M/s. Kankaria Maninagar Nagrik Sahakari Bank Ltd., Ahmedabad V. The Dy. CIT, Circle-6(1), Ahmedabad

ITA 2349/AHD/2018

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 7366 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 5 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-05-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 28-04-2024
• Assessment Year: 2012-2013
• Appeal Filed On: 02-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RAHUL PATEL
• Keywords: Depreciation; Difference of opinion; Change of opinion
• Section: 32; 54; 37; 28; 154; 15; 143(3); 43

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, AHMEDABAD BEFORE SHRI T.R. SENTHIL KUMAR, JUDICIAL MEMBER & SHRI NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER आयकर अपील सं./I.T.A. Nos. 2349 & 2 350/Ahd/2018 ( नधा रण वष / Assess ment Ye ar : 2012-13) Ka nk ar ia M an in ag ar Na ga ri k Sa ha ka ri Ba nk Lt d. Bh ag wa n Cha mb er , Ma ni nag ar C ha r Ra sta , Ma ni nag ar , Ah me d aba d 38 00 08 बनाम/ V s . De pu ty C o mmi ss i on er of In co me T ax Cir cl e – 6(1 ), A h meda ba d थायी लेखा सं./जीआइआर सं./P A N / G IR N o . : A A A A K 6 8 6 2 D (Appellant) . . (Respondent) अपीलाथ ओर से /Appellant by : Shri Rahul Patel, A.R. यथ क ओर से/Respondent by : Shri V. K. Mangla, Sr. DR D a t e o f H e a r i n g 29/04/2024 D a t e o f P r o n o u n c e m e n t 08/05/2024 O R D E R PER SHRI NARENDRA PRASAD SINHA, AM: These two appeals are filed b y the assessee against separate orders of the Co mmissioner of Inco me Tax ( Appeals)-6, Ah medabad, (in short ‘the CIT( A)’) dated 27.09.2018 for the Assessment Year 2012-13. While one appeal is against order u/s. 143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter referred as ‘the Act’) , the other one is against the rectification order u/s. 154 of the Act. These app eals were heard to gether and ITA Nos. 2349 & 2350/Ahd/2018 (Kankaria Maninagar Nagarik Sahakari Bank Ltd. vs. DCIT) A.Y.– 2012-13 - 2 – are being disposed of b y this consolidated order for t he sake of convenience. ITA No. 2349/Ahd/2018 2. The grounds of the appeal raised by the assessee in this appeal are as under: “ 1 . L d . C o m m i s s i o n e r o f I n c o m e T a x ( A p p e a l s ) - 6 , A h me d a b a d g r i e v o u s l y e r r e d i n l a w a s w e l l a s i n f a c t s i n u p h ol d i n g d i s a l l o w a n c e o f l o s s o n s a l e o f G o v e r n m e n t S e c u r i t ie s o f R s . 3 8 , 5 5 , 0 0 0 c l a i m e d b y t h e A s s e s s e e B a n k . a . L d . C o m m i s s i o n e r o f I n c o m e T a x (A p p e a l s ) - 6 , A h m e d a b a d w a s n o t c o r r e c t i n d i s a l l o w i n g l o s s c l a i me d i n r e s p e c t o f s a l e o f G o v e r n m e n t S e c u r i t i e s h e l d b y t h e A s s e s s e e B a n k i n c o m p l i a n c e o f t h e r e g u l a t o r y g u i d e l i n e s o f t h e R e s e r v e B a n k o f I n d i a a n d p r o v i s io n s o f t h e B a n k i n g R e g u l a t i o n A c t , 1 9 4 9 t o m e e t i t s l i q u i d i t y r e q u i r e m e n t s . b . L d . C o m m i s s i o n e r o f I n c o m e T a x (A p p e a l s ) - 6 , A h m e d a b a d w a s n o t c o r r e c t i n d i s a l l o w i n g l o s s i n r e s p e c t o f s a l e o f G o v e r n m e n t S e c u r i t i e s h e l d b y t he A s s e s s e e B a n k a s s t o c k f o r i t s b a n k i n g b u s i n e s s . c . L d . C o m m i s s i o n e r o f I n c o m e T a x ( A p p e a l s ) - 6 , A h m e d a b a d w a s n o t c o r r e c t i n u p h o l d i n g t h a t i n v e s t m e n t s w e r e u n d e r H T M c a t e g o r y m e r e l y b e c a u s e b a l a n c e s h e e t o f t h e b a n k d o e s n o t s p e c i f y a n y t h i n g a n d m a t u r i t y i s o f 2 0 2 8 a n d 2 0 3 4 a n d t h e c o n t e n t i o n o f l d . A p p e l l a t e A u t h o r i t y w a s p r e s u m p t i v e a n d f a c t u a l . L d. C o m m i s s i o n e r o f I n c o m e T a x ( A p p e a l s ) 6 , A h m e d a b a d w a s n o t c o r r e c t i n l i n k i n g t h e c l a s s i f i c a t i o n o f t he s e c u r i t y w i t h t h e y e a r o f i t s m a t u r i t y . d . L d . C o m m i s s i o n e r o f I n c o m e T a x (A p p e a l s ) - 6 , A h m e d a b a d w a s n o t c o r r e c t i n u p h o l d i n g t h a t n o n e o f t h e i n v e s t m e n t s w e r e i n A F S c a t e g o r y m e r e l y b e c a u s e t h e b a n k i s m a n d a t e d b y R e s e r v e B a n k o f I n d i a t o k ee p c e r t a i n p a r t s o f t h e s e c u r i t i e s u n d e r H T M C a t e g o r y w h i c h c o u l d b e m a x i m u m u p t o 2 5 % . L d . C o m m i s s i o n e r o f I n c o m e T a x ( A p p e a l s ) 6 , A h m e d a b a d d e p e n d e d u p o n t h e p r e s u m p t i o n r a t e r t h a n f a c t s i n h o l d i n g t h a t n on e o f t h e s e c u r i t i e s w e r e u n d e r A F S . e . L d . C o m m i s s i o n e r o f I n c o m e T a x (A p p e a l s ) - 6 , A h m e d a b a d w a s n o t c o r r e c t i n h o l d i n g a v i e w t h a t l os s o n s a l e o f G o v e r n m e n t S e c u r i t i e s h e l d i n c a t e g o r y of ITA Nos. 2349 & 2350/Ahd/2018 (Kankaria Maninagar Nagarik Sahakari Bank Ltd. vs. DCIT) A.Y.– 2012-13 - 3 – H T M i s n o t a l l o w a b l e . L d . C o m m i s s i o n e r o f I n c o m e T ax ( A p p e a l s ) - 6 , A h m e d a b a d w a s o u g h t t o h a v e p r o c e e d ed t o a l l o w t h e l o s s o n s a l e o f G o v e r n m e n t S e c u r i t i e s h e l d b y t h e A s s e s s e e B a n k a s p a r t o f i t s b u s i n e s s a c t i v it y i r r e s p e c t i v e o f i t s c l a s s i f i c a t i o n u n d e r t h e g u i d e li n e s o f R e s e r v e B a n k o f I n d i a . 2 . L d . C o m m i s s i o n e r o f I n c o m e T a x ( A p p e a l s ) 6 , A h m ed a b a d w a s n o t j u s t i f i e d i n d i s r e s p e c t i n g a n d d i s r e g a r d i n g j u di c i a l d i s c i p l i n e i n a s m u c h a s s h e h a s f a i l e d t o f o l l o w t h e d e c i s i o n d e l i v e r e d b y H o n ' b l e G u j a r a t H i g h C o u r t i n c a s e o f H o n ' b l e C o m m i s s i o n e r o f I n c o m e - T a x , R a j k o t V / s R a j k o t D i s t . C o . O p . B a n k L i m i t e d a n d H o n ' b l e A h m e d a b a d T r i b u n a l i n c a s e o f H o n ' b l e T r i b u n a l i n c a s e o f A s s t . C o m m i s s i o n e r o f In c o m e - T a x v / s T h e M e h s a n a U r b a n C o . O p . B a n k L t d . 3 . L d . C o m m i s s i o n e r o f I n c o m e T a x ( A p p e a l s ) - 6 , A h me d a b a d w a s n o t c o r r e c t i n l a w a s w e l l a s i n f a c t s i n p a s s in g i m p u g n e d o r d e r u p h o l d i n g t h e r e - a s s e s s m e n t o r d e r m a d e u / s 1 43 r e a d w i t h s e c t i o n 1 4 7 i n v o l v i n g c h a n g e o f o p i n i o n . L d . C o m m i s s i o n e r o f I n c o m e T a x ( A p p e a l s ) - 6 , A h m e d a b a d fa i l e d t o o b s e r v e t h a t r e - a s s e s s m e n t p r o c e e d i n g w a s u l t r a -v i r e r a n d i l l e g a l . ” 3. The assessee is en gaged in the business of banking activity. The original assess ment in this case was co mpleted u/s. 143(3) of the Act on 30.03.2015. Thereaf ter, the AO had initiated proceeding u/s.147 of the Act and the assess ment u /s. 143(3) r.w.s. 147 of the Act was co mpleted on 05.09.2017. The case was reopened for the reason that the assessee had clai me d loss of Rs.38,55,000/- on sale of Government securities i n the P& L account and according to the AO, such expenditure can be clai med set-off o nly against si mila r capital gain. F urther, the assessee had cl ai med depreciation of Rs .34,48,500/- on Govern ment secur ities and as per the reason recorded by the AO, such claim of de preciation was admissible only in respect of business assets. Accordingly, the l oss of Rs.38,55,000/- on sale of Govern ment securities was d isallowed in re- assessment ITA Nos. 2349 & 2350/Ahd/2018 (Kankaria Maninagar Nagarik Sahakari Bank Ltd. vs. DCIT) A.Y.– 2012-13 - 4 – proceeding which was upheld by the CIT( A) vide the impugned order. 4. Shri Rahul Patel, ld. AR appearing for the assessee Bank submitted that the AO was not correct in disallowing the loss clai med in r espect of sale of Go vern ment securities as the securities were hel d in co mpliance to the regulatory guidelines of the Reserve Bank of India and the provisions of the Banking Regulation Act, 1 949 to me et its liquidity require ments. He further sub mitted that the ld. CIT( A) was not corr ect i n holding that the investme nts were under HTM categor y mer el y because balance sheet of the bank did not specif y an ything and on the ground that the maturity of the sec urity was of 2028 and 2034. He contended that the ld. C IT( A) was not correct in l inking the classification of the security with the year of its mat urity. The Ld. AR further s ubmitted that ld. CIT(A) was also wrong in upholding that none of the investments were in AFS category mer el y because the bank was manda ted b y R eserve Ba nk of India to keep certain par ts of the securities under HTM categ or y which could be maxi mu m upto 25%. Acc ording to ld. AR, the loss on sale of Govern men t securities was part of the business activity of the Bank, irrespec tive of its classification under the guidelines of Reserve Bank of India and such business loss was allowable under the provisions of Income Tax Act. In this regard, he has drawn our attention to the provisions of Banking Regulations Act and CBDT Cir cular No.599 of 24.04.1991. The Ld. AR also submitted that the reopening of the case was based on mer e change of opinion. ITA Nos. 2349 & 2350/Ahd/2018 (Kankaria Maninagar Nagarik Sahakari Bank Ltd. vs. DCIT) A.Y.– 2012-13 - 5 – 5. Ld. DR , on the other hand, sub mitted that the assessee had no stock-in-trade in the balance sheet and the “Central and State Govern ment Sec urities” were a ppearing under the head ‘Invest ments’. Therefore, the loss on such invest ments was rightly treated as c apital loss by the AO, which has bee n correctl y confir med b y the CIT( A). He furthe r sub mitted that there was no bifurcation of HTM and AFS appear ing in the balance sheet and, therefore, he supported the order of the ld. CIT(A). 6. We have carefull y considered the rival submissions. The basic issue for consideration is whether loss on sale of Govern ment secur ities as clai med b y the assessee is per missible business loss or not. The AO has disallowed the loss on the presumption that Central and State Govern ment securities, the year for maturit y of which was spec ified as 2028 and 2034, were not business stock-in-trade but were in the nature of investments. As per RBI guidelines, the securities are classified in the following heads: i. Held to Maturit y ( HTM) ii. Available for Sale (AFS) iii. Held for Trading ( HFT) This guideline is pri maril y to mai ntain certain percentage of investments as C RR and S LR. Under the provisions of Inco me Tax, there is no re striction that loss on shares held as HTM will not be allowed as business loss. The refore, the basic presu mption for disallowing the loss that Govern ment securities were not in the nature of AFS but were HTM is found to be untenable. The contention of the Revenue that there was no stock-in-trade ITA Nos. 2349 & 2350/Ahd/2018 (Kankaria Maninagar Nagarik Sahakari Bank Ltd. vs. DCIT) A.Y.– 2012-13 - 6 – appearing in the balance sheet and the Govern ment securities were shown as “I nvestment” is also found to be misplaced. As per Banking Regulation Act, 1949, the ter m “banking” means the accepting, for the purpose of lending or investment, o f deposits of mone y f ro m the public, repayable on demand or otherwise, and withdrawable b y cheque, draft, order or otherwise. Further, as per Section 6 of t he Banking Regulation Act, in addition to the business of banking, a banking compan y ma y also engage in buying and selling of securities an d such bu ying and selling is considered as part of its business activities. Ther efore, the investment in C entral and State Govern ment Se curities as appearing in the balance sheet of the co mpan y were its business assets and in the nature of stock-in-trade. Me rel y be cause the y were shown as invest ment in the balance sheet they don’t beco me capital asset, as buying and selling of the securities including Govern ment secur ities is part of business activity of the assessee co mpan y. Further, the CB DT had is sued a Circular No .599 dated 24.04.1991 giving clarification regarding treatment of securities as stock-in-trade or invest ment b y the Banks which is r eproduced below: “ C l a r i f i c a t i o n r e g a r d i n g t r e a t m e n t o f s e c u r i t i e s a s s t o c k - i n - t r a d e o r i n v e s t m e n t 1 . C l a r i f i c a t i o n s o n t h e f o l l o w i n g i s s u e s h a v e b e e n s o u g h t b y b a n k s f r o m t h e C e n t r a l B o a r d o f D i r e c t T a x e s : ( i ) Wh e t h e r t h e s e c u r i t i e s h e l d b y t h e b a n k s c o n s t i t u t e t h e i r s t o c k - i n - t r a d e o r i n v e s t m e n t , a n d c o n s e q u e n t ly w h e t h e r t h e l o s s c l a i m e d b y t h e b a n k s o n t h e v a l u a ti o n o f t h e i r s e c u r i t i e s s h o u l d b e a l l o w e d a s a d e d u c t i on i n c o m p u t i n g t h e i r t a x a b l e p r o f i t s ? ( i i ) Wh e t h e r d e d u c t i o n c l a i m e d i n r e s p e c t o f i n t e r e s t p ai d f o r b r o k e n p e r i o d o n t h e p u r c h a s e o f s e c u r i t i e s s h ou l d ITA Nos. 2349 & 2350/Ahd/2018 (Kankaria Maninagar Nagarik Sahakari Bank Ltd. vs. DCIT) A.Y.– 2012-13 - 7 – “ 2 . T h e m a t t e r h a s b e e n c o n s i d e r e d b y t h e B o a r d a n d i t h a s b e e n d e c i d e d t h a t t h e s e c u r i t i e s m u s t b e r e g a r d e d a s s t oc k - i n - t r a d e b y t h e b a n k s . T h e r e f o r e , t h e c l a i m o f l o s s , i f d e b i t ed i n t h e b o o k s o f a c c o u n t , w o u l d b e g i v e n t h e s a m e t r e a t m e n t a s i s n or m a l l y g i v e n t o t h e s t o c k - i n - t r a d e . A s f a r a s t h e s e c o n d i s s u e i s c o n c e r n e d , b o t h t h e i n t e r e s t p a y m e n t s a n d r e c e i p t s m u s t b e r e g a r d e d a s r e v e n u e p a y m e n t s / r e c e i p t s , a n d o n l y t h e n e t i n t e r e s t o n s e cu r i t i e s s h a l l b e b r o u g h t t o t a x a s b u s i n e s s i n c o m e . C i r c u l a r : N o . 5 9 9 , d a t e d 2 4 - 4 - 1 9 9 1 ” 7. CBDT has categorically clarified tha t the securities held b y Banks must be regarded as stock-in-trade of the Banks. Therefore, the loss on Govern ment securities of Rs.38,55,000/- as debited in the books of accounts of the assessee has to be treated as loss i n stock-in-trade and not a capital loss in investments. As t his loss was in the nature of business loss, the AO was not corre ct in disallowing the sa me . In view of these facts, the CIT(A) was not correct in confir ming the or der of the AO disallowing the loss. Accordi ngly, the AO is directed to allow the loss in Government securities clai med b y the assesse as business loss. 8. Since, the appeal of the assessee has been allowed on merit, the ground taken by the assessee a gainst reopening of the case need not to be adjudicated. 9. In the result, appeal filed b y the ass essee is allowed. ITA No. 2350/Ahd/2018 10. In the order u/s. 143(3)/147 of the Act, the AO had held that depreciation on Government securities can be clai med only on ITA Nos. 2349 & 2350/Ahd/2018 (Kankaria Maninagar Nagarik Sahakari Bank Ltd. vs. DCIT) A.Y.– 2012-13 - 8 – business asset and not on invest ment. However , the de preciation of Rs.34,48,500/- on Government securities was not added in the co mputation of inco me . Subsequently, an order u/s. 154 of the Act was passed on 22.11.2017 where by the mistake apparent fro m record was rectified and addition of Rs.34,48,500/- was made on account of disallowance of depre ciation wrongly clai med on Govern ment secur ities. The assessee preferred an appeal against this order, which was decided b y the ld. CI T( A)-6, Ah medabad vide order dated 27.09.2018 and the order of the AO was confir med. 11. In the appeal filed against this order, the assessee has ra ised the following grounds: “ 1 . C o m m i s s i o n e r o f I n c o m e T a x ( A p p e a l s ) - 6 , A h m e d a ba d g r i e v o u s l y e r r e d i n l a w a s w e l l a s i n f a c t s i n u p h ol d i n g t h e d i s a l l o w a n c e o f d e p r e c i a t i o n o f R s . 3 4 , 4 8 , 5 0 0 c l a i me d b y t h e A s s e s s e e B a n k i n r e s p e c t o f t h e G o v e r n m e n t S e c u r i t ie s . a . L d . C o m m i s s i o n e r o f I n c o m e T a x (A p p e a l s ) - 6 , A h m e d a b a d w a s n o t c o r r e c t i n d i s a l l o w i n g d e p r e c i a t io n i n r e s p e c t o f t h e G o v e r n m e n t S e c u r i t i e s h e l d b y t h e A s s e s s e e B a n k i n c o m p l i a n c e o f t h e r e g u l a t o r y g u i d e l i n e s o f t h e R e s e r v e B a n k o f I n d i a a n d p r o v i s io n s o f t h e B a n k i n g R e g u l a t i o n A c t , 1 9 4 9 t o m e e t i t s l i q u i d i t y r e q u i r e m e n t s . b . L d . C o m m i s s i o n e r o f I n c o m e T a x (A p p e a l s ) - 6 , A h m e d a b a d w a s n o t c o r r e c t i n d i s a l l o w i n g d e p r e c i a t io n i n r e s p e c t o f t h e G o v e r n m e n t S e c u r i t i e s h e l d b y t h e A s s e s s e e B a n k a s s t o c k f o r i t s b a n k i n g b u s i n e s s . c . L d . C o m m i s s i o n e r o f I n c o m e T a x (A p p e a l s ) - 6 , A h m e d a b a d w a s n o t c o r r e c t i n d i s a l l o w i n g d e p r e c i a t io n i n r e s p e c t o f t h e G o v e r n m e n t S e c u r i t i e s p r o v i d e d f or b y t h e A s s e s s e e B a n k o n m a r k - t o - m a r k e t b a s i s . d . L d . C o m m i s s i o n e r o f I n c o m e T a x (A p p e a l s ) - 6 , A h m e d a b a d w a s n o t c o r r e c t i n u p h o l d i n g t h a t i n v e s t m e n t s w e r e u n d e r H T M c a t e g o r y m e r e l y b e c a u s e ITA Nos. 2349 & 2350/Ahd/2018 (Kankaria Maninagar Nagarik Sahakari Bank Ltd. vs. DCIT) A.Y.– 2012-13 - 9 – b a l a n c e s h e e t o f t h e b a n k d o e s n o t s p e c i f y a n y t h i n g a n d m a t u r i t y i s o f 2 0 2 8 a n d 2 0 3 4 a n d t h e c o n t e n t i o n o f I d . A p p e l l a t e A u t h o r i t y w a s p r e s u m p t i v e a n d F a c t u a l . L d. C o m m i s s i o n e r o f I n c o m e T a x ( A p p e a l s ) - 6 , A h m e d a b a d w a s n o t c o r r e c t i n l i n k i n g t h e c l a s s i f i c a t i o n o f t he s e c u r i t y w i t h t h e y e a r o f i t s m a t u r i t y . e . L d . C o m m i s s i o n e r o f I n c o m e T a x (A p p e a l s ) - 6 , A h m e d a b a d w a s n o t c o r r e c t i n u p h o l d i n g t h a t n o n e o f t h e i n v e s t m e n t s w e r e i n A F S c a t e g o r y m e r e l y b e c a u s e t h e b a n k i s m a n d a t e d b y R e s e r v e B a n k o f I n d i a t o k ee p c e r t a i n p a r t s o f t h e s e c u r i t i e s u n d e r H T M C a t e g o r y w h i c h c o u l d b e m a x i m u m u p t o 2 5 % . L d . C o m m i s s i o n e r o f I n c o m e T a x ( A p p e a l s ) - 6 , A h m e d a b a d d e p e n d e d u p o n t h e p r e s u m p t i o n r a t e r t h a n f a c t s i n h o l d i n g t h a t n on e o f t h e s e c u r i t i e s w e r e u n d e r A F S . 2 . L d . C o m m i s s i o n e r o f I n c o m e T a x ( A p p e a l s ) - 6 , A h m ed a b a d w a s n o t c o r r e c t i n f a c t s i n c o n t e n d i n g i n t h e i m p u gn e d o r d e r t h a t t h e A p p e l l a n t h a d n o t m a d e s u b m i s s i o n o n t h e gr o u n d o f d i s a l l o w a n c e o f R s . 3 4 , 4 8 , 5 0 0 m o r e p a r t i c u l a r l y w h en t h e A u t h o r i s e d R e p r e s e n t a t i v e c a t e g o r i c a l l y r e l i e d u p o n t h e d e c i s i o n o f H o n ' b l e G u j a r a t H i g h C o u r t i n c a s e o f Ho n ' b l e C o m m i s s i o n e r o f I n c o m e - T a x , R a j k o t V / s R a j k o t D i s t . C o . O p . B a n k L i m i t e d a n d H o n ' b l e T r i b u n a l i n c a s e o f A s s t . C o m m i s s i o n e r o f I n c o m e - T a x v / s T h e M e h s a n a U r b a n C o. O p . B a n k L t d . d u r i n g t h e c o u r s e o f p e r s o n a l h e a r i n g . 3 . L d . C o m m i s s i o n e r o f I n c o m e T a x ( A p p e a l s ) - 6 , A h m ed a b a d g r i e v o u s l y e r r e d i n l a w a s w e l l a s i n f a c t s i n u p h ol d i n g t h e o r d e r o f l d . A s s e s s i n g O f f i c e r p a s s e d w / s 1 5 4 o f t he I n c o m e T a x A c t , 1 9 6 1 t h o u g h t h e r e w a s n o m i s t a k e a p p a r e n t f r o m t h e r e c o r d . L d . C o m m i s s i o n e r o f I n c o m e T a x ( A p p e a l s ) 6 , A h m e d a b a d c o m p l e t e l y i g n o r e d i n t h e i m p u g n e d o r d e r t h a t d i s a l l o w a n c e o f d e p r e c i a t i o n o f R s . 3 4 , 4 8 , 5 0 0 w a s an a f t e r t h o u g h t . ” 12. The ld. AR sub mi tted that the Govern ment securities were held in co mpliance to regulator y guidelines of RBI and we re part of business assets of the Bank. The Ld. AR explained that the depreciation on Government securities is not the depr eciation as contemplated in Section 32 of the Act, but is the syste matic allocation of deterioration in the value of security over its useful life and was an allowable business deduction. He further ITA Nos. 2349 & 2350/Ahd/2018 (Kankaria Maninagar Nagarik Sahakari Bank Ltd. vs. DCIT) A.Y.– 2012-13 - 10 – submitted that this issue was covered in favour of the assessee b y the decision of the Co-ordinate Bench of the Tr ibunal in assessee’s own c a se for A.Y. 2013-14. 13. The ld. DR, on th e other hand, supported the order o f the AO and the CI T(A). 14. We have care fully considered the facts of the case. It is found that identical issue was involved in assessee’s own case for A.Y. 2013-14 which was decided by the Co-ordinate Bench of this Tribunal in ITA No. 2928/Ahd/2017 dated 29.01.2020. The findings given by the Co-ordinate Bench in that case is reproduced below: “8. We have gone through the relevant record and impugned order. Assessee is a Co.op. Bank and as per mandate assessee has to keep certain investment with itself in order to maintain Statutory Liquidity Ratio (SLR) and Cash Reserve Ratio (CRR) if any loss or deterioration is caused to the value of stock, it is charged to profit and loss account. In our considered opinion, same is allowable as deduction u/s. 37 as Govt. Securities are part of liquid assets, stock in trade. 9. We draw support from a case of Punjab and Haryana High Court High Court in the matter of Pr. CIT, Patiala vs. State Bank of Patiala order dated 30.01.2017 where in similar facts and circumstances, relief was granted to the assessee. We also draw support from a case of ITAT Pune Bench in the matter DCIT vs. Dy. CIT vs. Vishwash Co.op. Bank Ltd. wherein it is held “the method of valuation followed by the assessee Bank was to value investments at cost or market value whichever was lower. ... Law is well settled that the Securities held by the Bank are in the nature of stock-in-trade. 10. In view of the above, we direct A.O. to deleted addition of Rs. 2,44,325/- as claimed by the assessee.” 15. We see no reason to depart fro m the view already take n b y the Tribunal in th e assessee ’s o wn case. As explained b y the assessee the de preciation on Government Secur ities was ITA Nos. 2349 & 2350/Ahd/2018 (Kankaria Maninagar Nagarik Sahakari Bank Ltd. vs. DCIT) A.Y.– 2012-13 - 11 – deterioration in the value of security. In essence, this was a loss clai med on valuation of the security. As clarified b y the CBDT vide Circular No. 599, reproduced earlier, the loss claimed b y the banks on valuation of their securities was a business loss and an allowable deduction. We ac cordingly hold that the depreciation on Govern ment securities claime d by the assessee bank is allowable, as deduction. 16. In the result, appeal preferred b y the assessee is allowed. 17. In the co mbined result, both appeals preferred b y the assessee are allowed. This Order pronounced on 08/05/2024 Sd/- Sd/- (T.R. SENTHIL KUMAR) (NARENDRA PRASAD SINHA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad; Dated 08/05/2024 S. K. SINHA True Copy आदेश क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं धत आयकर आय ु त / Concerned CIT 4. आयकर आय ु त(अपील) / The CIT(A)- 5. "वभागीय &त&न ध, आयकर अपील)य अ धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड/ फाईल / Guard file. आदेशान ु सार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील$य अ%धकरण, अहमदाबाद / ITAT, Ahmedabad