M/s Triveni Kshetriya Gramin Bank, Banda. V. Asstt. Commossioner of Income Tax-6, Kanpur

ITA 444/LKW/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87776 (ITAT-LUCKNOW)
• Duration Of Justice: 2 year(s) 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 09-01-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 06-08-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUSHWAHA
• Keywords: Depreciation; Cost of acquisition
• Section: 6

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.421/LKW/2012 ASSTT. YEAR:2008 - 09 M/S TRIVENI KSHETRIYA GRAMIN BANK, D.M. COLONY, BANDA. PAN:AAALT0714E VS. A.C.I.T. - 6, KANPUR. (RESPONDENT) (APPELLANT) ITA NOS.444 & 445/LKW/2012 ASSTT. YEARS:2007 - 08 & 2008 - 09 A.C.I.T. - 6, KANPUR. VS. M/S TRIVENI KSHETRIYA GRAMIN BANK, D.M. COLONY, BANDA. PAN:AAALT0714E (RESPONDENT) (APPELLANT) SHRI RAJNISH YADAV, D. R. REVENUE BY RAJESH KUSHWAHA, C. A. ASSESSEE BY 1 3 / 01 /201 5 DATE OF HEARING 26 /02/2015 DATE OF PRONOUNCEMENT O R D E R PER A. K. GARODIA, A.M. OUT OF THIS BUNCH OF THREE APPEALS , THERE IS ONE APPEAL BY THE REVENUE FOR THE ASSESSMENT YEAR 2008 - 09 , WHICH IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(A) - I , KANPUR DATED 19 /0 3 /201 2 AND THE REMAINING TWO APPEALS ARE FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2007 - 08 AND 2008 - 09 WHICH ARE DIRECTED AGAINST THE ORDER OF LEARNED CIT(A) DATED 27/03/2012 FOR THE ASSESSMENT YEAR 2007 - 08 AND DATED 19/03/2012 FOR THE ASSESSMENT YEAR 2008 - 09. ALL THESE APPEALS WERE HEARD T OGETHER AND ARE BEING DISPOSED OF BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2 2. FIRST WE TAKE UP THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 200 7 - 0 8 I.E. I.T.A. NO. 444 /LKW/201 2 . IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLLOWING GROUN DS: 1. THE ORDER PASSED BY THE LEARNED CIT IS ARBITRARY AND UNJUSTIFIED AND AGAINST THE FACTS OF THE CASE. 2. THE LD CIT (APPEAL) COMMITTED A MISTAKE BY BIFURCATING THE PROVISION OF SECTION 36(1)(VIIA) INTO LEGAL AND FACTUAL ASPECTS WHICH WAS TOTALLY UNCALLED FOR, AND CONCLUDING THAT BANK WAS NOT A SCHEDULED BANK. 3. THE LEARNED CIT(APPEAL) GROSSLY ERRED IN TREATING THE BANK, NOT AS A SCHEDULE BANK FOR FINANCIAL YEAR 2006 - 07 AND 2007 - 08 AND THE DISALLOWANCE OF DEDUCTION MADE RS.19,48,40,000 / - TREATING BANK AS NON - SCHEDULED BANK IS ILLEGAL AS PER THE PROVISION OF SECTION 36(1)(VIIA) AS THERE IS NO DISTINCTION BETWEEN SCHEDULED BANK AND NON SCHEDULED BANK AS FAR AS ALLOWABILITY OF DEDUCTION IS CONCERNED. 4. THE LEARNED CIT(APPEAL) GROSSLY ERRED IN DRAWI NG THE CONCLUSION THAT ASSESSEE BANK IS NON - SCHEDULE BANK DURING THE FINANCIAL YEAR 2006 - 07, FOR WANT OF TECHNICAL COMPLIANCE ON THE PART OF THE RBI, IS LEGALLY AND FACTUALLY INCORRECT, AS HE WAS POINTED OUT THAT THE RBI DURING THE ENTIRE PERIOD HAS TREATE D THE BANK AS SCHEDULED BANK FOR ALL REGULATORY AND MONITORING PURPOSES. 5. THE LD CIT (APPEAL) GROSSLY ERRED IN DISALLOWING THE DEDUCTION IN - SPITE OF BEING FULLY SATISFIED AFTER VERIFYING THE (SO CALLED) FACTUAL ASPECTS OF THE APPELLANT BANK AS UNDER THE RULE 6ABA OF INCOME TAX RULES AND THIS SATISFACTION OF CIT IS ON RECORD, BUT DISALLOWED THE DEDUCTION CAMOUFLAGING IT AS LEGALLY NOT ALLOWABLE. 3. IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT THE ASSESSEE BANK HAS COME INTO EXISTENCE AFTER THE MERGER OF THREE REGIONAL RURAL BANKS I.E. CHHTRASAL GRAMIN BANK, TULSI GRAMIN BANK AND VINDHYAVASINI GRAMIN BANK. HE ALSO SUBMITTED THAT ALL THESE THREE BANKS WERE SCHEDULED BANKS AND 3 ALTHOUGH THE NAME OF THE ASSESSEE BANK WAS INCLUDED AS A SCHEDULED BANK IN THE NOTIFICATION OF RESERVE BANK OF INDIA DATED 22/09/2008 BUT BEFORE THIS DATE ALSO, THE ASSESSEE BANK SHOULD BE TREATED AS SCHEDULED BANK BECAUSE EARLIER THREE BANKS WERE WHICH MERGED FOR BRINGING INTO EXISTENCE THE ASSESSEE BANK WERE SCHEDULED BANK S . IN THIS REGARD , HE ALSO FURNISHED A COPY OF NOTIFICATION DATED 01/03/2006 REGARDING MERGER OF THESE THREE BANKS. AT THIS JUNCTURE, THE BENCH POINTED OUT CLAUSE NO. 9 OF THIS NOTIFICATION AS PER WHICH IT IS SPECIFIED THAT THE TRANSFEREE BANK I.E. THE AS SESSEE BANK SHOULD BE CONSIDERED AS HAS BEEN ESTABLISHED UNDER SUB SECTION (1) OF SECTION 3 OF THE ACT. THE BENCH WANTED THE LEARNED A.R. OF THE ASSESSEE TO FILE THE PROVISIONS OF SUB SECTION (1) OF SECTION (3) OF THE ACT, WHICH HAS BEEN SUBMITTED BY LEAR NED A.R. OF THE ASSESSEE. 4. LEARNED D.R. OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THIS ISSUE WAS DECIDED BY LEARNED CIT(A) AS PER PARA NO. 2.1.1 OF HIS ORDER, WHICH IS REPRODUCED BELOW FOR THE SAKE OF READY REFERENCE: - 2.1.1 FROM THIS RULE IT IS SEEN THAT THIS DEDUCTION @10% IS AVAILABLE ONLY TO A SCHEDULED BANK AND NOT TO ANY OTHER CATEGORIES OF BANKS. I DISCUSSED THIS ISSUE WITH THE LD. A.R. OF THE APPELLANT. HE BROUGHT TO MY NOTICE A NOTIFICATION OF THE RBI DATED 22.09.2008 THROUGH WHICH THE ASSESSEE BANK HAS BEEN INCLUDED SEH. - 2 TO THE RBI ACT, 1934. I SPECIFICALLY POINTED OUT TO THE LD. A.R. THAT THE SAID INCLUSION IN THE SCH. - LL W AS W.E.F. 22.09.2008 AND, THEREFORE, THE ASSESSEE BANK COULD NOT BE TREATED AS A SCHEDULED BANK FOR F.Y. 2006 - 07 (I.E. THE A.Y. 2007 - 08) AND ALSO FOR F.Y. 2007 - 08 (I.E. A.Y. 2008 - 09). IN RESPONSE, THE LD. AR HAD NOTHING TO ADD EXCEPT SAYING THAT HE WOULD S EEK CLARIFICATION FROM THE RBI. SINCE THE DATE OF INCLUSION IN THE SCH. - LL OF THE RBI ACT IS AN OBVIOUS FACT, I HEREBY HOLD THAT THE ASSESSEE BANK WAS NOT A SCHEDULED BANK DURING THE F.Y. 2006 - 07 (CORRESPONDING TO THE A.Y. 2007 - 08) AND, THEREFORE, IS NOT E NTITLED TO DEDUCTION @10% U/S 36 (I)(VIIA) OF THE ACT. 5.1 FROM THE ABOVE PARA FROM THE ORDER OF CIT(A), WE FIND THAT A CLEAR FINDING IS GIVEN BY CIT(A) THAT NOTIFICATION OF THE RBI IS DATED 22/09/2008 4 THROUGH WHICH THE ASSESSEE BANK HAS BEEN INCLUDED IN SCHEDULE - 2 TO THE RBI, ACT, 1934. IT IS ALSO NOTED BY CIT(A) THAT IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE BEFORE HIM THAT HE WOULD SEEK CLARIFICATION FROM RBI IN THIS REGARD. IN COURSE OF HEARING BEFORE US, LEARNED A.R. OF THE ASSESSEE COULD NO T SUBMIT ANY CLARIFICATION FROM RBI IN THIS REGARD. WE ALSO FIND THAT THE NOTIFICATION DATED 01/03/2006 AS PER WHICH THREE TRANSFERRED REGIONAL RURAL BANKS WERE MERGED INTO THE ASSESSEE BANK, IT HAS BEEN SPECIFIED IN CLAUSE 9 OF THE NOTIFICATION THAT UNLE SS AND OTHERWISE EXPRESSLY PROVIDED IN THIS NOTIFICATION, THE PROVISIONS OF THE ACT SHALL HAVE THE SAME EFFECT ON THE TRANSFEREE RURAL BANKS AS IT HAS BEEN ESTABLISHED UNDER SUB SECTION (1) OF SECTION (3) OF THE ACT. AS PER SUB SECTION (1) OF SECTION (3) OF THE ACT, WE FIND THAT THIS IS REGARDING ESTABLISHING OF REGIONAL RURAL BANK AND THERE IS NO MENTION OF SCHEDULED BANK IN THIS SUB SECTION (1) OF SECTION 3 OF THE ACT. WE ALSO FIND THAT AS PER SUB SECTION (6) OF SECTION 4 2 OF THE RBI ACT, 1934, THERE AR E THREE REQUIREMENTS FOR INCLUSION OF NAME IN SCHEDULE - 2 . FOR THE SAKE OF READY REFERENCE, WE REPRODUCE SUB SECTION (6) OF SECTION 42 OF RBI ACT, 1934 AS UNDER: (6) THE BANK SHALL, SAVE AS HEREINAFTER PROVIDED, BY NOTIFICATION IN THE GAZETTE OF LNDIA: - ( A ) DIRECT THE INCLUSION IN THE SECOND SCHEDULE OF ANY BANK NOT ALREADY SO INCLUDED WHICH CARRIES ON THE BUSINESS OF BANKING '[IN INDIA] AND WHICH - (I) HAS A PAID - UP CAPITAL AND RESERVES OF AN AGGREGATE VALUE OF NOT LESS THAN FIVE LAKHS OF RUPEES, AND (II) SATISFIES THE BANK THAT ITS AFFAIRS ARE NOT BEING CONDUCTED IN A MANNER DETRIMENTAL TO THE INTERESTS OF ITS DEPOSITORS, AND (III) [IS A STATE CO - OPERATIVE BANK OR A COMPANY] AS DEFINED IN ''[SECTION 3 OF THE COMPANIES ACT, 1956, OR AN INSTITUTION NOTIFIED BY THE CENTRAL GOVERNMENT IN THIS BEHALF] OR A CORPORATION OR A COMPANY INCORPORATED BY OR UNDER ANY LAW IN FORCE IN ANY PLACE [OUTSIDE INDIA]; 5 5.2 FROM THE ABOVE CLAUSE (A) OF SUB SECTION 6 OF SECTION 42 OF RBI ACT, 1934, WE FIND THAT IN ADDITION TO EXA MINING THE AMOUNT OF PAID UP CAPITAL AND RESERVE AND THE CONSTITUTION OF BANK WHETHER IT IS A COMPANY OR STATE CO - OPERATIVE BANK ETC. , IT IS ALSO REQUIRED TO BE SEEN BY RBI AS TO WHETHER THE CONCERNED BANK SATISFIED THE REQUIREMENT THAT ITS AFFAIRS ARE NOT BEING CONDUCTED IN A MANNER DETRIMENTAL TO THE INTERESTS OF ITS DEPOSITORS. HENCE, IN OUR CONSIDERED OPINION, MERELY BECAUSE THE TRANSFEROR BANKS WERE SCHEDULED BANKS, IT CANNOT BE ACCEPTED THAT THE TRANSFEREE BANK ALSO GETS THE STATUS OF SCHEDULED BANK AUTOMATICALLY. THIS VIEW OF US IS FURTHER STRENGTHENED BY THIS FACT THAT ON A LATER DATE I.E. ON 22/09/2008, THE RBI HAS INCLUDED THE NAME OF THE ASSESSEE BANK IN SCHEDULE - 2 BY WAY OF NOTIFICATION. MOREOVER, IN SPITE OF GIVING ASSURANCE BEFORE CIT(A) BY T HE LEARNED A.R. OF THE ASSESSEE THAT HE WILL SEEK CLARIFICATION FROM RBI, NO SUCH CLARIFICATION FROM RBI HAS BEEN BROUGHT ON RECORD . CONSIDERING ALL THESE FACTS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) AS PER WHICH IT IS HELD BY HIM THAT ASSES SEE BANK WAS NOT A SCHEDULED BANK DURING FINANCIAL YEAR 2006 - 07 CORRESPONDING TO ASSESSMENT YEAR 2007 - 08 AND THEREFORE, IT IS NOT ENTITLED TO DEDUCTION U/S 36(1)(VIIA) OF THE ACT. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS DISMISSED. 7. NOW WE TAKE UP THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2008 - 09 I.E. I.T.A. NO.445/LKW/2012. GROUND NOS. 1 TO 5 ARE INTER - CONNECTED, WHICH ARE AS UNDER: 1. THE ORDER PASSED BY THE LEARNED CIT IS ARBITRARY AND UNJUSTIFIED AND AGAINST THE FACTS OF THE CASE. 2. THE LD CIT (APPEAL) COMMITTED A MISTAKE BY BIFURCATING THE PROVISION OF SECTION 36 (1) (VIIA) INTO LEGAL AND FACTUAL ASPECTS WHICH WAS TOTALLY UNCALLED FOR, AND CONCLUDING THAT BANK WAS NOT A SCHEDULED BANK. 3. THE LD CIT (APPEAL) GROSSLY ERRED IN TR EATING THE BANK, NOT AS A SCHEDULE BANK FOR FINANCIAL YEAR 2006 - 07 AND 2007 - 08 AND THE DISALLOWANCE OF DEDUCTION MADE RS.19,48,40,000/ - 6 , TREATING BANK AS NON - SCHEDULED BANK IS ILLEGAL AS PER THE PROVISION OF SECTION 36 (1) (VIIA), AS THERE IS NO DISTINCTIO N BETWEEN SCHEDULED BANK AND NON SCHEDULED BANK AS FAR AS ALLOWABILITY OF DEDUCTION IS CONCERNED. 4. THE LD CIT (APPEAL) GROSSLY ERRED IN DRAWING THE CONCLUSION THAT ASSESSEE BANK IS NON - SCHEDULE BANK DURING THE FINANCIAL YEAR 2006 - 07, FOR WANT OF TECHNIC AL COMPLIANCE ON THE PART OF THE RBI, IS LEGALLY AND FACTUALLY INCORRECT, AS HE WAS POINTED OUT THAT THE RBI DURING THE ENTIRE PERIOD HAS TREATED THE BANK AS SCHEDULED BANK FOR ALL REGULATORY AND MONITORING PURPOSES. 5. THE LD CIT (APPEAL) GROSSLY ERRED I N DISALLOWING THE DEDUCTION IN - SPITE OF BEING FULLY SATISFIED AFTER VERIFYING THE (SO CALLED) FACTUAL ASPECTS OF THE APPELLANT BANK AS UNDER THE RULE 6ABA OF INCOME TAX RULES AND THIS SATISFACTION OF CIT IS ON RECORD, BUT DISALLOWED THE DEDUCTION CAMOUFLAG ING IT AS LEGALLY NOT ALLOWABLE. 8. BOTH THE SIDES AGREED THAT THESE GROUNDS ARE IDENTICAL TO THE GROUNDS OF THE ASSESSEE FOR ASSESSMENT YEAR 2007 - 08 AND SAME CAN BE DECIDED ON SIMILAR LINE. IN ASSESSMENT YEAR 2007 - 08, THIS ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE AND SINCE THE NAME OF THE ASSESSEE BANK WAS INCLUDED IN SCHEDUE - 2 BY RBI AS PER NOTIFICATION DATED 22/09/2008, IN THIS YEAR ALSO , THE FACTS REMAIN SAME AND HENCE, IN LINE WITH OUR DECISION FOR ASSESSMENT YEAR 2007 - 08, IN THE PRESENT YE AR ALSO , THIS ISSUE IS DECIDED AGAINST THE ASSESSEE. THESE GROUNDS OF THE ASSESSEE ARE REJECTED. 9. GROUND NOS. 6 TO 9 ARE INTER - CONNECTED, WHICH ARE AS UNDER: 6. THE LEARNED CIT (APPEAL) GROSSLY ERRED IN CONFIRMING THE DISALLOWANCE OF AMORTIZATION OF PREMIUM OF SECURITIES WITHOUT UNDERSTANDING THAT THE INVESTMENT MADE BY OTHER INSTITUTIONS AND MADE BY THE BANK ARE TREATED DIFFERENTLY FOR TAX PURPOSES. 7. THE LEARNED CIT (APPEAL) ALSO FAILED TO APPRECIATE CIRCULAR NO. 17 DATED 26/11/2008 OF CBDT, WHICH CLEARLY DISPENSES THE REQUIREMENT OF MARKING HTM SECURITIES TO MARKET VALUE, WHICH IMPLIES THAT THEY CAN BE CARRIED UNDER THE 7 HEAD INVESTMENT IN BALANCE SHEET UNDER THE SUB - HEAD HTM CATEGORY. 8. THE LEARNED CIT (APPEAL) GROSSLY ERRED WHILE RELYING ON TH E DECISION OF HONORABLE SUPREME COURT IN THE CASE OF SOUTHERN TECHNOLOGIES LTD. VS. JCIT (2010) 320 ITR 577 (SC) AND RELYING ON STATUTORY AUDITORS REMARK GIVE IN SCHEDULE 18. 9. THE LD CIT(A) IN PARA 8.4 OF THE ORDER APPRECIATED THAT THE 'BROAD NOMENCLAT URE GIVEN TO SUCH SECURITIES IN ITS BOOKS AS 'INVESTMENTS' CANNOT BE THE SOLE BASIS OF ARRIVING AT A DECISION' BUT HE FAILED TO APPLY THIS LOGIC WHILE DISALLOWING THE AMORTIZATION OF PREMIUM PAID ON SECURITIES. 10. LEARNED A.R. OF THE ASSESSEE REITERATED THE SAME ARGUMENTS, WHICH WERE RAISED BY HIM BEFORE CIT(A). 11. LEARNED D.R. OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THIS ISSUE WAS DECIDED BY CIT(A) AS PER PARA 8.2 AND 8.2.1 OF HIS ORDER, WHICH ARE REPRODUCED BELOW FOR THE SAKE OF READY REFERENCE: - 8.2 AMORTIZATION OF PREMIUM RS.96,89.585.00 IN THIS REGARD, THE FACTS HAVE BEEN NARRATED BY THE A.O. AT PARA 10 OF THE ASSTT. ORDER. ON PERUSAL OF THE DETAILS FILED BY THE APPELLANT BEFORE THE CIT(A), IT IS SEEN THAT THE IMPUGNED AMORTIZATION IS IN RESPECT OF SECURITIES WHICH ARE 'HTM' (HELD TO MATURITY) CATEGORY. IT MEANS THAT SUCH SECURITIES WERE HELD PURELY A S INVESTMENTS AND NOT FOR SALES OR TRADING PURPOSES. THE INCOME - TAX LAW IS VERY CLEAR THAT THE INVESTMENTS ARE TO BE HELD AT THEIR BOOK VALUE EVEN IF SOME OTHER LAWS OR RULES REQUIRE THEM TO BE MARKED TO MARKET. (REFERENCE IN THIS REGARD IS MADE TO THE DEC ISION OF THE HON'BLE SUPREME COURT IN THE CASE OF SOUTHERN TECHNOLOGIES LTD. VS JCIT [(2010) 320 ITR 577 (SC)]. IN THIS CONNECTION, IT IS ALSO WORTH MENTIONING THAT THE STATUTORY AUDITOR IN SCH 18 TO THE FINANCIAL STATEMENT (WHICH DEAL S WITH 'NOTES ON ACCO UNTS') AT PARA NO. 26 HAS OBSERVED: - 'INVESTMENT HELD UNDER 'AVAILABLE FOR SALE' ARE BEING VALUED AT DIMINISHING VALUE OF COST OF ACQUISITION VALUE 8 WHICHEVER IS LESS. INVESTMENT HELD UNDER 'HELD TO MATURITY' ARE BEING VALUED AT THE COST OF ACQUISITION AS PER THE RB I REGULATION. SIMILARLY NET DEPRECIATION AND AMORTIZATIONS ARE BEING ACCOUNTED FOR IN THE REVENUE.' 8.2.1 FROM THIS NOTE, IT IS CLEAR THAT IT IS THE ASSESSEE BANK'S OWN POLICY TO VALUE INVESTMENTS UNDER HTM CATEGORY AT COST OF ACQUISITION. LOOKING AT THE OVERALL FACTS, AND CIRCUMSTANCES OF THE CASE, THE ACTION OF THE ASSESSING OFFICER IN NOT ALLOWING AMORTIZATION ON THESE SECURITIES IS CONFIRMED. 12.1 FROM THE ABOVE PARA S FROM THE ORDER OF CIT(A), IT IS SEEN THAT THE CIT(A) HAS REFERRED TO A JUDGMENT OF HON'BLE SUPREME COURT RENDERED IN THE CASE OF SOUTHERN TECHNOLOGIES LTD. VS JCIT (2010) 320 ITR 577 (SC) . HE HAS ALSO REFERRED TO SCHEDULE - 18 TO THE FINANCIAL STATEMENT (W HICH DEALS WITH 'NOTES ON ACCOUNTS') AND IT IS OBSERVED BY CIT(A) THAT IT IS ASSESSEE BANKS OWN POLICY TO VALUE INVESTMENT UNDER HTM CATEGORY. IN OUR CONSIDERED OPINION, ANY DEPRECIATION IN THE VALUE OF INVESTMENT IS NOT ALLOWABLE AS LOSS AND SUCH LOSS I S ALLOWABLE ONLY WHEN THE INVESTMENT IS TRANSFERRED AND SUCH LOSS IS ALLOWABLE AS CAPITAL LOSS DEPENDING ON THE PERIOD OF HOLDING WHETHER IT IS SHORT TERM CAPITAL LOSS OR LONG TERM CAPITAL LOSS. CONSIDERING ALL THESE FACTS, WE DO NOT FIND ANY REASON TO IN TERFERE IN THE ORDER OF CIT(A) ON THIS ISSUE ALSO. THESE GROUNDS ARE ALSO REJECTED. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS DISMISSED. 14. NOW WE TAKE UP THE APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2008 - 09 I.E. I.T.A. NO.421/LKW/2012. I N THIS APPEAL THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: 1. THE LEARNED CIT(A) - I, HAS IGNORED THE FACTS THAT THE ASSESSEE DID NOT FILE ANY EVIDENCE IN THIS REGARD EVEN AFTER SEVERAL OPPORTUNITIES WERE GIVEN DURING THE PROCEEDINGS OF REMAND REPORT AND THE ASSESSING OFFICER IN HIS REMAND REPORT MENTIONED THE SAME. THE EVIDENCE PRODUCED BEFORE CIT(A) WERE ACCEPTED WITHOUT GIVING OPPORTUNITIES TO THE ASSESSING OFFICER. 9 2. THE LEARNED CIT(A) HAS IGNORED THE FACTS THAT DURING THE COURSE OF ASSESSMENT PROCE EDINGS THE ASSESSEE NEVER SUBMITTED THAT THE MUTUAL FUND HELD WERE FOR THE PURPOSE OF TRADE AND NOT FOR INVESTMENTS. EVEN THE ASSESSEE DID NOT FILE ANY EVIDENCE IN THIS REGARD EVEN AFTER SEVERAL OPPORTUNITIES WERE GIVEN DURING THE PROCEEDINGS OF REMAND RE PORT AND THE ASSESSING OFFICER IN HIS REMAND REPORT MENTIONED THE SAME. THE EVIDENCES PRODUCED BEFORE CIT(A) WERE ACCEPTED WITHOUT GIVING OPPORTUNITIES TO THE ASSESSING OFFICER. 3. THAT THE ORDER OF LEARNED CIT(A) - I KANPUR BEING ERRONEOUS IN LAW AND ON F ACTS DESERVES TO BE VACATED AND THE ORDER OF THE ASSESSING OFFICER BE RESTORED. 15. LEARNED D. R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED A. R. OF THE ASSESSEE SUPPORTED THE ORDER OF LEARNED CIT(A). 16. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THIS ISSUE WAS DECIDED BY LEARNED CIT(A) AS PER PARA 8.4 OF HIS ORDER, WHICH IS REPRODUCED BELOW FOR THE SAKE OF READY REFERENCE: - 8.4 DEPRECIATION OF RS. 39,51.745.00 ON MUTUAL FUND SECURITIES THESE SECURITIES WERE HELD BY THE APPELLANT COMPANY FOR THE 'PURPOSE OF TRADE'. THE BROAD NOMENCLATURE GIVEN TO SUCH SECURITIES IN ITS BOOK AS 'INVESTMENT' CANNOT BE THE SOLE BASIS OF ARRIVING AT A DECISION. IT IS COMMON PRACTICE IN THE BANKS T O CLASSIFY THE SECURITIES HELD AS 'INVESTMENT' EVEN THOUGH MANY OF THEM ARE FOR TRADING PURPOSE. THE 'PROFIT' EARNED ON THESE KINDS OF SECURITIES IS OFFERED FOR NORMAL TAX AND NOT AS CAPITAL GAINS. SINCE THE UNITS OF M.F. HAD BEEN HELD BY THE BANK FOR THE PURPOSE OF TRADE, THE LOSS ON ACCOUNT OF 'MARKED TO MARKED' IN RESPECT OF THESE SECURITIES, IS TO BE ALLOWED AS BUSINESS LOSS. THE DISALLOWANCE MADE BY THE AO IN THIS REGARD IS VACATED. 17. THIS FINDING OF CIT(A) THAT THESE SECURITIES WERE HELD BY THE ASSESSEE FOR THE PURPOSE OF TRADE COULD NOT BE CONTROVERTED BY LEARNED D.R. OF THE REVENUE. IN VIEW OF THIS CLEAR AND UNCONTROVERTED FINDING OF CIT(A) THAT THE UNITS OF THE MUTUAL FUND WERE HEL D BY THE ASSESSEE FOR THE PURPOSE OF TRADE, 10 THE LOSS ON ACCOUNT OF MARKED TO MARKED VALUATION IN RESPECT OF THESE SECURITIES IS ALLOWABLE AS BUSINESS LOSS. THIS IS AN ACCEPTED METHOD OF VALUATION OF CLOSING STOCK THAT IT CAN BE VALUED AT COST OR MARKET PR ICE WHICHEVER IS LESS. WHEN MUTUAL FUND SECURITIES ARE HELD BY THE ASSESSEE FOR TRADING PURPOSE, IT HAS TO BE CONSIDERED AS CLOSING STOCK AND IF LOSS IS CLAIMED BY THE ASSESSEE BANK BY VALUING SUCH SECURITIES ON MARKET PRICE, SUCH LOSS HAS TO BE ALLOWED. IN VIEW OF THIS, WE DECLINE TO INTERFERE IN THE ORDER OF CIT(A) ON THIS ISSUE. 18. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DISMISSED. 19. IN THE COMBINED RESULT, BOTH THE APPEALS OF THE ASSESSEE AND APPEAL OF THE REVENUE ARE DISMISSED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV) ( A. K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 26 /02/2015 *C.L.SINGH COPY OF THE ORDER FORWAR DED TO : 1 . THE APPELLANT 2 . THE RESPONDENT. 3 . CONCERNED CIT 4 . THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR