The ACIT,S.K.Circle, Sabarkantha V. The Sabarkantha Dist.Central Co.Op.Bank Ltd., Sabarkantha

ITA 1103/AHD/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94531 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 17-08-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 21-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D C MISHRA
• Assessee Lawyers: A C SHAH
• Keywords: Capital asset; Depreciation; Cost of acquisition
• Section: 143(3); 145; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH AHMEDABAD BEFORE S/SHRI RAJPAL YADAV, JM, & MANISH BORAD, AM. ITA NO.1103/AHD/2012 ASST. YEAR:2008-09 ASSTT. CIT, SABARKANTHA CIRCLE, HIMATNAGAR. VS THE SABARKANTHA DIST. CO-OP. BANK LTD., HIMATNAGAR, DIST. SABARKANTHA. (APPELLANT) (RESPONDENT) PA NO.AAAAT 1019P APPELLANT BY SHRI D. C. MISHRA, SR. DR RESPONDENT BY SHRI A. C. SHAH, AR DATE OF HEARING: 17/8/2015 DATE OF PRONOUNCEMENT: 14/10/2015 O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF CIT(A) VIII, AHMEDABAD, DATED 17.2.2012 PERTAINING TO AY 2008-09. THE ASSESSMENT WAS FRAMED BY DCIT, SABARKANTHA CIRC LE, HIMATNAGAR, U/S 143(3) OF THE I.T. ACT, 1961 (HEREI N AFTER REFERRED TO AS THE ACT) ON 26.11.2010. THE REVENUE HAS RAISED T HE FOLLOWING GROUNDS OF APPEAL :- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.1,47,48,785/- ON ACCOUNT OF INVESTME NT DEPRECIATION ACCOUNT WITHOUT APPRECIATING THE FACT THAT THE SAID AMOUNT WAS NOTIONAL DEPRECIATION OF GOVERNMENT OF I NDIA ITA NO.1103/AHD/2012 ASST. YEAR: 2008-09 2 SECURITIES AS ON 31.3.2008 WHICH WERE HELD BY THE B ANK AS INVESTMENT AND NOT AS STOCK. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESS ING OFFICER. 3. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE L D. CIT(A) MAY BE SET ASIDE AND THAT OF THE AO MAY BE RESTORED TO THE ABOVE EXTENT. 2. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE F ILED ITS RETURN OF INCOME ON 14.9.2008, SHOWING TOTAL INCOME OF RS.93, 60,730/-. THE CASE WAS SELECTED FOR SCRUTINY AND ASSESSMENT UNDER SECTION 143(3) OF THE ACT WAS FRAMED WHEREIN ADDITION OF RS.1,87,9 8,785/- ONLY WAS MADE WHICH INCLUDED ADDITION ON ACCOUNT OF PROVISIO NS OF INVESTMENT DEPRECIATION DISALLOWED BY AO OF RS.1,47,66,239/-. AGAINST THE ORDER OF AO, THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A ) WHO AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEE DELETED THE DISALLOWANCE OF RS.1,47,66,239/-. 3. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE T RIBUNAL. WE WOULD LIKE TO MENTION HERE THAT AS PER THE ORDER OF A.O. THE ADDITION ON ACCOUNT OF DISALLOWANCE OF PROVISION OF INVESTME NT DEPRECIATION WAS MADE AT RS.1,47,66,239/- WHEREAS IN THE GROUNDS OF APPEAL FILED BY THE REVENUE THE AMOUNT MENTIONED IN GROUND NO.1 IS RS.1,47,48,785/-. THERE SEEMS TO BE SOME TYPOGRAPHI CAL ERROR ON THE PART OF REVENUE WHILE FILING THE GROUNDS OF APPEAL AND, THEREFORE, WE RECTIFY THE FIGURE FOR THE APPEAL PURPOSE AT RS.1,4 7,66,239/-. ITA NO.1103/AHD/2012 ASST. YEAR: 2008-09 3 4. DURING THE COURSE OF HEARING LD. DR RELIED ON TH E ORDER OF AO. 5. ON THE OTHER, THE LD. AR OF THE ASSESSEE FILED T HE DETAILED PAPER BOOK AND SUBMITTED AS UNDER :- THE LD. AO HAS MADE ADDITIONS AS UNDER :- (1) INVESTMENT DEPRECIATION OF RS.1,47,66,239. 1. INVESTMENT DEPRECIATION OF RS.1,47,66,239; 1.1 THE ASSESSEE IS DISTRICT CO-OP. BANK GOVERNED B Y RESERVE BANK OF INDIA ACT AND REGULATIONS FRAMED THERE UNDER. BY MASTER C IRCULAR DATED 7 TH JULY, 2007 PARA NO.15 THE BANK IS REQUIRED TO CLAS SIFY THE INVESTMENT IN THREE CATEGORIES. (A) HELD TO MATURITY (B) AVAILABLE FOR SALE (C) HELD FOR TRADING AS PER PARA NO.16.1 THE AVAILABLE FOR SALE AND HELD FOR TRADING ARE TO BE VALUED MARK TO MARKET I.E. COST OR MARKET PRICE WHI CHEVER IS LOWER. ACCORDING THE BANK HAS VALUED THE SECURITIES AT COS T OR MARKET PRICE WHICHEVER IS LOWER. AS PER WORKING, THE FALL IN MAR KET IS TO THE EXTENT OF RS.1,47,66,239. THIS FALL IS KNOWN AS INVESTMENT DE PRECIATION BY THE ASSESSEE BANK. THE INVESTMENTS SO MADE ARE STOCK IN TRADE THOUGHT IT IS MENTIONED AS INVESTMENT IN BALANCE SHEET. THE BANK IS REQUIRED TO AMORTIZE THE PREMIUM PAID ON SECURITIES OVER ITS LI FE IN CASE OF INVESTMENTS HELD TO MATURITY. IN CASE OF THE INVESTMENT HELD FO R TRADING AND AVAILABLE FOR SALE, THEY ARE TO BE VALUED MARK TO MARKET I.E. AT COST OR MARKET RATE WHICHEVER IS LOWER. 1.2 THE LD. AO ACCEPTED THE PROVISION FOR AMORTIZAT ION OF RS.1,26,69,000 AS ALLOWABLE IN LAST PARA ON PAGE NO.2 AFTER THE REPLY OF ASSESSEE. HOWEVER, THE LD. AO DISALLOWED INVESTMENT DEPRECIATION OF RS .1,47,66,239 ON THE GROUND THAT THE DEPRECIATION IN VALUE OF SECURITIES IS NOTIONAL AND NOT ACTUAL AND THAT THE GOVERNMENT SECURITIES HELD ARE INVESTMENT AND NOT STOCK IN TRADE. 1.3 IT MAY PLEASE FURTHER BE NOTED THAT THE ASSESSE E FOLLOWS MERCANTILE SYSTEM OF METHOD OF ACCOUNTING SINCE YEARS AND IT I S ACCEPTED BY THE REVENUE. THE ITAT AHMEDABAD BENCH HAS DISMISSED THE REVENUE APPEAL ITA NO.1103/AHD/2012 ASST. YEAR: 2008-09 4 FOR AY 2007-08 FOLLOWING UCO BAND DECISION AND WOOD WARD GOVERNANCE DECISION. 1.4 THE INVESTMENTS HELD BY THE BANK ARE STOCK IN T RADE AND THAT THE VALUATION IS TO BE MADE AT COST OR MARKET PRICE WHICHEVER IS LOWER. IF THE MARKET PRICE IS LOWER THAN THE SAID PROVISION SHOULD BE AL LOWED AS DEDUCTION. THE SUPREME COURT IN THE CASE OF UNITED COMMERCIAL BANK VS. CIT 240 ITR 355, 366 HELD AS UNDER : FROM THE DECISION DISCUSSED ABOVE, IT CAN BE HELD - (1) THAT FOR VALUING THE CLOSING STOCK, IT IS OPEN TO THE ASSESSEE TO VALUE IT AT THE COST OR MARKET VALUE, WHICHEVER IS LOWER; (2) IN THE BALANCE SHEET, IF THE SECURITIES AND SHA RES ARE VALUED AT COST BUT FROM THAT NO FIRM CONCLUSION CAN BE DRAWN. A TAXPAYER IS FREE TO EMPLOY FOR THE PURPOSE OF HIS TRADE, HIS OWN METHOD OF KEEPING ACC OUNTS, AND FOR THAT PURPOSE, TO VALUE STOCK IN TRADE EITHER AT COST OR MARKET PRICE; (3) A METHOD OF ACCOUNTING ADOPTED BY THE TAXPAYER CONSISTENTLY AND REGULARLY CANNOT BE DISCARDED BY THE DEPARTMENTAL AUTHORITIES ON THE VIEW THAT HE SHOULD HAVE ADOPTED A DIFFERENT METHOD OF KEEPING O F ACCOUNT OR OF VALUATION; (4) THE CONCEPT OF REAL INCOME IS CERTAINLY APPLICA BLE IN JUDGING WHETHER THERE HAS BEEN INCOME OR NOT, BUT IN EVERY CASE, IT MUST BE APPLIED WITH CARE AND WITHIN THEIR RECOGNIZED LIMITS; (5) WHETHER THE INCOME HAS REALLY ACCRUED OR ARISEN TO THE ASSESSEE MUST BE JUDGED IN THE LIGHT OF THE REALITY OF THE SITUATION ; (6) UNDER SECTION 145 OF THE ACT, IN A CASE WHERE A CCOUNTS ARE CORRECT AND COMPLETE BUT THE METHOD EMPLOYED IN SUCH THAT IN TH E OPINION OF THE ITO, THE INCOME CANNOT BE PROPERLY DEDUCED THEREFROM, THE CO MPUTATION SHALL BE MADE IN SUCH MANNER AND ON SUCH BASIS AS THE ITO MA Y DETERMINE. 1.5 THE ASSESSEE BANK FOLLOWS MERCANTILE METHOD OF ACCOUNTING CONSISTENTLY. THE DEPRECIATION IN INVESTMENT HAS BEEN PROVIDED AN D ALLOWED CONSISTENTLY UNLESS THE AO HAS GIVEN A FINDING CONT RARY TO THAT EFFECT THE BOOKS CANNOT BE REJECTED. THE RATIO LAID DOWN BY SC IN THE CASE OF UNITED COMMERCIAL BANK VS. CIT 240 ITR 355 IS FOLLOWED REC ENTLY BY THE SC IN THE CASE OF CIT VS. WOODWARD GOVERNOR INDIA (P) LTD . 312 ITR 254. IT IS HELD ON PAGE NO.265 12 TH LINE FROM THE TOP AS UNDER : UNDER THE MERCANTILE SYSTEM OF ACCOUNTING, WHAT I S DUE IS BROUGHT INTO CREDIT BEFORE IT IS ACTUALLY RECEIVED; IT BRINGS INTO DEBI T AND EXPENDITURE FOR WHICH A LEGAL LIABILITY HAS BEEN INCURRED BEFORE IT IS ACTUALLY D ISBURSED.(SEE JUDGMENT OF THIS COURT IN THE CASE OF UNITED COMMERCIAL BANK VS. CIT 240 ITR 355.) THEREFORE, ITA NO.1103/AHD/2012 ASST. YEAR: 2008-09 5 THE ACCOUNTING METHOD FOLLOWED BY AN ASSESSEE CONTI NUOUSLY FOR A GIVEN PERIOD OF TIME NEEDS TO BE PRESUMED TO BE CORRECT TILL THE AO COMES TO THE CONCLUSION FOR REASONS TO BE GIVEN THAT THE SYSTEM DOES NOT RE FLECT THE TRUE AND CORRECT PROFITS. 1.6 THE MADRAS HIGH COURT IN THE CASE OF LAXMI VILA S BANK LTD. VS. CIT 284 ITR 93 APPLIED THE RATIO LAID DOWN BY UNITED COMMER CIAL BANK VS. CIT 240 ITR 355 (SC). FROM THE ABOVE, IT IS CLEAR THAT THE FALL IN MARKE T PRICE IN GOVERNMENT SECURITIES HELD FOR TRADING IS ALLOWABLE AS DEDUCTI ON. 1.7 THE KIND ATTENTION IS DRAWN TO THE BOARD CIRCUL AR NO.599 DATED 24.04.1991 (189 ITR 126 (STAT). THE RELEVANT PORTION IS REPROD UCED AS UNDER: (I) WHETHER THE SECURITIES HELD BY THE BANKS CONST ITUTE THEIR STOCK-IN-TRADE OR INVESTMENT, AND CONSEQUENTLY WHETHER THE LOSS CLAIM ED BY THE BANKS ON THE VALUATION OF THEIR SECURITIES SHOULD BE ALLOWED AS DEDUCTION IN COMPUTING THEIR TAXABLE PROFITS? (II) WHETHER. THE MATTER HAS BEEN CONSIDERED BY THE BOARD AND IT HAS BEEN DECIDED THAT THE SECURITIES MUST BE REGARDED AS STOCK-IN-TRADE BY TH E BANKS. THEREFORE, THE CLAIM OF LOSS, IF DEBITED IN THE BOOKS OF ACCOUNT, WOULD BE GIVEN THE SAME TREATMENT AS IS NORMALLY GIVEN TO THE STOCK-IN-TRADE. FROM THE ABOVE, IT IS CLEAR THAT THE PROVISION MADE FOR INVESTMENT DEPRECIATION IS ALLOWABLE AS DEDUCTION. 2. IT MAY PLEASE BE NOTED THAT THE CIT(A) HAS ALLOW ED THE APPEAL FOR AY 2007-08. THE FACTS ARE IDENTICAL. THE ITAT HAS DISM ISSED THE REVENUE APPEAL FOR AY 2007-08. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE, PERUSED THE MA TERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIE S BELOW. FROM THE PERUSAL OF THE OFFICE FILE WE NOTICE THAT THIS APPE AL CAME UP BEFORE THE CO-ORDINATE BENCH ON 14.7.2015 WHEREIN THE BENCH IS SUED AN ORDER ITA NO.1103/AHD/2012 ASST. YEAR: 2008-09 6 WHICH WAS SUPPLIED TO BOTH THE PARTIES AND THE SAME IS REPRODUCED BELOW:- 14.7.2015 PRESENT : SHRI D. C. MISHRA, SR. DR. SH RI A. C. SHAH, LD. COUNSEL FOR THE SSESSEE. SOLITARY GRIEVANCE OF THE REVENUE IS THAT THE LEAR NED CIT(A) HAS ERRED IN ALLOWING DEPRECIATION ON ACCOUNT OF IN VESTMENT AMOUNTING TO RS.1.47 CRORES. WITH THE ASSISTANCE OF THE LEARNED REPRESENTATIVES, WE HAVE GONE THROUGH THE RECORDS CAREFULLY. WE FIND THAT IN PARA NO.4, THE LEARNED AO HAS RECORDED A CATEGORICAL FIN DING THAT THIS PROVISION HAS BEEN MADE WITH REGARD TO THE SEC URITIES HELD AS INVESTMENTS. IT IS TO BE BORNE IN MIND THAT DEPRECIATION IN A CASE OF BANK, ON INVESTMENT IN GO VERNMENT SECURITIES, WILL BE ADMISSIBLE, IF IT IS HELD AS ST OCK-IN-TRADE. IF THE SECURITIES ARE HELD AS INVESTMENT, THEN THE DEP RECIATION WHETHER ADMISSIBLE OR NOT IS TO BE DECIDED BY US. T HE LD. COUNSEL SUBMITTED THAT INVESTMENT WAS HELD AS STOCK -IN- TRADE. FACED WITH THIS CONTRADICTORY FACTUAL POSITI ON, WE FIND IT DIFFICULT TO RESOLVE THE CONTROVERSY, BECAUSE, COMP LETE FACTS ARE NOT ON RECORD. THE LD. COUNSEL FOR THE ASSESSEE SEEKS TIME TO FILE PAPER BOOK TO DEMONSTRATE THAT THESE S ECURITIES ARE HELD AS STOCK-IN-TRADE AND NOT AS LONG TERM INV ESTMENT. HEARING IS ADJOURNED TO 17 TH AUGUST, 2015. COPY OF THIS ORDER IS SUPPLIED TO BOTH THE PARTI ES. FROM THE ABOVE OFFICE ORDER THE LD. COUNSEL OF THE ASSESSEE SOUGHT TIME TO FILE PAPER BOOK TO DEMONSTRATE THAT THESE S ECURITIES ON WHICH IT HAS CLAIMED INVESTMENT DEPRECIATION WERE HELD AS STOCK-IN-TRADE AND NOT AS LONG TERM INVESTMENT. 7. WE HAVE EXAMINED THE RECORD PLACED BEFORE US AND THE ONLY ISSUE TO BE EXAMINED IS REGARDING THE ALLOWABILITY OF INVESTMENT ITA NO.1103/AHD/2012 ASST. YEAR: 2008-09 7 DEPRECIATION OF RS.1,47,66,239/- ON THE SECURITIES HELD AS STOCK-IN- TRADE. BEFORE ANALYZING THE FACTS OF THE CASE WE WO ULD LIKE TO DISCUSS ABOUT THE GUIDELINES OF R.B.I. AS WELL AS CBDT CIRC ULAR NO.665 DATED 5.10.1993. AS PER THE MASTER CIRCULAR OF RBI ON INV ESTMENTS BY PRIMARY (URBAN) CO-OPERATIVE BANKS DATED 2 ND JULY, 2007, CATEGORIZATION OF INVESTMENTS HAVE BEEN PROVIDED IN THE FOLLOWING MANNER :- 15. PRIMARY (URBAN) CO-OPERATIVE BANKS ARE REQUIRE D TO CLASSIFY THEIR ENTIRE INVESTMENT PORTFOLIO (INCLUDING SLR AND NON- SLR SECURITIES) UNDER THREE CATEGORIES VIZ:- I) HELD TO MATURITY (HTM) II) AVAILABLE FOR SALE (AFS) III) HELD FOR TRADING )HFT) BANKS SHOULD DECIDE THE CATEGORY OF THE INVESTMENT AT THE TIME OF ACQUISITION AND THE DECISION SHOULD BE RECORDED ON THE INVESTMENT PROPOSALS. 15.2 HELD TO MATURITY 15.2.1 SECURITIES ACQUIRED BY THE BANKS WITH THE I NTENTION TO HOLD THEM UPTO MATURITY WILL BE CLASSIFIED UNDER HELD T O MATURITYCATEGORY. 15.2.2 THE INVESTMENTS INCLUDED UNDER HELD TO MA TURITYCATEGORY SHOULD NOT EXCEED 25 PER CENT OF THE BANKS TOTAL I NVESTMENTS. HOWEVER, BANKS ARE PERMITTED TO EXCEED THE LIMIT OF 25 PER CENT OF THEIR TOTAL INVESTMENTS UNDER HTM CATEGORY PROVIDED , A) THE EXCESS COMPRISES ONLY OR SLR SECURITIES B) THE TOTAL SLR SECURITIES HELD IN THE HTM CATEGOR Y IS NOT MORE THAN 25 PER CENT OF THEIR NDTL AS ON THE LAST FRIDA Y OF THE SECOND PRECEDING FORTNIGHT. ITA NO.1103/AHD/2012 ASST. YEAR: 2008-09 8 15.2.3 PRIMARY (URBAN) CO-OPERATIVE BANKS ARE NOT PERMITTED TO INVEST IN BONDS AND DEBENTURES OF PRIVATE SECTOR CO MPANIES. THEIR INVESTMENTS IN BONDS OF PSUS AND SHARES (AS PERMITT ED BY RBI) SHOULD BE CLASSIFIED UNDER HELD TO MATURITY CATEG ORY BUT THESE WILL NOT BE COUNTED FOR THE PURPOSE OF SPECIFIED CEILING UNDER THIS CATEGORY. 15.2.4 PROFIT ON SALE OF INVESTMENTS IN THIS CATE GORY SHOULD BE FIRST TAKEN TO THE P & L ACCOUNT AND THEREAFTER BE APPROP RIATED TO THE INVESTMENT FLUCTUATION RESERVE. LESS ON SALE WILL B E RECOGNIZED IN THE P & L A/C. 15.3 HELD FOR TRADING 15.3.1 SECURITIES ACQUIRED BY THE BANKS WITH THE I NTENTION TO TRADE BY TAKING ADVANTAGE OF THE SHORTER PRICE/INTEREST RATE MOVEMENTS WILL BE CLASSIFIED UNDER HELD FOR TRADING CATEGORY. 15.3.2 IF BANKS ARE NOT ABLE TO SELL THE SECURITY WITHIN 90 DAYS DUE TO EXCEPTIONAL CIRCUMSTANCES SUCH AS TIGHT LIQUIDITY C ONDITIONS, OR EXTREME VOLATILITY, OR MARKET BECOMING UNIDIRECTION AL, THE SECURITY SHOULD BE SHIFTED TO THE VAILABLE FOR SALE CATEGO RY, SUBJECT TO CONDITIONS STIPULATED IN PARAGRAPHS 15.5.3 AND 15.5 .4 BELOW. 15.4 AVAILABLE FOR SALE 15.4.1 SECURITIES WHICH DO NOT FALL WITHIN THE AB OVE TWO CATEGORIES WILL BE CLASSIFIED UNDER AVAILABLE FOR SALE CATE GORY. 15.4.2 BANKS HAVE THE FREEDOM TO DECIDE ON THE EX TENT OF HOLDINGS UNDER AVAILABLE FOR SALE CATEGORY. THIS MAY BE D ECIDED BY THEM CONSIDERING VARIOUS ASPECTS SUCH AS BASIS OF INTENT , TRADING STRATEGIES, RISKS, MANAGEMENT, CAPABILITIES, TAX PL ANNING, MANPOWER SKILLS, CAPITAL POSITION, ETC. FURTHER AS PER SECTION 6 R.W.S. 5(B) & (C) OF BANKI NG REGULATION ACT AND AS PER THE GUIDELINES ISSUED BY THE RBI INVESTM ENT ACTIVITY IS A NORMAL BANKING ACTIVITY AND SHOULD BE TREATED AS BA NKING STOCK-IN- ITA NO.1103/AHD/2012 ASST. YEAR: 2008-09 9 TRADE. THE FORMAT OF THE BALANCE SHEET HAS BEEN PRE SCRIBED BY THE LEGISLATURE AND BANK HAS TO REPORT THEIR FINANCIAL RESULT IN THAT FORMAT ONLY. AS PER THIS FORMAT THE INVESTMENT IN NON-SLR SECURITIES THOUGH TREATED AS BANKING ASSETS (STOCK IN TRADE) HAS TO B E SHOWN IN THE BALANCE SHEET AS INVESTMENT. THE ABOVE POSITION HAS ALSO BEEN CLARIFIED BY CIRCU LAR NO.665 OF THE CBDT DATED 05.10.1993. THE QUESTION WHETHER A PARTICULAR ITEM OF INVESTME NT IN SECURITIES CONSTITUTES STOCK IN TRADE OR A CAPITAL ASSET IS A QUESTION OF FACT. IN FACT, THE BANKS ARE GENERALLY GOVERNED BY THE INSTRUCTIONS OF THE RESERVE BANK OF INDIA FROM TIME TO TIME WITH REGARD TO THE CLASSIFICATION OF ASSETS AND ALS O THE ACCOUNTING STANDARDS FOR INVESTMENTS. THE BOARD HAS , THEREFORE, DECIDED THAT THE ASSESSING OFFICERS SHOU LD DETERMINE ON THE FACTS AND CIRCUMSTANCES OF EACH CASE AS TO W HETHER ANY PARTICULAR SECURITY CONSTITUTES STOCK IN TRADE AS I NVESTMENT TAKING INTO ACCOUNT THE GUIDELINES ISSUED BY THE RE SERVE BANK OF INDIA IN THIS REGARD FROM TIME TO TIME. CBDT HAS FURTHER ISSUED INSTRUCTION FOR THE ASSESSM ENT OF BANKS VIDE ITS INSTRUCTION NO.17/2008 DATED 26.11.2008 (F.NO.2 28/3/2008 ITA- III) POINT NO.VII OF THE SAID INSTRUCTION AS PER RBI GUIDELINES DATED 16 TH OCTOBER 2000, THE INVESTMENT PORTFOLIO OF THE BANKS IS REQUIRED TO BE CLASSIFIED UNDER THREE CATEGORIES VIZ. HELD TO MATURITY (HTM), HELD FOR TR ADING (HFT) AND AVAILABLE FOR SALE (AFS). INVESTMENTS CLASSIFIE D UNDER HTM CATEGORY NEED NOT BE MARKED TO MARKET AND ARE CARRI ED AT ACQUISITION COST UNLESS THESE ARE MORE THAN THE FAC E VALUE, IN WHICH CASE THE PREMIUM SHOULD BE AMORTIZED OVER THE PERIOD REMAINING TO MATURITY. IN THE CASE OF HFT AND AFS S ECURITIES ITA NO.1103/AHD/2012 ASST. YEAR: 2008-09 10 FORMING STOCK IN TRADE OF THE BANK, THE DEPRECIATIO N/APPRECIATION IS TO BE AGGREGATED SCRIP WISE AND ONLY NET DEPRECI ATION, IF ANY, IS REQUIRED TO BE PROVIDED FOR IN THE ACCOUNTS. THE LASTEST GUIDELINES OF THE RBI MAY BE REFERRED TO FOR ALLOWI NG ANY SUCH CLAIMS. 8. AFTER GOING THROUGH THE ABOVE GUIDELINES OF RBI AND CBDT CIRCULAR LOSS INVOICE THE FACTS OF THE ASSESSEE THA T AS PER AUDITED BALANCE SHEET OF THE ASSESSEE INVESTMENT IN CENTRAL AND STATE GOVERNMENT SECURITIES ITS BOOK VALUE WAS VALUED AT RS.109 CRORES OUT OF WHICH PERMANENT CATEGORY SECURITIES WERE RS. 101.50 CRORES AND CURRENT CATEGORY SECURITIES WERE OF RS.7.5 CROR ES AND AS PER THE SUBMISSIONS MADE BY THE LD. AR THESE INVESTMENTS OF RS.109 CRORES ARE INVESTMENTS HELD AS STOCK-IN-TRADE AND FOR VALU ING CLOSING STOCK AT THE END OF THE YEAR THE VALUE PREVAILING ON THE LA ST DATE OF THE YEAR IS RELEVANT AND ASSESSEE HAS, THEREFORE, CLAIMED 1,47, 66,239/- AS INVESTMENT DEPRECIATION. 9. SIMILAR FACTS WERE EXAMINED IN ASSESSEES OWN CA SE BY THE TRIBUNAL IN ITA NO.626/AHD/2012 FOR AY 2007-08 AND THE CO-ORDINATE BENCH, VIDE ORDER DATED 5.6.2015 HAS DECIDED THE IS SUE IN FAVOUR OF ASSESSEE BY GIVING FOLLOWING DECISION:- 4. WE HAVE HEARD THE LD. SR. DR, PERUSED THE MATER IAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE LD. CIT(A) HAS FOLLOWED THE DECISION OF HIS PREDECESSOR PASSED FOR AY 2004-05 A ND ALSO THE DECISION OF THE CO-ORDINATE BENCH PASSED IN ITA NO.1819 & ITA NO.1103/AHD/2012 ASST. YEAR: 2008-09 11 1820/AHD/2005 DATED 29.6.2005 AS WELL AS THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF UNITED COMMERCIAL BANK VS. CIT REPORTED AT (1999) 240 ITR 355 (SC) AND CIT VS. WOODWARD GOVERNOR INDIA (P) LTD. REPORT ED AT (2009) 312 ITR 254 (SC) WHILE ALLOWING THE CLAIM OF ASSESSEE. THE LD. SR. DR COULD NOT DISTINGUISH THE DECISION R ELIED UPON BY THE LD. CIT(A). THEREFORE, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A), SAME IS HEREBY UP HELD. THUS, GROUND NO.1 OF REVENUES APPEAL IS DISMISSED. 10. WE, THEREFORE, ON THE BASIS OF ABOVE DISCUSSION AS WELL AS FOLLOWING THE FINDING OF CO-ORDINATE BENCH IN ASSES SEES OWN CASE IN ITA NO.626/AHD/2012 FOR AY 2007-08, VIDE ORDER DATE D 5.6.2015, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER O F LD. CIT(A) AND THE SAME IS HEREBY UPHELD. THIS GROUND OF REVENUE IS DI SMISSED. 11. THE OTHER GROUNDS ARE OF GENERAL NATURE WHICH, DO NOT REQUIRE ADJUDICATION. 12. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14/10/2015 SD/- SD/- (RAJPAL YADAV) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER DATED 14/10/2015 MAHATA/- ITA NO.1103/AHD/2012 ASST. YEAR: 2008-09 12 COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DY. REGISTRAR, ITAT, AHMEDABAD 1. DATE OF DICTATION: 11/9/2015 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 28/9/2015 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 14/10/2015 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: