GE Capital Transportation Financial Sevices Ltd., V. DCIT, Circle-12(1),

ITA 2190/DEL/2006

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 97419 (ITAT-DELHI)
• Duration Of Justice: 9 year(s) 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 24-08-2015
• Assessment Year: 2001-2002
• Appeal Filed On: 16-06-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: T VASANTHAN
• Keywords: Capital asset; Depreciation; Speculation loss; Bad and doubtful debts

Judgement Text

1 ITA NO. 2190/DEL/06 ITA NO. 2069/DEL/06 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: C NEW DELHI BEFORE SHRI N. K. SAINI, ACCOUNTANT MEMBER AND SMT SUCHITRA KAMBLE , JUDICIAL MEMBER I.T.A .NO.- 2190/DEL/2006 (ASSESSMENT YEA R-2001-02) GE CAPITAL TRANSPORTATION FINANCIAL SERVICES LTD. AIFACS BUILDING, 1, RAFI MARG NEW DELHI-110001 (APPELLANT) VS DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 12 (1), NEW DELHI (RESPONDENT) I.T.A .NO.-2069/DEL/2006 (ASSESSMENT YEAR-2001-02) DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 12 (1), NEW DELHI (APPELLANT) VS GE CAPITAL TRANSPORTATION FINANCIAL SERVICES LTD. AIFACS BUILDING, 1, RAFI MARG NEW DELHI-110001 (RESPONDENT) APPELLANT BY SH.T. VASANTHAN, SR. DR RESPONDENT BY SH.SANJEEV SUBHARWAL, SR. ADV, SH. TUSHAR SARWAL, ADV, SH. RAHUL SATEGA, ADV. ORDER PER SUCHITRA KAMBLE, JM DATE OF HEARING 16.09.2015 DATE OF PRONOUNCEMENT 23.09.2015 2 ITA NO. 2190/DEL/06 ITA NO. 2069/DEL/06 THE PRESENT APPEALS ARE FILED BY THE ASSESSEE (ITA NO. 2190/DEL/06) AND REVENUE (ITA NO. 2069/DEL/06) AGAINST THE ORDER DAT ED 31.03.2006 PASSED BY CIT(A) XV, NEW DELHI. THE GROUND OF APPEAL IN RE VENUES APPEAL URGED BEFORE US IS AS FOLLOWS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN TREATING THE LOSS OF RS.1,70,83 ,682/- ON ACCOUNT OF REPOSSESSED VEHICLES AS REVENUE LOSS. 2. THE GROUND OF APPEAL IN ASSESSEES APPEAL URGED BEFORE US IS AS FOLLOWS:- 3(D) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN NOT APPRECIATING THAT THE SHARES, S ALE WHEREOF HAD GIVEN RISE TO A LOSS, HAD BEEN HELD AS STOCK IN TRADE OF THE A PPELLANT AND HENCE THE LOSS OF RS. 1,04,37,529/- ON THAT ACCOUNT HAD TO BE TREATED AS A BUSINESS LOSS. 3. GROUND NO. 1 OF THE ASSESSEES APPEAL IS GENERAL IN NATURE, HENCE NOT DISCUSSED. GROUND NO. 2(A), 2(B) AND 2(C) ARE WITH DRAWN BY THE ASSESSEE. GROUND NO. 3(A), 3(B), 3(C) AND 3(E) ARE INCORPORAT ED IN GROUND NO. 3(D) TO THE EXTENT OF RS. 1,04,37,525/-, AS THE ASSESSEE HAS WI THDRAWN THE AMOUNT OF RS.18,95,714/- WHICH IS CLASSIFIED AS INVESTMENT AN D DOES NOT FALL INTO CATEGORY OF STOCK IN TRADE. GROUND NO. 4(A) AND 4(B) ARE AL SO WITHDRAWN BY THE ASSESSEE. 4. THE ASSESSEE COMPANY IS NON-BANKING FINANCE COMP ANY ENGAGED IN THE BUSINESS OF LEASING, HIRE PURCHASE AND FINANCE OF V EHICLES. DURING THE YEAR, TOTAL RECEIPTS WERE RS.29.05 CRORE AS AGAINST RS.70 .03 CRORES IN PRECEDING YEAR. AS PER PROFIT AND LOSS ACCOUNT, THERE WAS A LOSS OF RS.6.79 CRORES AS AGAINST LOSS OF RS.37.37 CRORE IN PRECEDING YEAR. 3 ITA NO. 2190/DEL/06 ITA NO. 2069/DEL/06 5. AS REGARDS TO GROUND NO. 1 OF THE REVENUES APPE AL, THE FACTUAL MATRIX ARE THAT THE ASSESSEE HAS CLAIMED DEDUCTION OF RS.1 ,70,83,682/- IN RESPECT OF LOSSES ON RE-POSSESSED STOCK WHICH WERE GIVEN ON HI RE PURCHASE, BUT WAS REPOSSESSED BY THE ASSESSEE BECAUSE THE BORROWERS D EFAULTED ON THE INSTALLMENTS. THE ASSESSING OFFICER TOOK THE VIEW T HAT IN LIGHT OF THE DECISION OF ALLAHABAD HIGH COURT IN CASE OF MOTOR AND GENERAL S ALES PVT. LTD. VS. CIT (1997) 226 ITR 137 AND FOR THE REASONS GIVEN IN THE ASSESSMENT ORDER OF ASSESSMENT YEAR 95-96, THE LOSS ON REPOSSESSED HIRE -PURCHASE ASSETS IS NOT ALLOWABLE AS DEDUCTION BECAUSE IT IS BASICALLY OF T HE NATURE OF CAPITAL LOSS/BUSINESS LOSS. 6. THE CIT(A) HELD THAT THE REAL BUSINESS OF THE CO MPANY IS NOT ONE SIMPLY OF GIVING LOANS OR MONEY LENDING. IN THE BUSINESS OF V EHICLE FINANCE/SALE ON HIRE PURCHASE, THE BUSINESS OF THE COMPANY TAKES A MUCH LARGER DIMENSION BECAUSE IT COVERS NOT ONLY FINANCING BUT ALSO REPOSSESSION AND RESALE-THE LATTER BEING AN INTEGRAL PART OF THE BUSINESS OF THE COMPANY. THE B USINESS OF THE COMPANY IS NOT ONLY RESTRICTED TO FINANCING AND THE RELATED AC TIVITY OF RE-POSSESSION BUT RE- SALE IS A PART OF ITS REGULAR BUSINESS ACTIVITY. TH E TRADING PROFITS OF THE COMPANY ARE ENMESHED IN THE ENTIRE TRANSACTION THAT MAY BE SPREAD OVER A FEW YEARS. SINCE THE PROFITS ARE ENMESHED IN THE OVERALL TRANS ACTION, THE RE-POSSESSION AND RE-SALE IS ALSO AN INTEGRAL PART OF THE TRANSACTION . CONSEQUENTLY, ANY LOSS OR PROFIT ON RE-POSSESSION OR RE-SALE SHALL BE TO TRAD ING ACCOUNT. ACCORDINGLY, THE CIT(A) HELD THAT THE LOSS ON RE-SALE OF RE-POSSESSE D VEHICLES IS A REVENUE LOSS AND DIRECTED THE A.O. TO TREAT THE SAID LOSS AS A R EVENUE LOSS IN RESPECT OF THE RE- POSSESSED VEHICLES THAT HAVE BEEN RE-SOLD. 4 ITA NO. 2190/DEL/06 ITA NO. 2069/DEL/06 7. THE DR SUBMITTED THAT THE IMPUGNED LOSS CANNOT BE T REATED AS REVENUE LOSS AND THE PROVISIONS OF THE INCOME TAX ACT SHOUL D BE TAKEN INTO ACCOUNT AND NOT THAT OF ACCOUNTING PRACTICE FOLLOWED. HE HAS A LSO RELIED ON AOS ORDER AT PARA 5 WHEREIN THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS NOT ELABORATED UPON HOW THE ESTIMATED REALIZABLE VALUE IS BEING ARRIVED AT NOR THE METHOD OF COMPUTATION OF ESTIMATED VALUE HAS BEEN F URNISHED. THIS IMPLIES THE LOSS FIGURE OF RS.1,70,83,682/- IS NOT ACTUAL LOSS OF THE ASSESSEE BUT ALSO INCLUDES NOTIONAL LOSS CLAIMED BY THE ASSESSEE WHO HAVE OCCURRED TO IT. NOTIONAL LOSS CANNOT BE ALLOWED AS EXPENSE IN THE P ROFIT AND LOSS ACCOUNT OF THE ASSESSEE AS THE SAME IS NOT AN ASCERTAINED EXPENDIT URE. 8. THE AR SUBMITTED THAT THE LOSS DOES NOT AMOUNT T O CAPITAL LOSS AS IN THE PREVIOUS YEARS THE SIMILAR GROUND WAS DECIDED IN FA VOUR OF ASSESSEES OWN CASE BY THE CIT(A) XV FOR THE A. YS 1992-93, 1993-94, 19 94-95, 1995-96 1997-98, 1998-99. THE AR FURTHER SUBMITTED THAT THE REPOSSE SSED ASSETS ARE NORMALLY DISPOSED OFF AT THE PREVAILING MARKET PRICE WHICH I S DECIDED ON THE BASIS OF REMAINING LIFE AND CONDITION OF THE ASSETS. THE LO SS ON SALE OF REPOSSESSED ASSET OCCURS WHEN THE ASSET RECOVERED FROM SALE, FALLS SH ORT OF THE VALUE OF THE REPOSSESSED ASSETS. THE LOSS ON SALE OF REPOSSESSE D STOCK WAS INCIDENTAL AND INHERENT PART OF THE BUSINESS OF HIRE PURCHASE. TH E LOSS INCURRED ON DISPOSAL OF REPOSSESSED HIRE PURCHASE ASSETS REPRESENTS THE INS TALLMENTS, WHICH COULD NOT BE RECOVERED FROM PARTIES TO WHOM THE GOODS WERE SO LD ON HIRE PURCHASE BASIS LESS THE SALE PROCEEDS RECOVERED. THEREFORE, THE A MOUNT WRITTEN OFF AND CLAIMED BY THE COMPANY IN ANY CASE WAS ALLOWABLE AS REVENUE EXPENSES UNDER THE INCOME TAX ACT. FOR THE SAID SUBMISSIONS. THE AR F URNISHED THE ASSESSMENT ORDERS OF THE ASSESSEE COMPANY FOR THE ASSESSMENT Y EARS 1995-96 & 1999-2000 WHEREIN THE CLAIM OF THE ASSESSEE WAS ALLOWED BY TH E TRIBUNAL. HE ALSO FURNISHED THE COPY OF HONBLE DELHI HIGH COURTS OR DER IN CASE OF 5 ITA NO. 2190/DEL/06 ITA NO. 2069/DEL/06 COMMISSIONER OF INCOME TAX VS. CITY CORPORATE MULTI FINANCE LTD ITA NO. 1712/2010 WHEREIN THE HONBLE HIGH COURT HAS STATED IN PARA 6 AS UNDER:- 6. WE FIND FROM THE ORDER OF CIT(A) THAT THERE IS A DE TAILED DISCUSSION ON THIS ASPECT IN PARA 1.3 OF HIS ORDER WHERE FOLLOWING ADM ITTED FACTS ARE TAKEN NOTE OF:- I) THERE IS NO DISPUTE THAT THE APPELLANT IS A NBF C AND IS IN THE BUSINESS OF MONEY LENDING GIVING FINANCE FOR PURCHASE OF VEHICLE UNDER HIRE PURCHASE SCHEME. TH E OWNER OF THE VEHICLE IS THE PURCHASER AND APPELLANT IS ONLY LENDER OF MONEY. II) I HAVE GONE THROUGH THE MODUS-OPERANDI OF TRANS ACTION AND THE MODEL OF ENTRIES PASSED IN CONNECTION WITH THE TRAN SACTION STARTING WITH THE FINANCE AND ITS LOGICAL END. FRO M PERUSAL OF THE ENTRIES IT IS ABUNDANTLY CLEAR THAT IT IS CLEAR LY CUT CASE OF WRITE OFF OF BAD DEBTS. ALTHOUGH THE APPELLANT COM PANY HAS USED THE NOMENCLATURE AS LOSS ON SALES OF REPROCES SED ASSETS AS PROVIDED UNDER NBFC NORMS BUT THE FACT O F THE MATTER IS THAT IT IS A WRITE OFF OF BAD DEBTS. W HEN THE CUSTOMER MAKES DEFAULT IN PAYMENT OF LOAN THE VEHIC LE IS REPROCESSED AND SOLD. THE AMOUNT REALIZED ON SALE IS CREDITED TO THE CUSTOMER A/C AND BALANCE LEFT IN THE ACCOUNT OF CUSTOMER IS WRITTEN OFF AS LOSS ON SALE OF REPROCESSED ASSE TS WHICH IS NOTHING A WRITE OFF OF BAD DEBTS. NOMENCLATURE DOES NOT CHANGE THE REAL CHARACTER OF THE TRANSACTION AND TH E TREATMENT GIVEN TO EXPENDITURE IN PARTICULARS MANNER OR THE A CCOUNTING ENTRIES DOES NOT CHANGE THE REAL CHARACTER OF TRANS ACTION AND ARE NOT DETERMINATIVE AND DECISIVE FOR TAX PURPOSES . THE CLAIM OF THE ASSESSEE SHOULD BE DECIDED AS PER PROVISION OF LAW (SEE CASE OF BURGER PAINTS (INDIA) LTD. 254 ITR 503 (CL .) AND KEDAR NATH JUTE MANUFACTURING CO. 82 ITR SC. 6 ITA NO. 2190/DEL/06 ITA NO. 2069/DEL/06 9. AFTER PERUSAL OF THE RECORDS AND THE SUBMISSIONS OF THE BOTH THE COUNSELS, IT IS NOTICED THAT THE CLAIM OF THE ASSES SEE FOR THE SAID RECEIPTS SHOULD BE TREATED AS REVENUE RECEIPTS IS PROPER AS RE-POSS ESSED VEHICLES/ ASSETS ARE TREATED AS STOCK-IN-TRADE THROUGHOUT THE EARLIER YE ARS AND THE SAME WAS ACCEPTED BY THE DEPARTMENT IN THE EARLIER YEARS. TH US LD. CIT(A) HAS TAKEN A CORRECT VIEW AND DIRECTED THE AO TO TREAT THE SAID LOSS AS REVENUE LOSS. IN LIGHT OF THIS, THE A.O. IS DIRECTED TO TREAT THE SAID LOS S AS A REVENUE LOSS IN RESPECT OF THE RE-POSSESSED VEHICLES THAT HAVE BEEN RESOLD. 10. HENCE, THE GROUND NO. 1 OF THE DEPARTMENTS APP EAL IS DISMISSED. 11. IN RESPECT OF SECOND ISSUE THAT IS GROUND 3 (D) OF THE ASSESSEES APPEAL, THE FACTS IN BRIEF ARE THAT THE ASSESSEE COMPANY IS ALSO ENGAGED IN BILLS DISCOUNTING ACTIVITY, DEALING IN ALL KINDS OF SECUR ITIES INCLUDING SHARES, THE DEBENTURES, COMMERCIAL PAPERS, GOVERNMENT SECURITIE S. VIDE CLAUSE III (B) (3) OF THE MEMORANDUM OF ASSOCIATION OF THE COMPANY THE OB JECT OF THE COMPANY IS TO UNDERTAKE THE ACTIVITY RELATING TO DEALING OF SHARE S AND SECURITIES. THE ASSESSING OFFICER OBSERVED THAT IN THE PROFIT AND L OSS ACCOUNT OF THE ASSESSEE, LOSS ON SALE OF INVESTMENT AMOUNTING TO RS.1,23,33, 239/- HAS BEEN CLAIMED BY THE ASSESSEE. THE ASSESSEES INVESTMENT CONSTITUTE CAPITAL ASSET, THEREFORE, ANY LOSS ON ACCOUNT OF SALE OF CAPITAL ASSET CANNOT BE CLAIMED AS A DEDUCTION IN THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE. THE ASSES SEE HAS SUBMITTED THE DETAILS OF THE LOSS ON SALE OF INVESTMENT WHICH INCLUDES RS .18,95,714/- AS INVESTMENT LOSS AND RAISED AS LOSS ON SECURITIES AND OTHER INV ESTMENT SHOWN AS STOCK-IN- TRADE IN THE BOOKS OF THE ASSESSEE. THE ASSESSEE H AS RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF INVESTMENT LTD . VS. CIT 77 ITR 533, IT HAS BEEN OBSERVED IN THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE FOR THIS YEAR AND THE LAST SO MANY YEARS THAT NO PURCHASE OF SHARES H AS BEEN DONE. THE 7 ITA NO. 2190/DEL/06 ITA NO. 2069/DEL/06 ASSESSING OFFICER FURTHER HELD THAT LOSS WHICH HAS ARISEN IS ON ACCOUNT OF SHARES AND THAT ON THE GOVERNMENT SECURITIES HELD FOR A VE RY LONG TIME BY TREATING PART OF IT AS STOCK-IN-TRADE, THE ASSESSEE WAS NOT ENTIT LED TO CLAIM THE LOSS ON STOCK- IN-TRADE. 12. THE LD. CIT(A) HELD THAT EACH YEAR TO BE CONSID ERED SEPARATELY, THE ASSESSMENT PROCESS REQUIRES FRESH APPLICATION OF TH E INDIVIDUALS MIND TO EACH YEAR AS HE/SHE INTERPRETS THE LAW. THEREFORE, IT IS ALWAYS POSSIBLE THAT TWO A.O.S WOULD COME TO DIFFERENT CONCLUSIONS ON THE S AME SET OF FACTS AND ACCORDINGLY THE CIT(A) UPHOLD THE ORDERS OF THE A.O . 13. AT THE TIME OF THE ARGUMENTS, THE AR SUBMITTED THAT INVESTMENT LOSS OF RS.18,95,714/- IS NOT BY THE ASSESSEE AS THE SAME A MOUNT TO TWO PORTFOLIOS, THEREFORE, HE VESTED HIS ARGUMENT ONLY TO THE EXTEN T OF LOSS ON SECURITIES AND OTHER INSTRUMENTS SHOWN AS STOCK-IN-TRADE IN THE BO OKS OF THE ASSESSEE AMOUNTING TO RS. 2,04,37,525/-. THE AR FURTHER STA TED THAT THE COMPANY IS A NON-BANKING FINANCE COMPANY (NBFC) AND IS GOVERNED BY THE DIRECTIONS ISSUED BY THE RBI AND EVERY NBFC IS MANDATORILY REQUIRED T O FOLLOW THOSE DIRECTIONS, IN THE TERM OF THE DIRECTIONS ISSUED BY THE RBI, EVERY NBFC IS REQUIRED TO MAINTAIN LIQUID ASSETS INCLUDING INVESTMENT IN SHARES, STOCK S, GOVERNMENT SECURITIES ETC. THESE INVESTMENTS, THEREFORE, ARE MADE IN THE ORDIN ARY COURSE OF THE BUSINESS OF THE ASSESSEE. THE AR RELIED UPON THE FOLLOWING DEC ISIONS:- CIT VS. NEDUNGADI BANK LTD. 364 ITR 54 IN THIS CASE THE KERALA HIGH COURT HELD THAT GOVERN MENT SECURITIES HELD BY THE BANK IN COMPLIANCE WITH THE PROVISIONS OF BANKING R EGULATION ACT FOR THE PURPOSE OF MAINTAIN STATUTORY LIQUIDITY RATIO ARE STOCK IN TRADE OF THE BUSINESS OF THE BANKS AND THE NOTIONAL LOSS SUFFERED ON ACCOUNT OF THE REVALUATION OF SAID SECURITIES AT THE END OF THE YEAR IS AN ALLOWABLE D EDUCTION WHILE COMPUTING THE TOTAL INCOME OF THE BANK. IN THIS CASE, THE BANK HE LD GOVERNMENT SECURITIES IN ACCORDANCE WITH THE REQUIREMENTS OF SECTION 24(2) O F THE BANKING COMPANIES ACT AND THE SAME WERE REFLECTED IN THE BALANCE SHEET AS INVESTMENTS VALUED AT COST. AS PER THESE PROVISIONS, AN AMOUNT EQUAL TO 20% OF ITS TIME AND DEMAND LIABILITIES 8 ITA NO. 2190/DEL/06 ITA NO. 2069/DEL/06 MUST BE INVESTED IN THESE SECURITIES. A SUM OF RS. 52,935/- WAS CLAIMED AS BEING DEPRECIATION IN THE VALUE OF SECURITIES. THE HONBL E HIGH COURT HELD THAT THE SECURITIES HELD BY THE ASSESSEE REALLY CONSTITUTE S TOCK-IN-TRADE AND THEIR PRICE WILL FLUCTUATE JUST LIKE THE PRICE OF ALL OTHER COMMODIT IES WHICH MAY BE SUBJECT OF TRADE. BANK OF COCHIN VS. CIT 94 ITR 93 (KER.) IN THIS CASE THE KERALA HIGH COURT HELD THAT THESE INVESTMENTS ARE MADE IN ACCORDANCE WITH THE REQUIREMENTS OF BANKING COMPANI ES ACT. THESE PROVISIONS IN THE ACT WERE INTENDED TO LEGALISE THE SOUND BANKING PRACTICE, NAMELY, THAT THE BANK MAY KEEP A RESERVE OF CASH AND LIQUID ASSETS T O MEET ITS DEMAND LIABILITY. AS PER THESE PROVISIONS AN AMOUNT EQUAL TO 20% OF I TS TIME AND DEMAND LIABILITIES MUST BE INVESTED IN THESE SECURITIES. NO DOUBT THE STOCK IN-TRADE CAN EASILY BE CONVERTED INTO CASH TO MEET ANY PROBABLE DEMAND BY THE DEPOSITORS. BUT THEY ARE NOT EQUAL TO CASH. TO GET CASH THEY WILL H AVE TO BE SOLD. THE SALE MAY BE EASY. THE SALE PRICE WILL NOT GENERALLY BE EQUAL TO THE FACE VALUE OF THE SECURITIES. THE PRICE WILL FLUCTUATE JUST LIKE THE PRICE OF ALL OTHER COMMODITIES WHICH MAY BE THE SUBJECT OF TRADE. SO, THE GOVERNMENT SECURITIES HELD BY THE ASSESSEE REALLY CONSTITUTE STOCK-IN-TRADE WITHOUT ANY RESTRICTION O R LIMITATION OF THE ORDINARY CONCEPT OF STOCK-IN-TRADE. 14. THE ASSESSEE ALSO RELIED UPON THE CASE OF ACIT VS. SHRI RAM TRANSPORT FINANCE COMPANY (2011) 9 ITR (TRI.) 543 (CHENNAI), WHEREIN THE SAME ISSUE HAS BEEN RAISED AND THE HONBLE TRIBUNAL HOLD THAT THE RBI NOTIFIES THE PERCENTAGE OF THE OUTSTANDING DEPOSIT WHICH HAS TO BE INVESTED IN APPROVED SECURITIES FROM TIME TO TIME. THE PERCENTAGE NOTIFIED IS 15 PER CEN T. REGULATIONS REGARDING CUSTODY OF SECURITIES ETC. ARE INCORPORATED IN NBFC PUBLIC DEPOSITS (RBI) DIRECTIONS-1998. IT IS THUS CLEAR THAT INVESTMENT IN SECURITIES IS A STATUTORY DIRECTION WHICH HAS TO BE NECESSARILY COMPLIED WITH BY THE ASSESSEE, AS IT HAS PUBLIC DEPOSITS. IT IS IMMATERIAL THAT THEY ARE SH OWN UNDER THE CLASSIFICATION INVESTMENT. TRUE NATURE OF THE INVESTMENT BE TAKE N INTO CONSIDERATION. THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F CIT VS. COCANADA RADHESWAMI BANK LTD. [1965] 57 ITR 306 (SC) AND THE OTHER DECISIONS ARE ALSO IN SUPPORT OF THE SAID VIEW THAT THE ASSESSEE IS EN TITLED TO THE CLAIM OF DIMINUTION IN THE VALUE OF SECURITIES WHICH ARE HEL D FOR THE PURPOSE OF ITS BUSINESS. 9 ITA NO. 2190/DEL/06 ITA NO. 2069/DEL/06 15. THE LD. DR SUBMITTED THAT PARA 6 OF THE AOS OR DER CLEARLY MENTIONS THAT TWO PORTFOLIOS HAS BEEN KEPT BY THE ASSESSEE COMPAN Y AND THE BUSINESS LOSS SHOULD BE TAKEN INTO ACCOUNT IN RESPECT OF SECTION 73 OF THE INCOME TAX ACT BECAUSE IT IS SPECULATIVE LOSS. 16. AFTER PERUSAL OF THE RECORDS AND THE ARGUMENTS OF BOTH THE SIDES IT CAN BE SEEN THAT THE CONTENTIONS OF THE DR IN RESPECT OF S ECTION 73 OF THE ACT CANNOT BE SUSTAINED AS THE SAME STAND WAS NOT TAKEN BY THE AS SESSING OFFICER WHILE PASSING THE ASSESSMENT ORDER AND THE SAID PLEA WAS NOT RAISED BEFORE THE CIT(A) AS WELL. THE HONBLE SUPREME COURT IN CASE OF COCANADA RADHESWAMI BANK LTD. (SUPRA) CLEARLY HELD THAT THE INCOME FROM THE SECURITIES WHICH FORMED PART OF THE ASSESSEES TRADING ASSETS WAS PART OF I TS INCOME DERIVED FROM THE BUSINESS AND, THEREFORE, THE LOSS INCURRED IN THE B USINESS IN THE EARLIER YEAR COULD BE SET OFF AGAINST THAT INCOME IN THE SUCCEED ING YEAR. AS PER GUIDELINES ISSUED BY THE RBI, EVERY NBFC IS REQUIRED TO MAINTA IN LIQUID ASSETS INCLUDING INVESTMENT IN SHARES, STOCKS, GOVERNMENT SECURITIES ETC. AND THUS THE ASSESSEE HAS MADE THESE INVESTMENTS IN THE ORDINARY COURSE O F ITS BUSINESS. THEREFORE, LOSS IN THE SAID INVESTMENT RELATES TO THE BUSINESS . THUS, THE GROUND NO. 3(D) OF THE ASSESSEES APPEAL IS ALLOWED. 17. IN RESULT, APPEALS ARE DISPOSED OFF ACCORDINGLY . THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 23 RD OF SEPTEMBER 2015. SD/- SD/- (N. K. SAINI) (SU CHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 23/09/2015 *R. NAHEED* 10 ITA NO. 2190/DEL/06 ITA NO. 2069/DEL/06 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT R EGISTRAR ITAT NEW DELHI DATE 1. DRAFT DICTATED ON 25.08.2015 PS 2. DRAFT PLACED BEFORE AUTHOR 25.08.2015 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 30.08.2015 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 18.09.2015 PS/PS 6. KEPT FOR PRONOUNCEMENT ON 23.09.2015 PS 7. FILE SENT TO THE BENCH CLERK 23.09.2015 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER. 11 ITA NO. 2190/DEL/06 ITA NO. 2069/DEL/06