CTR 0276 : (2012) 208 TAXMAN 0511 : (2013) 094 DTR 0425 Income Tax Act, 1961 --Business income--Business loss Fall in value of permanent investments in securities by assessee-bank--The assessee was a public limited Banking Company carrying on the activities of banking and the assessment year is 1993-94. On filing of the returns of the company, the assessing officer completed the assessment, after issuing notice to the assessee under section 143(2) as the assessing officer, prima facie found that many deductions, exemptions, etc., as, by way of expenditure or otherwise, claimed by the assessee were not admissible. One such claim for deduction was the claim of the assessee for a sum of Rs. 1,09,10,252 to be allowed as loss, in the wake of revaluation of securities classified as permanent assets. The assessee had valued its securities for investments, which the assessee had held, for the purpose of complying with the RBI instructions that a minimum percentage of its total deposits to be invested in such securities, in the wake of deposits that it had received from its customers as part of its business activity. The assessee had indicated such investment as a permanent asset and had claimed that it was held as stock-in-trade, being a part of the trading asset. The assessee had claimed that though none of these securities had been actually transferred resulting in a loss, on sales, the loss was being computed on the premise that on valuing securities at market value on the last date of the financial year, the market value of the assets having gone down, the assessee had incurred a loss as the market value of the securities was less than the cost of acquisition and the security being held as stock-in-trade, the assessee is entitled to evaluate the stock at the market value and therefore, can claim it as a business loss, which, in fact, was the practice that the assessee had been following for the past several years. The assessee, in fact, so reflected the loss in its Profit and Loss Account purporting to be on the basis of the method of accounting it had followed and the manner of making up its profits, as had been done for the past several years. The assessing officer rejected the claim of the assessee on examination of the nature of holdings which were undisputedly in the form of investments in securities. According to assessing officer, the assessee itself having described some part of these investments in securities (70%) as permanent investment and balance 30% as current investments and in the wake of legal position as prevailed in the clarification issued by the Board Circular No. 665/1992-93 and having found the assets in the nature of investments, any securities held by the assessee cannot be termed as stock-in-trade as it was an investment to fulfill the RBI Instructions and Guidelines and therefore held it as investments and not as part of the business asset of the assessee, valued for trading. Nevertheless, the claim of the assessee had been allowed to an extent of 30% based on the RBI Circular relating to the investments in securities, allowing a bank to treat 30% of the investments as current investment, whereas 70% of the investment should be in the nature of permanent investments. Such disallowing became contentious issue against which the assessee carried the matter in appeal before the Commissioner (Appeals), but without much success on this aspect, as the view of the assessing authority was affirmed by the Commissioner (Appeals) who dismissed the appeal on this aspect. Tribunal was of the opinion that its earlier view should be followed in the case of the assessee also and reversed the view of the assessing officer as well as that of the Commissioner (Appeals) and held that the assessee is entitled to claim deduction of the amount as business loss, attributable to fluctuation in the valuation of stock which it had held and the value of securities having gone down in the market, as valued on the last day of the financial year. *Held:* Assessee, bank was not entitled to business loss on falling of market value of permanent investment in securities held and invested after approval of RBI guidelines. Be that as it may, on the assessee's own declaration that it was permanent investment, the Tribunal could not have held otherwise as lasting asset and definitely cannot assume the character of stock-in-trade. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2013 TaxPub(DT) 2102 (Karn-HC) : (2013) 356 ITR 0532 : (2013) 263 CTR 0276 : (2012) 208 TAXMAN 0511 : (2013) 094 DTR 0425

Income Tax Act, 1961

--Business income--Business loss Fall in value of permanent investments in securities by assessee-bank--The assessee was a public limited Banking Company carrying on the activities of banking and the assessment year is 1993-94. On filing of the returns of the company, the assessing officer completed the assessment, after issuing notice to the assessee under section 143(2) as the assessing officer, prima facie found that many deductions, exemptions, etc., as, by way of expenditure or otherwise, claimed by the assessee were not admissible. One such claim for deduction was the claim of the assessee for a sum of Rs. 1,09,10,252 to be allowed as loss, in the wake of revaluation of securities classified as permanent assets. The assessee had valued its securities for investments, which the assessee had held, for the purpose of complying with the RBI instructions that a minimum percentage of its total deposits to be invested in such securities, in the wake of deposits that it had received from its customers as part of its business activity. The assessee had indicated such investment as a permanent asset and had claimed that it was held as stock-in-trade, being a part of the trading asset. The assessee had claimed that though none of these securities had been actually transferred resulting in a loss, on sales, the loss was being computed on the premise that on valuing securities at market value on the last date of the financial year, the market value of the assets having gone down, the assessee had incurred a loss as the market value of the securities was less than the cost of acquisition and the security being held as stock-in-trade, the assessee is entitled to evaluate the stock at the market value and therefore, can claim it as a business loss, which, in fact, was the practice that the assessee had been following for the past several years. The assessee, in fact, so reflected the loss in its Profit and Loss Account purporting to be on the basis of the method of accounting it had followed and the manner of making up its profits, as had been done for the past several years. The assessing officer rejected the claim of the assessee on examination of the nature of holdings which were undisputedly in the form of investments in securities. According to assessing officer, the assessee itself having described some part of these investments in securities (70%) as permanent investment and balance 30% as current investments and in the wake of legal position as prevailed in the clarification issued by the Board Circular No. 665/1992-93 and having found the assets in the nature of investments, any securities held by the assessee cannot be termed as stock-in-trade as it was an investment to fulfill the RBI Instructions and Guidelines and therefore held it as investments and not as part of the business asset of the assessee, valued for trading. Nevertheless, the claim of the assessee had been allowed to an extent of 30% based on the RBI Circular relating to the investments in securities, allowing a bank to treat 30% of the investments as current investment, whereas 70% of the investment should be in the nature of permanent investments. Such disallowing became contentious issue against which the assessee carried the matter in appeal before the Commissioner (Appeals), but without much success on this aspect, as the view of the assessing authority was affirmed by the Commissioner (Appeals) who dismissed the appeal on this aspect. Tribunal was of the opinion that its earlier view should be followed in the case of the assessee also and reversed the view of the assessing officer as well as that of the Commissioner (Appeals) and held that the assessee is entitled to claim deduction of the amount as business loss, attributable to fluctuation in the valuation of stock which it had held and the value of securities having gone down in the market, as valued on the last day of the financial year. Held: Assessee, bank was not entitled to business loss on falling of market value of permanent investment in securities held and invested after approval of RBI guidelines. Be that as it may, on the assessee's own declaration that it was permanent investment, the Tribunal could not have held otherwise as lasting asset and definitely cannot assume the character of stock-in-trade.