Janata Sahakari Bank Ltd., Pune V. ITO, Ward 11(2), Pune

ITA 522/PUN/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88999 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 29-01-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 19-02-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K MODI
• Keywords: Capital asset; Business income; Depreciation; Transfer pricing; Opportunity of being heard; International transaction; Cost of acquisition; Difference of opinion; Assessment record; Capital receipt; Revised return; Change of opinion; Revenue expenditure
• Section: 143(3); 6; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND MS SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.21/PN/2014 ASSESSMENT YEAR: 2005-06 JANATA SAHAKARI BANK LTD., 1444, SHUKRAWAR PETH, PUNE 411002 . APPELLANT PAN: AAAJJ0073G VS. THE INCOME TAX OFFICER, WARD 11(2), PUNE . RESPONDENT ITA NO.235/PN/2014 ASSESSMENT YEAR: 2005-06 THE INCOME TAX OFFICER, WARD 11(2), PUNE . APPELLANT VS. JANATA SAHAKARI BANK LTD., 1444, SHUKRAWAR PETH, PUNE 411002 . RESPONDENT PAN: AAAJJ0073G ITA NO.236/PN/2014 ASSESSMENT YEAR: 2006-07 THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE 11(1), PUNE . APPELLANT VS. JANATA SAHAKARI BANK LTD., 1444, SHUKRAWAR PETH, PUNE 411002 . RESPONDENT PAN: AAAJJ0073G ITA NOS.522 & 523/PN/2013 ASSESSMENT YEARS: 2007-08 & 2009-10 JANATA SAHAKARI BANK LTD., 1444, SHUKRAWAR PETH, PUNE 411002 . APPELLANT PAN: AAAJJ0073G VS. THE INCOME TAX OFFICER, WARD 11(2), PUNE . RESPONDENT ITA NOS.21, 235, 236/PN/2014 ITA NOS.522, 523 AND 1872/PN/2013 JANATA SAHAKARI BANK LTD. 2 AND ITA NO.1872/PN/2013 ASSESSMENT YEAR: 2010-11 JANATA SAHAKARI BANK LTD., 1444, SHUKRAWAR PETH, PUNE 411002 . APPELLANT PAN: AAAJJ0073G VS. THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE 11(1), PUNE . RESPONDENT ASSESSEE BY : NIKHIL PATHAK REVENUE BY : A K MODI DATE OF HEARING : 29-01-2015 DATE OF PRONOUNCEMENT : 25-02-2015 ORDER PER SUSHMA CHOWLA, JM: OUT OF THIS BUNCH OF SIX APPEALS, CROSS APPEALS FIL ED BY THE ASSESSEE AND REVENUE ARE AGAINST THE ORDER OF CIT(A)-I, PUNE, DA TED 25.09.2013, RELATING TO ASSESSMENT YEAR 2005-06 AGAINST ORDER PASSED UNDER SECTION 143(3) R.W.S. 263 OF THE INCOME TAX ACT, 1961. THE REVENUE IS IN APPEAL AGAINST THE ORDER OF CIT(A)-I, PUNE, DATED 25.09.2013 RELATING TO ASSESSMENT YEAR 2006-07 AGAINST THE ORDER PASSED UNDER SECTION 154 OF THE INCOME TAX ACT, 196 1. THE ASSESSEE FURTHER HAS FILED APPEALS AGAINST CONSOLIDATED ORDER OF CIT(A)- I, PUNE, DATED 28.12.2012 RELATING TO ASSESSMENT YEARS 2007-08 AND 2009-10 AGAINST ORD ER PASSED UNDER SECTION 143(3) OF THE ACT. FURTHER, THE ASSESSEE IS IN APP EAL AGAINST THE ORDER OF CIT(A)-I, PUNE, DATED 30.08.2013 RELATING TO ASSESSMENT YEAR 2010-11 AGAINST ORDER PASSED UNDER SECTION 143(3) OF THE ACT. 2. ALL THE APPEALS RELATING TO THE SAME ASSESSEE WE RE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR TH E SAKE OF CONVENIENCE. 3. FIRST WE SHALL TAKE THE CROSS APPEALS FILED BY T HE ASSESSEE AND THE REVENUE RELATING TO ASSESSMENT YEAR 2005-06. ITA NOS.21, 235, 236/PN/2014 ITA NOS.522, 523 AND 1872/PN/2013 JANATA SAHAKARI BANK LTD. 3 4. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL IN ITA NO.21/PN/2014:- 1] THE LEARNED CIT(A) ERRED IN NOT ALLOWING THE EN TIRE LOSS OF RS.29,29,15,335/- INCURRED BY THE ASSESSEE BANK ON ACCOUNT OF CONVERSION OF AFS SECURITIES TO HTM SECURITIES. 2] THE LEARNED CIT(A) ERRED IN ALLOWING 1/5 TH OF THE TOTAL LOSS OF RS.29,29,15,335/- WITHOUT APPRECIATING THAT THE ENT IRE LOSS INCURRED BY THE ASSESSEE BANK WAS ALLOWABLE AS A DEDUCTION WHIL E COMPUTING THE INCOME OF THE ASSESSEE BANK. 3] THE LEARNED CIT(A) ERRED IN NOT ALLOWING THE AM OUNT OF RS. 1,44,31,124/- BEING THE AMOUNT OF PREMIUM AMORTIZED ON HTM SECURITIES WITHOUT APPRECIATING THAT THE SAID AMOUN T WAS ALLOWABLE IN VIEW OF THE RBI GUIDELINES AND HENCE, THE SAME SHOU LD HAVE BEEN ALLOWED WHILE COMPUTING THE TOTAL INCOME OF THE ASS ESSEE BANK. 4] THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL. 5. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL IN ITA NO.235/PN/2014:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED COMMISSIONER OF INCOME -TAX (APPEALS) ERRED IN DIRE CTING THAT THE ASSESSEE BE ALLOWED I/5 TH OF THE DEPRECIATION (LOSS) RESULTING FROM THE SHIFTING OF SECURITIES FROM THE AFS CATEGORY TO HTM CATEGORY ONLY ON THE GROUND THAT AS PER THE RBI CIRCULAR THE ASSESSE E WAS REQUIRED TO AMORTIZE THE RESULTANT DEPRECIATION (LOSS) OVER A P ERIOD OF FIVE YEARS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN FAILI NG TO APPRECIATE THAT SECURITIES IN THE HTM CATEGORY ARE IN THE NATU RE OF CAPITAL ASSETS AND, THEREFORE, ANY LOSS PERTAINING THERETO COULD B E ALLOWED AS DEDUCTION ONLY AT THE TIME OF TRANSFER OF SALE OR S ALE OF SUCH SECURITIES AND THAT TOO IN THE COMPUTATION OF INCOME UNDER THE HEAD 'CAPITAL GAINS' AND NOT IN ANY OTHER MANNER. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED COMMISSIONER OF INCOME-TAX ERRED IN ALLOWING I/5 TH OF THE IMPUGNED DEPRECIATION MERELY BECAUSE AS PER THE RBI CIRCULAR THE ASSESSEE WAS TO AMORTIZE DEPRECIATION (LOSS) FOR OVER A PERIOD O F FIVE YEARS, AND IN GROSS DISREGARD OF THE FACT THAT A CIRCULAR ISSUED BY THE RBI CANNOT SUPERSEDE THE INCOME-TAX ACT, 1961, AND, THERE IS N O PROVISION IN THE INCOME-TAX ACT, 1961 WHICH RECOGNIZES OR PERMITS TH E IMPUGNED AMORTIZATION. 4 THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND ANY OR ALL THE GROUNDS OF APPEAL. 6. THE GROUNDS OF APPEAL NO.1 RAISED BY THE ASSESSE E IS AGAINST THE NON- ALLOWANCE OF LOSS ON ACCOUNT OF CONVERSION OF AFS S ECURITIES TO HTM SECURITIES AMOUNTING TO RS.29,29,15,335/-. VIDE GROUND OF APP EAL NO.2, THE ASSESSEE IS AGGRIEVED BY THE ORDER OF CIT(A) IN ALLOWING ONLY 1 /5 TH OF THE TOTAL LOSS IN THE YEAR ITA NOS.21, 235, 236/PN/2014 ITA NOS.522, 523 AND 1872/PN/2013 JANATA SAHAKARI BANK LTD. 4 UNDER APPEAL AND THOUGH AS PER THE ASSESSEE, THE EN TIRE LOSS WAS ALLOWABLE AS A DEDUCTION. 7. THE GRIEVANCE OF THE REVENUE VIDE GROUNDS OF APP EAL NOS.1 TO 3 IS AGAINST THE ALLOWANCE OF 1/5 TH OF THE LOSS RESULTING FROM SHIFTING OF SECURITIES FROM AFS TO HTM CATEGORY. 8. THE BRIEF FACTS OF THE CASE ARE THAT, ORIGINAL A SSESSMENT WAS COMPLETED VIDE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) OF THE ACT ON A NET LOSS OF RS.25,73,01,810/- VIDE ORDER DATED 26.12.2007. THE CIT ON PERUSAL OF THE ASSESSMENT RECORDS NOTED THAT CERTAIN ISSUES WERE N OT CONSIDERED BY THE ASSESSING OFFICER IN THE ORIGINAL ASSESSMENT PROCEEDINGS AND THE ORDER OF THE ASSESSING OFFICER WAS FOUND TO BE ERRONEOUS AND PREJUDICIAL TO THE IN TEREST OF REVENUE ON (I) DEPRECIATION LOSS ON INVESTMENT AMORTIZED AT RS.29, 29,15,335/- WAS ALLOWED, (II) SUM OF RS.1,44,31,124/- DEBITED ON ACCOUNT OF PREMIUM O N INVESTMENT AMORTIZED, AND (III) SUM OF RS.5,15,25,300/- WAS DEBITED ON ACCOUNT OF D EPRECIATION ON INVESTMENTS OTHERS, BEING LOSS ON SALE OF SECURITIES. AS PER T HE CIT, THE SAID LOSS WAS WRONGLY ALLOWED AS BUSINESS LOSS AS HTM SECURITIES WERE IN THE NATURE OF CAPITAL ASSETS AND LOSS INCURRED ON SALE OF THOSE SECURITIES WAS A CAP ITAL LOSS. CONSEQUENT THERETO, THE CIT-I, PUNE PASSED ORDER UNDER SECTION 263 OF THE A CT, DATED 31.03.2010 AND THE ISSUES WERE SET-ASIDE TO THE FILE OF ASSESSING OFFI CER FOR EXAMINATION. THE ASSESSING OFFICER IN THE SECOND ROUND OF ASSESSMENT PROCEEDIN GS IN RELATION TO THE ISSUE OF DEPRECIATION (LOSS) ON INVESTMENTS AMORTIZED AT RS. 29,29,15,335/- NOTED THAT THE ASSESSEE HAD SHIFTED AFS SECURITIES TO HTM SECURITI ES. DURING SHIFTING OF THE SAME, THE ASSESSEE HAD VALUED THE INVESTMENT AT THE MARKE T RATE PREVAILING ON THE DATE OF SHIFTING WHICH HAD RESULTED IN THE LOSS, WHICH WAS DEBITED TO PROFIT & LOSS ACCOUNT. THE ASSESSING OFFICER NOTED THAT AS PER RBI GUIDELI NES, THE BANKS WERE ALLOWED TO SHIFT SECURITIES FROM ONE CATEGORY TO THE OTHERS AN D ON SUCH SHIFTING, IF IT RESULTS IN ANY DEPRECIATION IN VALUE OF INVESTMENTS, THE SAME CAN BE CLAIMED AS DEDUCTION IN THE PROFIT & LOSS ACCOUNT. HOWEVER, UNDER THE INCOME-T AX ACT, LOSS ARISING ON SUCH SHIFTING OF SECURITIES FROM AFS TO HTM SECURITIES, WAS NOT AN ALLOWABLE DEDUCTION. CONSEQUENTLY, THE LOSS OF RS.29,29,15,335/- WAS DIS ALLOWED. ITA NOS.21, 235, 236/PN/2014 ITA NOS.522, 523 AND 1872/PN/2013 JANATA SAHAKARI BANK LTD. 5 9. THE SECOND ISSUE OF AMOUNT OF RS.1.44 CRORES DEB ITED ON ACCOUNT OF PREMIUM ON INVESTMENT AMORTIZED WAS ALSO IN ACCORDANCE WITH THE RBI CIRCULARS. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE PREMIUM ON INVESTMENT AMORTIZED WAS REGARDING HTM SECURITIES WHICH ARE IN THE NATURE OF CAPITAL ASSETS AND THEY HAD TO BE VALUED AT COST ONLY, HENCE, THE DEDUCTION WAS NOT A LLOWED TO THE ASSESSEE. 10. ANOTHER ADDITION WAS MADE BY THE ASSESSING OFFI CER ON ACCOUNT OF AMOUNT DEBITED TO PROFIT & LOSS ACCOUNT UNDER THE HEAD DEP RECIATION ON INVESTMENTS OTHERS AT RS.5.15 CRORES. THE PLEA OF THE ASSESSEE WAS TH AT THE SAID LOSS DID NOT RELATE TO HTM SECURITIES, BUT INCLUDED TWO TYPES OF LOSS I.E. ONE FROM SHIFTING HFT TO AFS CATEGORY AND THE SECOND RELATING TO LOSS SUFFERED O N SALE OF SECURITIES. SINCE THE LOSS HAD ARISEN ON SHIFTING FROM HFT TO AFS CATEGORY, TH E SAME WAS ALLOWED BY THE ASSESSING OFFICER. 11. BEFORE THE CIT(A), THE LEARNED AUTHORIZED REPRE SENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE ORDER PASSED BY THE CIT UNDER SECTION 263 OF THE ACT WAS CHALLENGED BEFORE THE PUNE BENCH OF THE TRIBUNAL AN D THE SAID APPEAL WAS DECIDED VIDE ORDER DATED 31.05.2013. IT WAS FURTHER POINTE D OUT BY HIM THAT THE TRIBUNAL HAD ALLOWED THE ASSESSEE TO CLAIM DEPRECIATION / LOSS A RISING ON CONVERSION OF THE CATEGORY OF SECURITIES FROM AFS TO HTM TO THE EXTEN T OF 1/5 TH EACH YEAR FOR A PERIOD OF FIVE YEARS. THE LEARNED COUNSEL, DESPITE THE ORDER OF TRIBUNAL, FURTHER STRESSED THAT THE SHIFTING OF SECURITIES WAS AS PER THE GUIDELINE S OF RBI AND THE LOSS ON INVESTMENT AMORTIZED SHOULD BE ALLOWED IN ENTIRELY IN ASSESSME NT YEAR 2005-06. WITH REGARD TO THE OTHER ISSUE OF DISALLOWANCE OF AMORTIZED PREMIU M ON HTM INVESTMENT AMOUNTING TO RS.1,44,31,124/, IT WAS POINTED OUT BY THE LEARN ED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THAT THE TRIBUNAL HAD DISALLOWED THE C LAIM OF THE ASSESSEE IN ITS ENTIRETY. HOWEVER, THE CLAIM WAS MADE TO ALLOW THE SAID EXPENDITURE IN ENTIRETY. THE CIT(A) IN LINE WITH THE ORDER OF THE TRIBUNAL IN IT A NO.819/PN/2010 RELATING TO ASSESSMENT YEAR 2005-06 VIDE ORDER DATED 31.05.2013 DIRECTED THE ASSESSING OFFICER TO ALLOW 1/5 TH OF THE TOTAL DEPRECIATION LOSS OF RS.29.29 CRORES FOR THE YEAR UNDER CONSIDERATION. IN OTHER WORDS, DEPRECIATION OF RS. 5,85,83,066/- WAS DIRECTED TO BE ALLOWED IN THE HANDS OF THE ASSESSEE. ON THE OTHER ISSUE OF AMORTIZATION OF PREMIUM ITA NOS.21, 235, 236/PN/2014 ITA NOS.522, 523 AND 1872/PN/2013 JANATA SAHAKARI BANK LTD. 6 ON HTM SECURITIES, THE CIT(A) REFERRED TO THE RATIO LAID DOWN BY THE HONBLE APEX COURT IN SOUTHERN TECHNOLOGIES LTD. VS. JCIT (2010) 320 ITR 577 (SC) AND POINTED OUT THAT THE RBI GUIDELINES OR THE PRUDENTIAL NORMS ISSUED BY THE RBI WERE NOT INTENDED TO REGULATE THE INCOME-TAX LAWS. CONSEQUE NTLY, THE DISALLOWANCE OF AMORTIZATION OF PREMIUM ON INVESTMENTS OF RS.1.44 C RORES WAS UPHELD BY THE CIT(A). 12. THE ASSESSEE IS IN APPEAL AGAINST BOTH THE ADDI TIONS MADE BY THE CIT(A). THE REVENUE HAS ALSO CHALLENGED THE DIRECTIONS OF C IT(A). 13. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE A SSESSEE POINTED OUT THAT THE CIT(A) HAD APPLIED THE RATIO LAID DOWN BY THE TRIBU NAL IN THE ORDER PASSED UNDER SECTION 263 OF THE ACT AND DISALLOWED 1/5 TH OUT OF TOTAL LOSS CLAIMED ON TRANSFER OF SECURITIES FROM AFS TO HTM. IN RESPECT OF THE SECO ND ISSUE I.E. AMORTIZED PREMIUM ON HTM SECURITIES, THE LEARNED AUTHORIZED REPRESENT ATIVE FOR THE ASSESSEE POINTED OUT THAT UPTO ASSESSMENT YEAR 2006-07, THE ASSESSEE WAS VALUING THE SAME AT FACE VALUE OR COST, WHICHEVER WAS LESS AND BASICALLY THE SAID SECURITIES WERE BEING VALUED AT COST. HOWEVER, FROM ASSESSMENT YEAR 2007-08, TH EY WERE VALUED AT COST OF MARKET VALUE, WHICHEVER WAS LESS. 14. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE PLACED RELIANCE ON THE ORDERS OF AUTHORITIES BELOW. 15. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE FIRST ISSUE ARISING IN THE PRESENT APPEAL IS IN RELATION TO THE LOSS ARISEN ON SHIFTING OF SECURITIES FROM CATEGORY OF AFS TO HTM AS PER THE RBI GUIDELIN ES ISSUED ON THIS ACCOUNT. THE DISALLOWANCE HAS BEEN MADE IN THE HANDS OF THE ASSE SSEE PURSUANT TO THE DIRECTIONS OF THE CIT-I, PUNE VIDE ORDER PASSED UNDER SECTION 263 OF THE ACT. THE ASSESSEE HAD APPEALED AGAINST THE ORDER PASSED UNDER SECTION 263 OF THE ACT AND THE TRIBUNAL VIDE ORDER DATED 31.05.2013 HAD AFTER CONSIDERING THE IS SUE OF CLAIM OF LOSS ARISEN ON THE SHIFTING OF SECURITIES FROM AFS TO HTM HAD HELD THA T THE SAID DEPRECIATION LOSS IS TO BE AMORTIZED OVER A PERIOD OF FIVE YEARS. THE DIRECTI ONS OF THE TRIBUNAL WERE AS UNDER:- 9. W E THEREFORE, HOLD THAT THE METHOD ADOPTED BY THE AS SESSEE FOR VALUING THE SECURITIES WHILE CHANGING THE CATEGORY I. E. FROM AFS TO HTM IS AS PER THE RBI CIRCULAR AND HENCE THIS IS THE ACCEPTED METHOD. AT THE SAME TIME, WE FIND THAT AS PER RBI CIRCULAR ASSESSEE IS TO AMO RTIZE DEPRECIATION (LOSS) FOR ITA NOS.21, 235, 236/PN/2014 ITA NOS.522, 523 AND 1872/PN/2013 JANATA SAHAKARI BANK LTD. 7 THE PERIOD OF FIVE YEARS. IN THIS CASE THE ASSESSEE IN THE P & L A/C, DEBITED L/5 TH OF THE DEPRECIATION (LOSS) BUT BY FILING REVISED R ETURN THE ENTIRE DEPRECIATION (LOSS) HAS BEEN CLAIMED. IN OUR OPINIO N, THAT IS NOT AS PER THE RBI CIRCULAR. WE THEREFORE, UPHOLD THE ORDER OF THE LD. CIT TO THE EXTENT THAT ENTIRE DEPRECIATION (LOSS) CLAIMED BY THE ASSESSEE ON CONV ERSION AT THE TIME OF CHANGING CATEGORY OF THE SECURITIES FROM AFS TO HTM IS NOT AS PER LAW BUT THE ASSESSEE AT THE MOST CAN CLAIM DEPRECIATION (LOSS) TO THE EXTENT OF 1/5 TH EACH YEAR FOR THE PERIOD OF JIVE YEARS. WE ACCORDINGLY D IRECT THE AO TO ALLOW THE DEPRECIATION (LOSS) TO THE EXTENT OF 1/5 TH OF THE TOTAL DEPRECIATION (LOSS) OF RS.29,29,15,335/- AND TO THE EXTENT WE HOLD THAT TH E ASSESSMENT ORDER IS ERRONEOUS. 16. IN LINE WITH THE DIRECTIONS OF THE TRIBUNAL WHI CH HAVE NOT BEEN DISTURBED BY ANY OF THE HIGHER FORUMS, WE HOLD THAT THE ASSESSEE IS ONLY ENTITLED TO THE CLAIM TO THE EXTENT OF 1/5 TH OF THE DEPRECIATION (LOSS) ARISING ON TRANSFER OF SECURITIES FROM AFS TO HTM. THE CIT(A) HAVING FOLLOWED THE DIRECTIONS OF THE TRIBUNAL, CANNOT BE FAULTED WITH. ACCORDINGLY, WE UPHOLD THE ORDER OF CIT(A) I N THIS REGARD AND DISMISS THE GROUNDS OF APPEAL NOS.1 AND 2 RAISED BY THE ASSESSE E AND GROUNDS OF APPEAL NOS.1 TO 3 RAISED BY THE REVENUE. 17. THE ISSUE IN GROUND OF APPEAL NO.3 RAISED BY TH E ASSESSEE BEFORE US IS WITH REGARD TO NON-ALLOWANCE OF PREMIUM AMORTIZED ON HTM SECURITIES AMOUNTING TO RS.1,44,31,124/-. THE SAID ISSUE ALSO AROSE BEFORE THE TRIBUNAL (SUPRA) AND VIDE ORDER DATED 31.05.2013, IT WAS HELD AS UNDER:- 10. SO FAR AS THE SECOND ISSUE IS CONCERNED WHICH IS ALSO THE BASIS FOR EXERCISING THE REVISIONARY JURISDICTION, WE FIND TH AT THERE IS FORCE IN THE ARGUMENT OF THE LD. CIT (DR). THE ASSESSEE CONSISTE NTLY TOOK THE STAND THAT EVEN THE SECURITIES HELD IN THE CATEGORY OF HTM ARE PART OF THE STOCK IN TRADE. THE ASSESSEE'S CONTENTION THAT THE PREMIUM IS TO BE SEPARATED FROM THE FACE VALUE OF SECURITIES. WE ARE UNABLE TO ACCEPT THE SA ID CONTENTION OF THE ASSESSEE. IF THE ASSESSEE HAS PAID PREMIUM AS A COS T OF ACQUISITION OF THE SECURITIES, IT SHOULD REMAIN AS A COMPOSITE COST FO R ACQUIRING THE SECURITIES SUBJECT TO ITS VALUATION AT THE END OF EACH YEAR AS PRESCRIBED BY RBI AND NO SEPARATE TREATMENT CAN BE GIVEN TO THE PREMIUM PAID BY THE ASSESSEE. FOR EXAMPLE, IF THE ASSESSEE HAS ACQUIRED SECURITIES HA VING FACE VALUE OF RS.100/-FOR RS, 110/- SO THE COST OF ACQUISITION OF THE SAID SECURITY IS RS.110/- AS THAT WILL MERGE WITH THE STOCK IN TRADE. THE ASS ESSEE CAN VALUE THE SECURITIES AT THE END OF THE YEAR AS PER THE CONSIS TENT METHOD FOLLOWED BY THE ASSESSEE I.E. COST OR MARKET PRICE WHICHEVER IS LOW BUT NO SEPARATE TREATMENT CAN BE GIVEN TO RS.10/- WHICH IS THE PRICE OVER AND ABOVE THE FACE VALUE OF THE SECURITY. WE THEREFORE, UPHOLD THE ORDER OF THE LD. CIT ON THE SECOND ISSUE. THE A. O. WAS WRONG IN ALLOWING CLAIM OF THE ASSESS EE IN RESPECT OF AMORTIZATION OF THE PREMIUM PAID FOR SECURITIES TO THE EXTENT OF RS.1,45,31,124/-. ACCORDINGLY THE ORDER PASSED BY THE LD. CIT U/S. 263 IS MODIFIED WITH A DIRECTION TO A.O. TO IMPLEMENT THE ORDER U/S. 263 AS DIRECTED IN THIS ORDER. 18. THE FACTS RELATING TO THE ISSUE ARE THAT AS PER THE GUIDELINES OF RBI, THE BANKS ARE ENTITLED TO KEEP ITS INVESTMENTS UNDER THREE CA TEGORIES I.E. HELD TO MATURITY ITA NOS.21, 235, 236/PN/2014 ITA NOS.522, 523 AND 1872/PN/2013 JANATA SAHAKARI BANK LTD. 8 (HTM), AVAILABLE FOR SALE (AFS) AND HELD FOR TRADIN G (HFT). THE HTM SECURITIES ARE IN THE NATURE OF PREMIUM INVESTMENT AND ARE TO BE KEPT BY THE BANKS STILL THE DATE OF MATURITY. HOWEVER, THE AFS AND HFT SECURITIES A RE IN THE NATURE OF CURRENT INVESTMENTS AND CAN BE SOLD BY THE BANKS BEFORE THE DATE OF MATURITY. AS PER THE GUIDELINES OF RBI WITH REGARD TO CURRENT AND PERMAN ENT INVESTMENTS ISSUED FROM TIME TO TIME, THE BANKS ARE PERMITTED TO CHANGE INVESTME NTS FROM ONE CATEGORY TO THE OTHER, SUBJECT TO THE CONDITION THAT OVERALL RATIOS OF CURRENT TO PERMANENT INVESTMENTS ARE MAINTAINED AS PER THE RBI REQUIREMENTS. THE GU IDELINES ALSO PRESCRIBE THAT THE INVESTMENTS CLASSIFIED AS HTM SECURITIES ARE TO BE CARRIED AT ACQUISITION COST. IN THE FACTS OF THE PRESENT CASE, THE ASSESSEE HAD PARKED FUNDS IN HTM SECURITIES AND DURING THE YEAR, THE ASSESSEE HAD NOT SHIFTED THE S ECURITIES TO ANY OTHER CATEGORY. THE PREMIUM PAID ON GOVERNMENT SECURITIES WERE AMOR TIZED IN THE BOOKS OF ACCOUNT AND THE PLEA OF THE ASSESSEE WAS THAT THE SAID PREM IUM WAS TO BE SEPARATED FROM THE FACE VALUE OF THE SECURITIES AND BOOKED AS EXPE NDITURE. THE TRIBUNAL IN THE CASE OF THE ASSESSEE HAD HELD THAT EVEN WHERE THE ASSESS EE HAD PAID PREMIUM AS COST OF ACQUISITION OF THE SECURITIES, THE SAME SHOULD REMA IN AS COMPOSITE COST FOR ACQUIRING THE SECURITIES, SUBJECT TO VALUATION AT THE END OF EACH YEAR AS PRESCRIBED BY THE RBI AND NO SEPARATE TREATMENT COULD BE GIVEN TO THE PRE MIUM PAID BY THE ASSESSEE. ADMITTEDLY, THE ASSESSEE WAS FOLLOWING THE METHOD O F VALUING ITS HTM SECURITIES AT FACE VALUE OR COST. IN VIEW THEREOF, WE FIND NO ME RIT IN THE GROUND OF APPEAL NO.3 RAISED BY THE ASSESSEE IN THIS REGARD. THE CIT(A) HAD DISMISSED THE CLAIM OF THE ASSESSEE IN LINE WITH THE ORDER OF TRIBUNAL IN APPE AL AGAINST THE ORDER OF REVISION PASSED UNDER SECTION 263 OF THE ACT ON THIS COUNT. UPHOLDING THE ORDER OF CIT(A), WE FIND NO MERIT IN THE GROUND OF APPEAL NO.3 RAISED B Y THE ASSESSEE AND THE SAME IS DISMISSED. 19. AS A RESULT, BOTH THE APPEALS OF ASSESSEE AND T HE REVENUE RELATING TO ASSESSMENT YEAR 2005-06 ARE DISMISSED. 20. THE REVENUE IN ITA NO.236/PN/2014 HAS RAISED TH E FOLLOWING GROUNDS OF APPEAL:- 1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LE ARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN CANCELLING THE ORD ER PASSED U/S.154 OF THE ITA NOS.21, 235, 236/PN/2014 ITA NOS.522, 523 AND 1872/PN/2013 JANATA SAHAKARI BANK LTD. 9 ACT BY THE ASSESSING OFFICER HOLDING THAT THE MISTA KE SOUGHT TO BE RECTIFIED WAS NOT A PATENT MISTAKE APPARENT FROM RECORDS. 2 ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEA RNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN NOT APPRECIATING T HAT THE ASSESSEE HAD ITSELF ADDED BACK THE PREMIUM ON INVESTMENT AMORTIZED FOR THE A.Y.2007-08 AND A.Y.2008-09 IN THE COMPUTATION OF INCOME WHILE THE ASSESSING OFFICER HAD DISALLOWED IT FOR A.Y.2005-06. 3 ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEA RNED COMMISSIONER OF INCOME-TAX (APPEALS) RELYING UPON THE BINDING DE CISION OF THE HON'BLE INCOME-TAX APPELLATE TRIBUNAL IN ASSESSEE'S OWN CAS E FOR A.Y.2005-06 ALLOWED THE APPEAL IN FAVOUR OF THE ASSESSEE RATHER THAN CANCELLING THE ORDER U/S.154 OF THE ACT PASSED BY THE ASSESSING OFFICER. 4 ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEA RNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN HOLDING THAT MEREL Y BECAUSE THE ASSESSEE HAD FILED AN APPEAL AGAINST SUCH ADDITION WHICH HAS BEEN ALLOWED IN HIS FAVOUR, THE ISSUE HAS BECOME DEBATABLE NOT COVERED U/ S. 154 OF THE ACT. 5 FOR THESE AND SUCH OTHER GROUNDS AS MAY BE URGED A T THE TIME OF HEARING, THE ORDER OF THE LEARNED CIT (APPEALS) MAY BE VACATED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 6 THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND ANY OR ALL THE GROUNDS OF APPEAL. 21. THE BRIEF FACTS RELATING TO THE APPEAL ARE THAT ORDER UNDER SECTION 154 OF THE ACT WAS PASSED BY THE ASSESSING OFFICER, PURSUANT T O THE ORDER PASSED BY THE ASSESSING OFFICER IN ASSESSMENT YEAR 2005-06 UNDER SECTION 143(3) R.W.S 263 OF THE ACT, DATED 23.12.2010. ON VERIFICATION OF THE ASSE SSMENT FOLDER, IT WAS NOTED THAT THE ASSESSEE HAD DEBITED PREMIUM ON INVESTMENT AMORTIZE D AT RS.3,90,09,806/-. THE ASSESSING OFFICER NOTED THAT THE SAID PREMIUM ON IN VESTMENT AMORTIZED WAS DISALLOWED IN ASSESSMENT YEAR 2005-06 AND THE SAME HAS BEEN ADDED BY THE ASSESSEE WHILE COMPUTING THE TOTAL INCOME FOR ASSES SMENT YEAR 2007-08 AND 2008- 09. CONSEQUENT THERETO, THE ASSESSING OFFICER PASS ED AN ORDER UNDER SECTION 154 OF THE ACT AND ADDED BACK PREMIUM ON INVESTMENT AMORTI ZED AT RS.3,90,09,806/- TO THE TOTAL INCOME OF THE ASSESSEE. 22. IN APPEAL, THE CIT(A) HELD THAT THE ISSUE RELAT ING TO THE ADMISSIBILITY OF AMORTIZATION OF PREMIUM AS DEDUCTION UNDER INCOME T AX ACT WAS HIGHLY DEBATABLE AND CONTENTIOUS IN NATURE. REFERENCE WAS MADE TO T HE RATIO LAID DOWN BY THE PUNE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.819/PN/2010 RELATING TO ASSESSMENT YEAR 2005-06, WHEREIN VIDE ORDER DATED 3 1.05.2013, THE ASSESSING OFFICER WAS DIRECTED TO ALLOW THE EXPENDITURE TO TH E EXTENT OF 1/5 TH OF THE TOTAL ITA NOS.21, 235, 236/PN/2014 ITA NOS.522, 523 AND 1872/PN/2013 JANATA SAHAKARI BANK LTD. 10 DEPRECIATION LOSS. HOWEVER, THE TRIBUNAL IN THE CA SE OF ANOTHER ASSESSEE IN SUBSEQUENT ORDER DATED 05.08.2013 IN THE CASE OF KA LLAPPANNA AWADE ICHALKARANJI JANATA SAHAKARI BANK LTD. IN ITA NO.449/PN/2012, RE LATING TO ASSESSMENT YEAR 2008- 09, HAD TAKEN A CONTRARY VIEW AND THE ADDITION MADE ON ACCOUNT OF AMORTIZATION OF HTM SECURITIES WAS DELETED. THE CIT(A) FURTHER OBS ERVED THAT MERELY BECAUSE THE ASSESSEE HIMSELF HAD ADDED PREMIUM ON INVESTMENT AM ORTIZED WHILE COMPUTING THE TOTAL INCOME FOR ASSESSMENT YEARS 2007-08 AND 2008- 09, DOES NOT MAKE THE ISSUE PLAIN AND NOT DEBATABLE AND THE SAME COULD BE SUBJE CT MATTER OF RECTIFICATION UNDER SECTION 154 OF THE ACT. RELIANCE IN THIS REGARD WA S PLACED ON THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN VOLKART BROTHERS VS. I TO REPORTED IN 82 ITR 50 (SC). THUS, THE ORDER PASSED BY THE ASSESSING OFFICER UND ER SECTION 154 OF THE ACT WAS CANCELLED BY THE CIT(A). 23. THE REVENUE IS IN APPEAL AGAINST THE SAID CANCE LLATION OF THE ORDER PASSED UNDER SECTION 154 OF THE ACT. 24. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE POINTED OUT THAT THE AMENDMENT WAS MADE BY THE ASSESSING OFFICER TO THE ORIGINAL ASSESSMENT ORDER PASSED ONLY IN LINE WITH THE DIRECTIONS OF THE TRIB UNAL AND ALSO BECAUSE OF ASSESSEES NON-CLAIM IN ASSESSMENT YEARS 2007-08 AND 2008-09. 25. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE A SSESSEE POINTED OUT THAT THE ORDER UNDER SECTION 154 OF THE ACT WAS PASSED PRIOR TO THE PASSING OF ORDER OF TRIBUNAL IN THE ASSESSEES OWN CASE. IN APPEAL AGA INST ORDER PASSED UNDER SECTION 263 OF THE ACT, THE CONTENTION OF THE LEARNED AUTHO RIZED REPRESENTATIVE FOR THE ASSESSEE WAS THAT THE ISSUE WAS DEBATABLE AS THE PR ESENT ISSUE WAS PENDING BEFORE THE HONBLE HIGH COURT. WITH REGARD TO THE WRITING BACK THE SAID AMOUNT IN ASSESSMENT YEARS 2007-08 AND 2008-09 IN THE COMPUTA TION OF INCOME ITSELF, THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THERE WAS CHANGE IN THE METHOD OF VALUATION AND HENCE THE SAM E WAS ADDED BACK. RELIANCE WAS PLACED ON THE RATIO LAID DOWN BY THE HONBLE CA LCUTTA HIGH COURT IN 130 ITR 710 (CAL) AND ALSO ON THE RATIO LAID DOWN BY THE HONBL E SUPREME COURT IN MEPCO INDUSTRIES LTD. VS. CIT & ANOTHER (2009) 319 ITR 20 8 (SC). ITA NOS.21, 235, 236/PN/2014 ITA NOS.522, 523 AND 1872/PN/2013 JANATA SAHAKARI BANK LTD. 11 26. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. UNDER THE PROVISIONS OF SECTION 154 OF THE ACT, AN ORDER OF A SSESSMENT OR AN INTIMATION ISSUED UNDER SECTION 143(1) OF THE ACT OR SECTION 200A(1) OF THE ACT OR ANY OTHER ORDER PASSED BY ANY INCOME TAX AUTHORITY REFERRED TO IN S ECTION 116 OF THE ACT, CAN BE AMENDED WITH A VIEW TO RECTIFY ANY MISTAKE APPARENT FROM THE RECORD. THE FIRST STEP TO BE SEEN BEFORE INVOKING THE PROVISIONS OF SECTIO N 154 OF THE ACT IS THAT THERE IS A MISTAKE APPARENT FROM THE RECORD WHICH CAN BE RECTI FIED BY THE INCOME TAX AUTHORITY WHO HAD PASSED THE SAID ORDER UNDER THE PROVISIONS OF THE ACT. IT HAS BEEN HELD BY THE COURTS TIME AND AGAIN THAT THE DEBATABLE ISSUES ARE NOT OPEN TO RECTIFICATION UNDER SECTION 154 OF THE ACT. THE HONBLE SUPREME COURT IN VOLKART BROTHERS VS. ITO (SUPRA) HAD HELD AS UNDER:- 'A MISTAKE APPARENT FROM THE RECORD MUST BE AN OBVI OUS AND PATENT MISTAKE AND NOT SOMETHING WHICH CAN BE ESTABLISHED BY A LON G-DRAWN PROCESS OF REASONING ON POINTS ON WHICH THERE MAY CONCEIVABLY BE TWO OPINIONS. A DECISION ON A DEBATABLE POINT OF LAW IS NOT A MISTA KE APPARENT FROM THE RECORD. THE POWER OF THE OFFICERS MENTIONED IN S. 154 OF TH E IT. ACT, 1961 TO CORRECT 'ANY MISTAKE APPARENT FROM THE RECORD' IS UNDOUBTED LY NOT MORE THAN THAT OF THE HIGH COURT TO ENTERTAIN A WRIT PETITION ON THE BASIS OF AN 'ERROR APPARENT ON THE FACE OF THE RECORD'. 27. THE MISTAKE APPARENT FROM THE RECORD MUST BE OB VIOUS AND PATENT MISTAKE. FURTHER, THE DECISION ON A DEBATABLE POINT OF LAW I S NOT A MISTAKE APPARENT FROM RECORD. IN THE FACTS OF THE PRESENT CASE, THE ASSE SSING OFFICER IN THE ORIGINAL ROUND OF ASSESSMENT PROCEEDINGS HAD ALLOWED THE CLAIM OF DED UCTION ON ACCOUNT OF PREMIUM ON INVESTMENT AMORTIZED AT RS.3,90,09,806/-. HOWEV ER, PURSUANT TO THE ORDER PASSED BY THE ASSESSING OFFICER RELATING TO ASSESSMENT YEA R 2005-06 UNDER SECTION 143(3) R.W.S. 263 OF THE ACT, THE SAID AMOUNT WAS ADDED BA CK TO THE INCOME OF THE ASSESSEE WHILE PASSING THE ORDER UNDER SECTION 154 OF THE AC T. THE PLEA OF THE ASSESSEE IN THIS REGARD WAS THAT THE ISSUE BEING DEBATABLE COULD NOT BE AMENDED BY RESORTING TO THE PROVISIONS OF SECTION 154 OF THE ACT. THE FIRST PL EA RAISED BY THE ASSESSEE IN THIS REGARD WAS THAT THOUGH THE TRIBUNAL IN THE APPEAL F ILED AGAINST THE ORDER PASSED UNDER SECTION 263 OF THE ACT, HAD DIRECTED THE ASSE SSING OFFICER TO ALLOW ONLY 1/5 TH OF THE TOTAL EXPENDITURE AS DEDUCTION, BUT THE SAID OR DER WAS PASSED ON 31.05.2013, WHEREAS THE ASSESSING OFFICER HAD PASSED THE ORDER UNDER SECTION 154 OF THE ACT ON 19.03.2013 I.E. PRIOR TO PASSING OF THE ORDER BY TH E TRIBUNAL. THE SECOND ASPECT ITA NOS.21, 235, 236/PN/2014 ITA NOS.522, 523 AND 1872/PN/2013 JANATA SAHAKARI BANK LTD. 12 RAISED BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE WAS THAT THE SUBSEQUENT DECISION OF THE TRIBUNAL COULD NOT BE AP PLIED TO PASS AN ORDER OF AMENDMENT / RECTIFICATION UNDER SECTION 154 OF THE ACT. ANOTHER ASPECT RAISED BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE WAS THAT THE ISSUE WAS DEBATABLE AS THE ASSESSEE ITSELF WAS IN APPEAL AGAI NST THE ORDER OF TRIBUNAL RELATING TO ASSESSMENT YEAR 2005-06, WHICH WAS PENDING BEFOR E THE HONBLE HIGH COURT. OUR ATTENTION WAS ALSO DRAWN TO THE ORDER OF CIT(A) WHI CH HAD REFERRED TO THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE, WHEREIN ONLY 1/5 TH OF THE PREMIUM AMOUNT AMORTIZED ON HTM SECURITIES WAS ALLOWED AS A DEDUCT ION. HOWEVER, IN THE CASE OF ANOTHER ASSESSEE, THE TRIBUNAL HAD ALLOWED THE SAID AMOUNT IN TOTALITY AS A DEDUCTION. 28. IN THE TOTALITY OF THE ABOVE SAID FACTS AND CIR CUMSTANCES, WE FIND MERIT IN THE PLEA OF THE ASSESSEE IN THIS REGARD. IN ORDER TO R ESORT TO THE PROVISIONS OF SECTION 154 OF THE ACT, THE FIRST STEP TO BE CONSIDERED IS WHET HER THE AMENDMENT SOUGHT FOR IS PATENT AND GLARING MISTAKE APPARENT FROM THE RECORD . THE ADMISSIBILITY OF AMORTIZATION OF PREMIUM ON HTM SECURITIES AS A DEDU CTION OR NOT UNDER THE INCOME TAX ACT IS A DEBATABLE ISSUE AS IS CLEAR FROM THE F ACT THAT THE PUNE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE VIDE ORDER DATED 31 .05.2013 HAD DIRECTED THE ASSESSING OFFICER TO ALLOW 1/5 TH OF THE SAID EXPENDITURE. FURTHER, THE TRIBUNAL IN ANOTHER DECISION DATED 05.08.2013 HAD ALLOWED THE S AID EXPENDITURE IN TOTALITY. THE ASSESSEE IS ALSO IN APPEAL AGAINST THE ORDER PASSED BY THE TRIBUNAL IN ORDER PASSED UNDER SECTION 263 OF THE ACT AND THE MATTER IS PEND ING BEFORE THE HONBLE HIGH COURT AND HENCE, THE ISSUE BECAME DEBATABLE. FURTHER, IN ANY CASE, THE ASSESSING OFFICER HAD EXERCISED THE POWERS UNDER SECTION 154 OF THE A CT PRIOR TO THE PASSING OF ORDER OF THE TRIBUNAL DATED 31.05.2013. SUCH EXERCISE OF TH E POWER BY THE ASSESSING OFFICER UNDER SECTION 154 OF THE ACT IS INVALID. EVEN OTHE RWISE, IN ORDER TO GIVE EFFECT TO THE FINDING OF TRIBUNAL IN A YEAR DIFFERENT FROM THE YE AR UNDER CONSIDERATION, THE HONBLE SUPREME COURT IN MEPCO INDUSTRIES LTD. VS. CIT (SUP RA) HAD HELD THAT THE RIGHT TO RECTIFY MISTAKES UNDER SECTION 154 OF THE ACT COULD NOT BE INVOKED IN A CASE OF MERE CHANGE OF OPINION. IN THE FACTS OF THE CASE BEFORE THE HONBLE SUPREME COURT, THE SAID POWER WAS EXERCISED UNDER SECTION 154 OF THE A CT SUBSEQUENT TO THE DECISION OF ITA NOS.21, 235, 236/PN/2014 ITA NOS.522, 523 AND 1872/PN/2013 JANATA SAHAKARI BANK LTD. 13 HONBLE SUPREME COURT ON THE ISSUE OF SUBSIDIARY RE CEIVED AFTER COMMENCEMENT OF PRODUCTION, WAS REVENUE RECEIPT, WHICH WAS ORIGINAL LY HELD TO BE NOT TAXABLE ON THE GROUND THAT IT WAS CAPITAL RECEIPT. THE HONBLE SU PREME COURT IN MEPCO INDUSTRIES LTD. VS. CIT (SUPRA) FURTHER HELD THAT A RECTIFIABL E MISTAKE WAS A MISTAKE WHICH WAS OBVIOUS AND NOT SOMETHING WHICH HAD TO BE ESTABLISH ED BY A LONG DRAWN PROCESS OF REASONING OR WHERE TWO OPINIONS WERE POSSIBLE. A D ECISION ON A DEBATABLE POINT OF LAW COULD NOT BE TREATED AS A MISTAKE APPARENT FRO M THE RECORD. 29. FOLLOWING THE SAID PROPOSITION LAID DOWN BY THE HONBLE SUPREME COURT, WE HOLD THAT THE ORDER OF RECTIFICATION PASSED BY THE ASSESSING OFFICER IN THE PRESENT CASE UNDER SECTION 154 OF THE ACT WAS NOT VALID. UPHOLD ING THE ORDER OF CIT(A), WE DISMISS THE GROUNDS OF APPEAL RAISED BY THE REVENUE. 30. IN ITA NOS.522 AND 523/PN/2013, THE ASSESSEE HA S RAISED THE COMMON GROUNDS OF APPEAL, WHICH READ AS UNDER:- 1. THE LEARNED CIT(A) ERRED IN UPHOLDING THE ACTION OF THE LEARNED A.O. IN DISALLOWING THE DEPRECIATION OF RS. 37,11,50,795/- IN THE VALUE OF 'HELD TO MATURITY' SECURITIES CLAIMED BY THE ASSESSEE BANK. 2. THE LEARNED CIT(A) ERRED IN HOLDING THAT THE 'HTM' SECURITIES WERE IN THE NATURE OF CAPITAL ASSETS OF THE BANK AND HENCE, THE SAME WERE TO BE VALUED AT COST OF ACQUISITION AND NOT AT COST OR MARKET VALUE , WHICHEVER IS LOWER. 3. THE LEARNED CIT(A) ERRED IN HOLDING THAT THE 'H TM' SECURITIES WERE IN THE NATURE OF INVESTMENTS AND NOT STOCK IN TRADE BY STA TING THE FOLLOWING REASONS A. THE 'HTM' SECURITIES HELD BY THE ASSESSEE BANK WERE IN THE NATURE OF INVESTMENTS HAVING REGARD TO THE PRINCIPLES LAID DO WN BY CBDT CIRCULAR NO. 4 OF 2007 DATED 15.06.2007. B. THERE WERE ONLY A FEW OCCASIONS WHERE THE ASSESS EE BANK HAD SOLD THE HTM SECURITIES BEFORE MATURITY IN THE EARLIER Y EARS AND HOLDING OF THE SAME TILL MATURITY HAD RESULTED IN HANDS OME PROFITS FOR THE ASSESSEE BANK AND HENCE, THE INTENTION OF THE ASSES SEE BANK WAS TO HOLD THE HTM SECURITIES TILL MATURITY. C. IN VIEW OF THE DECISION OF HON'BLE KARNATAKA HIG H COURT IN THE CASE OF ING VYASYA BANK LTD. [ITA NO. 2886 OF 2005], THE HT M SECURITIES HELD BY THE ASSESSEE BANK WERE IN THE NATURE OF CAPITAL ASSETS. D. THE DECISION OF HON'BLE SUPREME COURT IN THE CAS E OF UCO BANK LTD. VS. CIT [240 ITR 355] WAS DISTINGUISHABLE ON FACTS AND HENCE, NOT APPLICABLE TO THE INSTANT CASE. 4. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE HTM SECURITIES HELD BY THE ASSESSEE BANK WERE IN THE NATURE OF STOCK IN TR ADE AND NOT CAPITAL ASSETS AND HENCE, FOR INCOME TAX PURPOSES, THE SAME WERE T O BE VALUED AT COST OR MARKET VALUE, WHICHEVER IS LOWER. ITA NOS.21, 235, 236/PN/2014 ITA NOS.522, 523 AND 1872/PN/2013 JANATA SAHAKARI BANK LTD. 14 5. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THA T - A. ALL THE SECURITIES PURCHASED BY A BANK ARE TO BE CONSIDERED AS PART OF THE STOCK IN TRADE FOR INCOME TAX PURPOSES. B. THE ENTRIES IN THE BOOKS OF ACCOUNTS WERE NOT DE TERMINATIVE OF THE CORRECT NATURE OF THE SECURITIES PURCHASED BY THE BANK AND HENCE, THE CLASSIFICATION OF THE SECURITIES MADE BY THE ASSESS EE IN THE BOOKS WAS NOT RELEVANT. C. THE ACTIVITY OF PURCHASE AND SALE OF SECURITIES WAS IN THE COURSE OF THE NORMAL BANKING BUSINESS OF THE ASSESSEE BANK AND HE NCE, THE SAID SECURITIES WERE IN THE NATURE OF STOCK IN TRADE. D. EVEN THOUGH THE SECURITIES WERE CLASSIFIED IN HT M CATEGORY, THE BANK WAS PERMITTED TO SELL THEM BEFORE THE MATURITY DATE AND HENCE, IT WAS NOT CORRECT TO HOLD THAT HTM SECURITIES WERE CAPITAL AS SETS OF THE ASSESSEE BANK. E. THE ISSUE INVOLVED WAS COVERED IN FAVOUR OF THE ASSESSEE BANK BY VARIOUS DECISIONS AND THE DECISIONS RELIED UPON BY THE LEARNED CIT (A) WERE DISTINGUISHABLE ON THE FACTS OF THE PRESENT CA SE. 6. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL. 31. THE ASSESSEE ALSO RAISED ADDITIONAL GROUND OF A PPEAL, WHICH READS AS UNDER:- THE ASSESSEE SUBMITS THAT WITHOUT PREJUDICE TO ITS GROUNDS OF APPEAL RAISED IN A.Y. 2005-06, IT IS SUBMITTED THAT IN THIS YEAR, 1/5 TH OF THE LOSS INCURRED OF RS.29,29,15,335/- IN A.Y. 2005-06 ON ACCOUNT OF CON VERSION OF SECURITIES FROM AFS TO HTM CATEGORY SHOULD BE ALLOWED IN ACCORDANCE WITH THE DECISION OF HONBLE ITAT, PUNE FOR A.Y. 2005-06 IN THE ASSESSEE S OWN CASE. 32. THE ASSESSEE VIDE GROUNDS OF APPEAL NOS.1 TO 5 HAS RAISED THE ISSUE OF ALLOWANCE OF DEPRECIATION LOSS OF RS.37,11,50,795/- IN ASSESSMENT YEAR 2007-08 AND RS.5,19,40,000/- IN ASSESSMENT YEAR 2009-10 ON ACCO UNT OF AMORTIZATION OF PREMIUM ON HTM SECURITIES. 33. THE BRIEF RELATING TO THE ISSUE ARE THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE CLAIMED THAT IT HAS CHANGED ITS METHOD OF VALUATION OF HTM SECURITIES AND THE SAME WERE VALUED AT COST OR MARKET VALUE, WHICH EVER WAS LESS, PRINCIPLE. THE ASSESSING OFFICER WAS OF THE VIEW THAT HTM SECURITI ES HAD TO BE VALUED AT COST ONLY AND NOT COST OR MARKET VALUE, WHICHEVER WAS LESS OR ANY OTHER PRINCIPLE. HOWEVER, AFS AND HFT SECURITIES WERE TO BE VALUED AT COST OR MARKET VALUE, WHICHEVER WAS LESS. THE PLEA OF THE ASSESSEE THAT THE CLAIM WAS MADE AS PER THE RBI GUIDELINES WAS REJECTED AS THE SAME WAS NOT ALLOWABLE UNDER IN COME TAX ACT, AS ALL THE CAPITAL ASSETS WERE TO BE VALUED AT COST ONLY AND NO PART T HEREOF COULD BE CLAIMED AS ITA NOS.21, 235, 236/PN/2014 ITA NOS.522, 523 AND 1872/PN/2013 JANATA SAHAKARI BANK LTD. 15 REVENUE EXPENDITURE IN COMPUTING THE TOTAL INCOME. PURSUANT THERETO, THE ASSESSING OFFICER DISALLOWED THE LOSS FROM DEPRECIATION ON HT M SECURITIES AT RS.37,11,50,795/- IN ASSESSMENT YEAR 2007-08 AND RS.5,19,40,000/- IN ASSESSMENT YEAR 2009-10. 34. THE CIT(A) VIDE CONSOLIDATED ORDER DECIDED THE ISSUE HOLDING THAT THE GUIDELINES OF RBI WERE ISSUED FOR THE PURPOSE OF CO NSIDERING MANAGEMENT AND CONTROL OF THE MONETARY AND CREDIT SYSTEM OF THE CO UNTRY, BUT SUCH GUIDELINES HAD NOTHING TO DO AND COULD NOT OVER WRITE THE METHOD O F COMPUTATION OF TAXABLE INCOME. RELIANCE IN THIS REGARD WAS PLACED UPON THE RATIO L AID DOWN BY THE HONBLE SUPREME COURT IN SOUTHERN TECHNOLOGIES LTD. VS. JCIT (SUPRA ). THE CIT(A) CONSIDERED THE FACT THAT THE SAID JUDGMENT RELATED TO NON-BANKING FINANCIAL COMPANY, BUT THERE WAS NO REASON AS TO WHY THE SAME RATIONALE WOULD NOT AP PLY TO THE BANKING COMPANIES. THE CIT(A) FURTHER DELIBERATING UPON THE ISSUE OBSE RVED THAT WHERE THE INVESTMENT IN QUESTION COMPRISED OF STOCK IN TRADE OF THE ASSESSE E, THE ASSESSEE WAS ENTITLED TO VALUE THE SAME AT COST OR MARKET VALUE, WHICHEVER W AS LOWER AND SUCH VALUATION COULD BE MADE IRRESPECTIVE OF THE NECESSARY ENTRIES BEING MADE IN THE BOOKS OF ACCOUNT. HOWEVER, WHERE THE INVESTMENTS WERE NOT S TOCK IN TRADE, BUT WERE HELD AS AN INVESTMENT BY THE ASSESSEE, THEN THE SAME HAD TO BE VALUED AT COST AND THE DEPRECIATION IN THE VALUE OF INVESTMENT IN QUESTION WAS NOT ALLOWABLE AS A DEDUCTION IN COMPUTING BUSINESS INCOME OF THE ASSESSEE. 35. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF CIT(A). 36. IT WAS POINTED OUT BY THE LEARNED AUTHORIZED RE PRESENTATIVE FOR THE ASSESSEE THAT ASSESSMENT YEAR 2007-08 WAS THE FIRST YEAR OF CHANGE IN THE METHOD OF ACCOUNTING AND THE HTM SECURITIES WERE VALUED AT CO ST OR MARKET VALUE, WHICHEVER WAS LOWER. THE LEARNED AUTHORIZED REPRESENTATIVE F OR THE ASSESSEE FURTHER POINTED OUT THAT AS PER THE RBI GUIDELINES, THE HTM SECURIT IES HAD TO BE VALUED AT COST OR MARKET VALUE, WHICHEVER WAS LESS AND IN THE RETURN OF INCOME AFTER VALUING THE HTM SECURITIES AT COST OR MARKET VALUE, WHICHEVER WAS L ESS, THE ASSESSEE HAD CLAIMED DEPRECIATION ON VALUE OF SECURITIES. IT WAS THE PL EA OF LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THAT IT WAS A BONAF IDE CHANGE AND THIS CHANGE IN METHOD OF VALUING THE SECURITIES WAS AN ACCEPTED ME THOD OF ACCOUNTING. IT WAS ITA NOS.21, 235, 236/PN/2014 ITA NOS.522, 523 AND 1872/PN/2013 JANATA SAHAKARI BANK LTD. 16 FURTHER POINTED OUT BY THE LEARNED AUTHORIZED REPRE SENTATIVE FOR THE ASSESSEE THAT ALL THE SECURITIES WERE STOCK IN TRADE AND EVEN THE HTM SECURITIES COULD BE SHIFTED TO HFT OR AFS SECURITIES. THE LEARNED AUTHORIZED REPR ESENTATIVE FOR THE ASSESSEE PLACED RELIANCE ON THE RATIO LAID DOWN BY PUNE BENC H OF THE TRIBUNAL IN ACIT VS. BANK OF MAHARASHTRA IN CROSS APPEALS FILED BY THE A SSESSEE IN ITA NO.1505/PN/2008 AND REVENUE IN ITA NO.1618/PN/2008, BOTH RELATING T O ASSESSMENT YEAR 2005-06, ITA NOS.1135 TO 1138/PN/2013 AND ITA NOS.1219 TO 12 22/PN/2013, RELATING TO ASSESSMENT YEARS 2006-07 TO 2009-10, WHEREIN THE TR IBUNAL HAD ALLOWED THE CLAIM OF ASSESSEE IN TURN, RELYING ON THE RATIO LAID DOWN BY THE HONBLE KARNATAKA HIGH COURT IN KARNATAKA BANK LTD. VS. ACIT (2013) 356 ITR 549 (KAR). ANOTHER RELIANCE WAS PLACED UPON THE RATIO LAID DOWN BY PUNE BENCH OF TH E TRIBUNAL IN THE COSMOS CO-OP BANK LTD. VS. DCIT IN ITA NOS.460 & 461/PN/2012, RE LATING TO ASSESSMENT YEARS 2007-08 AND 2008-09 AND IN LATUR URBAN CO-OP. BANK LIMITED VS. DCIT IN ITA NO.778/PN/2011 & ACIT VS. LATUR URBAN CO-OP. BANK L IMITED IN ITA NO.792/PN/2011, BOTH RELATING TO ASSESSMENT YEAR 20 07-08. 37. IN RESPECT OF ADDITIONAL GROUND OF APPEAL FILED BY THE ASSESSEE, THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FAIRLY P OINTED OUT THAT A SIMILAR ISSUE WAS CONSIDERED BY THE PUNE BENCH OF THE TRIBUNAL IN ACI T VS. BANK OF MAHARASHTRA (SUPRA) AND THE ISSUE WAS SET-ASIDE TO THE FILE OF ASSESSING OFFICER FOR NECESSARY VERIFICATION. 38. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE PLACED RELIANCE ON THE ORDERS OF AUTHORITIES BELOW. 39. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE ARISING BEFORE US RELATES TO THE ALLOWANCE OF AMORT IZATION OF PREMIUM ON HTM SECURITIES. THE ASSESSEE FROM ASSESSMENT YEAR 2007 -08 HAD CHANGED THE METHOD OF ACCOUNTING FOR VALUING ITS HTM SECURITIES. AS PER THE BANKING NORMS, THE ASSESSEE WAS TO HOLD ITS INVESTMENTS IN THREE CATEGORIES I.E . HTM, AFS AND HFT. THE ASSESSEE UPTO ASSESSMENT YEAR 2006-07 WAS VALUING T HE HTM SECURITIES AT FACE VALUE OR COST, WHICHEVER WAS LESS AS PER THE RBI GU IDELINES. HOWEVER, AFS AND HFT INVESTMENTS WERE BEING VALUED AT COST OR MARKET VAL UE, WHICHEVER WAS LESS. THERE IS ITA NOS.21, 235, 236/PN/2014 ITA NOS.522, 523 AND 1872/PN/2013 JANATA SAHAKARI BANK LTD. 17 NO DISPUTE WITH REGARD TO THE VALUATION OF AFS AND HFT SECURITIES OR THE LOSS ARISING ON THE AMORTIZATION OF THE RESPECTIVE PREMIUMS. DU RING THE YEAR UNDER CONSIDERATION, AFTER ADOPTING THE CHANGE IN METHOD OF ACCOUNTING F OR VALUING ITS HFT SECURITIES AT COST OR MARKET VALUE, THE ASSESSEE HAD CLAIMED DEPR ECIATION ON VALUE OF SECURITIES AMOUNTING TO RS.37,11,50,795/- IN ASSESSMENT YEAR 2 007-08 AND RS.5,19,40,000/- IN ASSESSMENT YEAR 2009-10. THIS CHANGE WAS ADOPTED B Y THE ASSESSEE IN RETURN OF INCOME FILED FOR THE YEAR UNDER CONSIDERATION AS IS EVIDENT FROM THE COMPUTATION OF INCOME FILED AT PAGES 1 TO 3 OF THE PAPER BOOK. TH E ASSESSEE HAD BOOKED THE DEDUCTION ON ACCOUNT OF INVESTMENT AT COST PRICE OR MARKET PRICE, WHICHEVER WAS LESS ON ACCOUNT OF ALL SECURITIES I.E. HTM, AFS AND HFT AT RS.55,40,28,096/- IN ASSESSMENT YEAR 2007-08. ADMITTEDLY, THE ASSESSING OFFICER HAD ALLOWED THE CLAIM OF THE ASSESSEE VIS--VIS DEPRECIATION ON VALUE OF SECURITIES RELATING TO AFS, HFT IN THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) OF THE ACT. HOWEVER, THE DEPRECIATION (LOSS) ARISING ON ACCOUNT OF VALUATION OF THE HTM SECURITIES AT COST OR MARKET PRICE, WHICHEVER WAS LESS, AMOUNTING TO RS.3 7,11,50,795/- WAS NOT ALLOWED BY THE ASSESSING OFFICER WHILE COMPLETING ASSESSMENT F OR ASSESSMENT YEAR 2007-08. SIMILARLY, IN ASSESSMENT YEAR 2009-10, THE ASSESSIN G OFFICER DISALLOWED RS.5,19,40,000/-. 40. THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE SAID NON-ALLOWANCE OF DEPRECIATION ON THE VALUE OF HTM SECURITIES. WE FI ND THAT SIMILAR ISSUE AROSE BEFORE THE PUNE BENCH OF THE TRIBUNAL IN ACIT VS. BANK OF MAHARASHTRA (SUPRA), WHEREIN THE FACTS OF THE CASE WERE SIMILAR, AS TO THE ASSESSEE THEREIN UPTO PREVIOUS YEAR ENDING 31.03.2004 WAS VALUING THE HTM SECURITIES AT COST O NLY AND AFS, HFT SECURITIES WERE VALUED AS PER RBI GUIDELINES. HOWEVER, DURING THE ASSESSMENT YEAR 2005-06, THE ASSESSEE CHANGED ITS METHOD OF PORTFOLIO OF SEC URITIES / INVESTMENT FOR THE PURPOSE OF INCOME TAX AT LOWER OF THE COST OR MARKE T VALUE, WHICH METHOD WAS CONSISTENTLY FOLLOWED BY THE ASSESSEE IN THE SUBSEQ UENT YEARS. THE ASSESSEE THEREIN CLAIMED A LOSS OF RS.359.24 CRORES ON VALUA TION OF CLOSING STOCK OR SECURITIES BY WAY OF FILING A REVISED RETURN, WHICH WAS NOT AL LOWED BY THE ASSESSING OFFICER. THE TRIBUNAL AFTER DELIBERATING UPON THE ISSUE VIDE PAR AS 14 AND 15 OBSERVED AS UNDER:- ITA NOS.21, 235, 236/PN/2014 ITA NOS.522, 523 AND 1872/PN/2013 JANATA SAHAKARI BANK LTD. 18 14. NOW, WE MAY CONSIDER THE CLAIM OF THE ASSESSEE OF LOSS ON VALUATION OF CLOSING STOCK OF SECURITIES AT RS.359,24,58,508/ - ON ACCOUNT OF THE CHANGE IN THE METHOD OF VALUATION OF SECURITIES UNDERTAKEN FOR THE FIRST TIME DURING THE YEAR UNDER CONSIDERATION. THE ASSESSEE HAS VALUED ALL THE SECURITIES, INCLUDING THE HTM SECURITIES, AS ON THE LAST DAY, I .E. 31.03.2005 AT LOWER OF COST OR MARKET VALUE. SO FAR AS THE VALUATION OF A FS AND HFT SECURITIES IS CONCERNED, THE REVENUE HAS ACCEPTED THE STAND OF TH E ASSESSEE BECAUSE ACCORDING TO THE REVENUE SUCH SECURITIES REPRESENT STOCK-IN-TRADE OF THE ASSESSEE BANK AND THUS THE VALUATION OF SUCH SECURI TIES AT THE YEAR END AT THE LOWER OF COST OR MARKET VALUE IS ACCEPTABLE. HOWEV ER, THE REVENUE HAS NOT ACCEPTED THE CHANGED METHOD OF VALUATION WITH RESPE CT TO THE HTM SECURITIES. THE REASON ADVANCED FOR THE SAME IS THAT THE HTM SE CURITIES ARE IN THE NATURE OF LONG TERM PERMANENT INVESTMENTS SINCE THEY ARE H ELD UPTO MATURITY. THE LEARNED CIT-DR HAS DEFENDED THE AFORESAID STAND OF THE REVENUE BY POINTING OUT THAT DUE TO ITS NATURE, THE HTM SECURITIES ARE TO BE UNDERSTOOD AS PERMANENT INVESTMENTS AND THE SAME SHOULD BE VALUED AT COST, WHICH IS THE BASIS ADOPTED BY THE ASSESSEE IN ITS BOOKS OF ACCOU NT. IN THE BOOKS OF ACCOUNT, AS WE HAVE NOTED EARLIER, ASSESSEE BANK CO NTINUES TO VALUE THE HTM INVESTMENTS AT COST, FOLLOWING THE RBI GUIDELINES. AS PER THE LEARNED CIT-DR, THE HTM SECURITIES CANNOT BE CONSIDERED AS STOCK-IN -TRADE SINCE THEY ARE TO BE HELD TILL MATURITY AND ARE NOT AVAILABLE FOR SAL E OR TRADING THEREOF. THE LEARNED CIT-DR ASSERTED THAT IN THE ACCOUNT BOOKS, FOLLOWING THE RBI GUIDELINES, THE HTM SECURITIES ARE TREATED DIFFEREN TLY THAN THE AFS / HFT SECURITIES. IT IS EXPLAINED THAT WHEREVER THE COST OF ACQUISITION OF HTM SECURITIES IS HIGHER THAN ITS FACE VALUE, THE PREMI UM IS AMORTIZED OVER THE REMAINING PERIOD OF MATURITY AND WHERE THE COST PRI ZE IS LESS THAN THE FACE VALUE, THE DIFFERENCE IS IGNORED AS PER THE RBI GUI DELINES. HOWEVER, SECURITIES IN AFS CATEGORY ARE MARKED TO MARKET PRICE AND THE SECURITIES IN HFT CATEGORY ARE HELD AT ORIGINAL COST AND ARE VALUED A T MONTHLY INTERVALS AT MARKET RATES. IN SUM AND SUBSTANCE, THE RBI GUIDELINES HA VE BEEN PRESSED INTO SERVICE BY THE LEARNED CIT-DR TO EMPHASIZE THAT THE HTM SECURITIES STAND ON A DIFFERENT FOOTING THAN THE AFS/HFT SECURITIES. I T HAS ALSO BEEN SUBMITTED BEFORE US THAT ASSESSEE HAS NOT FURNISHED ANY DETAI LS TO SHOW THAT THE SECURITIES UNDER THE HTM CATEGORY HAVE BEEN SOLD PR EMATURELY PRIOR TO ITS MATURITY EITHER DURING THE YEAR OR IN THE PAST YEAR S. THEREFORE, ACCORDING TO THE LEARNED CIT-DR, THERE WAS NO JUSTIFICATION FOR EFFECTING CHANGE IN THE METHOD OF VALUATION OF CLOSING STOCK OF HTM SECURIT IES. 15. APART FROM EXPLAINING THE DIFFERENCE IN THE NAT URE OF HTM AND THE OTHER SECURITIES, NAMELY, AFS/HFT THE LEARNED CIT-DR POIN TED OUT THAT THE ASSESSEE HAS ALSO NOT JUSTIFIABLY EXPLAINED THE REA SONS AND THE CIRCUMSTANCES IN WHICH IT HAS CHANGED THE METHOD OF VALUATION OF SECURITIES FROM THE METHOD ADOPTED IN THE PAST YEARS. THE LEARNED CIT-DR EMPH ASIZED THAT THE CHANGE IN THE METHOD OF VALUATION OF CLOSING STOCK HAS BEE N EFFECTED ONLY FOR THE PURPOSE OF INCOME-TAX AND NOT FOR THE REGULAR BOOKS OF ACCOUNT, WHICH ARE BEING MAINTAINED AS PER THE RBI GUIDELINES. IT HAS ALSO BEEN POINTED OUT THAT THE ASSESSEE HAS NOT REFERRED TO ANY RESOLUTION PAS SED BY THE BOARD OF DIRECTORS OF THE ASSESSEE-BANK REGARDING THE CHANGE IN THE METHOD OF VALUATION OF THE SECURITIES. 41. THE TRIBUNAL FURTHER HELD AS UNDER:- 17. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISS IONS. THE CRUX OF THE CONTROVERSY BEFORE US RELATES TO THE METHOD OF VALU ATION OF THE CLOSING STOCK OF SECURITIES/INVESTMENTS ADOPTED BY THE ASSESSEE IN T HE CURRENT ASSESSMENT YEAR. THE ASSESSEE IS A NATIONALIZED BANK AND THER EFORE IT IS OPERATING WITHIN THE PURVIEW OF THE RBI GUIDELINES. IN THE BOOKS OF ACCOUNT, THE INVESTMENTS/SECURITIES HELD BY THE ASSESSEE BANK AR E CLASSIFIED AS PER THE RBI GUIDELINES INTO THREE CATEGORIES, NAMELY, HTM, AFS AND HFT. NOT ONLY THE CLASSIFICATION, IT IS ALSO AN ACCEPTED POSITION THAT, THE MANNER OF VALUATION OF SUCH SECURITIES IS ALSO PRESCRIBED IN THE RBI GU IDELINES, WHICH THE ASSESSEE ITA NOS.21, 235, 236/PN/2014 ITA NOS.522, 523 AND 1872/PN/2013 JANATA SAHAKARI BANK LTD. 19 IS ADHERING TO. IN THE EARLIER PARAGRAPHS, WE HAVE NOTED THE RBI GUIDELINES WHICH PRESCRIBE THE MANNER OF VALUATION OF THE INVE STMENTS. THUS, IN THE BOOKS OF ACCOUNT FOLLOWING THE RBI GUIDELINES HTM I NVESTMENTS ARE VALUED AT COST AND IN RESPECT OF AFS AND HFT INVESTMENTS, THE VALUATION IS CARRIED OUT BASKET-WISE AND WITHIN THE PRESCRIBED BASKET ANY AP PRECIATION IN SECURITY IS ADJUSTED AGAINST THE DEPRECIATION OF OTHER ANY SECU RITY. UP TO THE ASSESSMENT YEAR 2004-05, THE METHOD OF VALUATION OF CLOSING ST OCK OF SECURITIES ADOPTED IN THE BOOKS OF ACCOUNT FOLLOWING THE RBI GUIDELINES, WAS ALSO ADOPTED BY THE ASSESSEE FOR THE PURPOSES OF INCOME-TAX. IT IS IN THE INSTANT ASSESSMENT YEAR OF 2005-06 AND IN SUBSEQUENT YEARS, THAT ASSESSEE H AS CHANGED THE METHOD OF VALUATION FOR THE PURPOSES OF ITS INCOME-TAX COM PUTATION WHEREBY ASSESSEE HAS VALUED THE CLOSING STOCK OF SECURITIES / INVEST MENTS AT LOWER OF COST OR MARKET VALUE. THE RESULTANT EFFECT OF SUCH CHANGE IN THE ASSESSMENT YEAR 2005-06 AMOUNTING TO RS.359,24,58,508/- IS NOT ACCE PTED BY THE REVENUE, AND HENCE THE IMPUGNED ADDITION OF RS.359,24,58,508 /-. 18. FACTUALLY SPEAKING, THE CHANGE IN THE METHOD OF VALUATION HAS BEEN PARTLY ACCEPTED BY THE REVENUE AND WE SAY SO FOR TH E REASON THAT QUA THE INVESTMENTS CLASSIFIED AS AFS AND HFT THERE IS NO D ISPUTE AND, THE VALUATION OF SUCH CLOSING STOCK AT LOWER OF COST OR MARKET VA LUE, HAS BEEN ACCEPTED. THE DISPUTE IS ONLY WITH REGARD TO THE CLOSING STOC K OF HTM SECURITIES, WHICH ACCORDING TO THE ASSESSING OFFICER, SHOULD CONTINUE TO BE VALUED AT COST ONLY FOR THE PURPOSES OF INCOME-TAX COMPUTATION. 19. IN THE PRESENT CONTEXT, THE JUDGEMENT OF THE HO NBLE KARNATAKA HIGH COURT IN THE CASE OF CORPORATION BANK LTD. (SUPRA) IS RELEVANT. THE ISSUE BEFORE THE HONBLE HIGH COURT WAS WITH REGARD TO TH E METHOD OF VALUATION OF STOCK-IN-TRADE ADOPTED BY THE ASSESSEE. THE ASSESS EE BANK HAD ALL ALONG VALUED THE INVESTMENTS AT COST BUT FOR THE ASSESS MENT YEAR 1975-76, WHICH WAS BEFORE THE HONBLE HIGH COURT, ASSESSEE CHANGED THE METHOD AND INSTEAD VALUED THE STOCK AT LOWER OF THE COST OR MA RKET VALUE. THE REVENUE OBJECTED TO THE CHANGE ON THE GROUND THAT THE CHANG E WAS NOT BONA-FIDE, AS IT WAS DONE ONLY IN THE RETURN OF INCOME AND NOT IN TH E ACCOUNT BOOKS. THE HONBLE KARNATAKA HIGH COURT HELD THAT IT WAS PERMI SSIBLE FOR THE ASSESSEE BANK TO VALUE THE CLOSING STOCK EITHER AT MARKET VA LUE OR THE COST PRICE, WHICHEVER IS LOWER. AS PER THE HONBLE HIGH COURT, IRRESPECTIVE OF THE BASIS ADOPTED FOR VALUATION IN EARLIER YEARS, THE ASSESSE E HAD THE OPTION TO CHANGE THE METHOD OF VALUATION OF THE CLOSING STOCK TO LOW ER OF COST OR MARKET VALUE, AT ANY TIME, PROVIDED THE CHANGE WAS BONA-FIDE AND FOLLOWED REGULARLY THEREAFTER. SIMILAR PROPOSITION HAS ALSO BEEN UPHE LD BY THE HONBLE MADRAS HIGH COURT IN THE CASE OF KARUR VYSYA BANK LTD. (SU PRA) FOLLOWING THE RATIO OF THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE C ASE OF UNITED COMMERCIAL BANK LTD. VS. CIT, (1999) 240 ITR 355 (S C). 42. THE ISSUE RAISED BEFORE US IS IDENTICAL TO THE ISSUE BEFORE THE TRIBUNAL IN ACIT VS. BANK OF MAHARASHTRA (SUPRA) AND FOLLOWING THE S AME PARITY OF REASONING, WE HOLD THAT THE CHANGE IN METHOD OF ACCOUNTING ADOPTED BY THE ASSESSEE FOR VALUING ITS HTM SECURITIES AT LOWER OF COST OR MARKET PRICE IS A BO NAFIDE CHANGE AND THE ASSESSEE IS ENTITLED TO THE CLAIM OF DEPRECIATION ON VALUE OF H TM SECURITIES. THE LOSS ARISING ON ACCOUNT OF AFS AND HFT SECURITIES HAVE ALREADY BEEN ACCEPTED BY THE ASSESSING OFFICER. CONSEQUENTLY, WE DIRECT THE ASSESSING OFF ICER TO ALLOW THE CLAIM ARISING ON ACCOUNT OF DEPRECIATION ON VALUE OF HTM SECURITIES. HOWEVER, THE CHANGE IN METHOD OF VALUATION IN HTM SECURITIES AND ITS EFFECT ON TH E COMPUTATION OF INCOME WOULD BE ITA NOS.21, 235, 236/PN/2014 ITA NOS.522, 523 AND 1872/PN/2013 JANATA SAHAKARI BANK LTD. 20 VERIFIED BY THE ASSESSING OFFICER. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO CONSIDER THE PLEA OF THE ASSESSEE AND RE-WORK THE I NCOME IN LINE WITH THE OBSERVATIONS OF TRIBUNAL IN THE CASE OF ACIT VS. BA NK OF MAHARASHTRA (SUPRA) VIDE PARA 24, WHICH READS AS UNDER:- 24. IN-PRINCIPLE, WE HAVE ALREADY UPHELD THE STAN D OF THE ASSESSEE TO VALUE THE STOCK OF ITS INVESTMENTS / SECURITIES AT LOWER OF COST OR MARKET VALUE. BY APPLICATION OF SUCH METHOD OF VALUATION OF ITS S TOCK OF SECURITIES / INVESTMENTS IN ASSESSMENT YEAR 2005-06 ASSESSEE CLA IMED DEDUCTION FOR A LOSS OF RS.359,24,58,508/-. THE EFFECT OF THE CHAN GE IN METHOD OF VALUATION ON THE COMPUTATION OF INCOME FOR THE PURPOSES OF IN COME TAX IS A MATTER OF FACTUAL APPRECIATION, WHICH IS LIABLE TO BE VERIFIE D BY THE ASSESSING OFFICER APPROPRIATELY. FOR THE AFORESAID PURPOSE, WE THERE FORE DIRECT THE ASSESSING OFFICER TO CONSIDER THE STAND OF THE ASSESSEE STATE D AFORESAID AND THEREAFTER RE-WORK THE INCOME OF THE ASSESSEE ACCORDINGLY. NE EDLESS TO MENTION, THE ASSESSEE SHALL PROVIDE NECESSARY WORKINGS TO THE AS SESSING OFFICER, INCLUDING THE INVESTMENT TRADING ACCOUNT AND / OR SUCH OTHER WORKINGS WHICH WOULD ENABLE THE ASSESSING OFFICER TO RE-WORK THE INCOME OF THE ASSESSEE IN ACCORDANCE WITH OUR DECISION IN THE EARLIER PARAGRA PHS. THE ASSESSING OFFICER SHALL ALLOW THE ASSESSEE AN APPROPRIATE OPPORTUNITY OF BEING HEARD AND THEREAFTER RE-WORK THE COMPUTATION OF INCOME AS PER LAW AND KEEPING IN MIND THE AFORESAID DIRECTIONS. THUS, ON GROUND OF APPEA L NO.1 ASSESSEE SUCCEEDS. 43. IN VIEW OF THE DIRECTIONS OF THE TRIBUNAL IN TH E CASE OF ACIT VS. BANK OF MAHARASHTRA (SUPRA), IN ORDER TO GIVE THE EFFECT OF THE CHANGE IN THE METHOD OF VALUATION ON THE COMPUTATION OF INCOME, THE ASSESSI NG OFFICER IS DIRECTED TO VERIFY THE CLAIM OF THE ASSESSEE AFTER CONSIDERING THE FACTUAL ASPECTS AND COMPUTE THE DEDUCTION IN LINE WITH THE DIRECTIONS OF THE TRIBUN AL IN THE CASE OF ACIT VS. BANK OF MAHARASHTRA (SUPRA). REASONABLE OPPORTUNITY OF HEA RING IN THIS REGARD SHALL BE AFFORDED TO THE ASSESSEE. THE GROUNDS OF APPEAL RA ISED BY THE ASSESSEE ARE THUS, ALLOWED FOR STATISTICAL PURPOSES. 44. NOW, COMING TO THE ADDITIONAL GROUND OF APPEAL FILED BY THE ASSESSEE IN ASSESSMENT YEARS 2007-08 AND 2009-10. THE PLEA OF THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE PURSUANT TO THE ORD ER OF TRIBUNAL IN ASSESSMENT YEAR 2005-06 IN THE APPEAL AGAINST THE ORDER PASSED UNDE R SECTION 263 OF THE ACT, 1/5 TH OF THE AMORTIZED AMOUNT OF LOSS INCURRED OF RS.29,29,1 5,335/- IN ASSESSMENT YEAR 2005- 06 ON ACCOUNT OF CONVERSION OF SECURITIES FROM AFS TO HTM SHOULD BE ALLOWED IN ACCORDANCE WITH THE DECISION OF THE HONBLE TRIBUNA L IN ASSESSMENT YEAR 2005-06. PURSUANT TO THE ORDER OF TRIBUNAL IN ASSESSEES OWN CASE AGAINST ORDER PASSED UNDER SECTION 263 OF THE ACT, WHERE THE TRIBUNAL HAD DIRE CTED THAT THE EXPENDITURE CLAIMED ITA NOS.21, 235, 236/PN/2014 ITA NOS.522, 523 AND 1872/PN/2013 JANATA SAHAKARI BANK LTD. 21 IN ASSESSMENT YEAR 2005-06 IS TO BE AMORTIZED AND A LLOWED FOR THE YEARS STARTING FROM ASSESSMENT YEAR 2005-06 TO THE EXTENT OF 1/5 TH IN EACH YEAR, WE FIND MERIT IN THE PLEA OF THE ASSESSEE IN THIS REGARD. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO ALLOW 1/5 TH OF THE AMORTIZED AMOUNT OF LOSS INCURRED IN ASSESS MENT YEAR 2005-06 FOR THE YEARS UNDER APPEAL, CONSEQUENT TO THE ORDER OF TRIBUNAL PASSED IN APPEAL AGAINST ORDER PASSED UNDER SECTION 263 OF THE ACT RELATING TO ASSESSMENT YEAR 2005-06. THE ADDITIONAL GROUND OF APPEAL RAISED BY THE ASSESSEE IS THUS, ALLOWED. 45. NOW, WE TAKE UP ITA NO.1872/PN/2013 FILED BY TH E ASSESSEE AGAINST THE ORDER OF CIT(A)-I, PUNE RELATING TO ASSESSMENT YEAR 2010-11. 46. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS O F APPEAL:- 1. THE LEARNED CIT(A) ERRED IN UPHOLDING THE ACTION OF THE LEARNED A.O. IN DISALLOWING THE DEPRECIATION OF RS. 37,11,50,795/- IN THE VALUE OF 'HELD TO MATURITY' SECURITIES CLAIMED BY THE ASSESSEE BANK. 2. THE LEARNED CIT(A) ERRED IN HOLDING THAT THE 'HT M' SECURITIES WERE IN THE NATURE OF CAPITAL ASSETS OF THE BANK AND HENCE, THE SAME WERE TO BE VALUED AT COST OF ACQUISITION AND NOT AT COST OR MARKET VALUE , WHICHEVER IS LOWER. 3. THE LEARNED CIT(A) ERRED IN HOLDING THAT THE 'H TM' SECURITIES WERE IN THE NATURE OF INVESTMENTS AND NOT STOCK IN TRADE BY STA TING THE FOLLOWING REASONS A. THE 'HTM' SECURITIES HELD BY THE ASSESSEE BANK WERE IN THE NATURE OF INVESTMENTS HAVING REGARD TO THE PRINCIPLES LAID DO WN BY CBDT CIRCULAR NO. 4 OF 2007 DATED 15.06.2007. B. THERE WERE ONLY A FEW OCCASIONS WHERE THE ASSESS EE BANK HAD SOLD THE HTM SECURITIES BEFORE MATURITY IN THE EARLIER Y EARS AND HOLDING OF THE SAME TILL MATURITY HAD RESULTED IN HANDS OME PROFITS FOR THE ASSESSEE BANK AND HENCE, THE INTENTION OF THE ASSES SEE BANK WAS TO HOLD THE HTM SECURITIES TILL MATURITY. C. IN VIEW OF THE DECISION OF HON'BLE KARNATAKA HIG H COURT IN THE CASE OF ING VYASYA BANK LTD. [ITA NO. 2886 OF 2005], THE HT M SECURITIES HELD BY THE ASSESSEE BANK WERE IN THE NATURE OF CAPITAL ASSETS. D. THE DECISION OF HON'BLE SUPREME COURT IN THE CAS E OF UCO BANK LTD. VS. CIT [240 ITR 355] WAS DISTINGUISHABLE ON FACTS AND HENCE, NOT APPLICABLE TO THE INSTANT CASE. 4. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE HTM SECURITIES HELD BY THE ASSESSEE BANK WERE IN THE NATURE OF STOCK IN TR ADE AND NOT CAPITAL ASSETS AND HENCE, FOR INCOME TAX PURPOSES, THE SAME WERE T O BE VALUED AT COST OR MARKET VALUE, WHICHEVER IS LOWER. 5. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THA T - A. ALL THE SECURITIES PURCHASED BY A BANK ARE TO BE CONSIDERED AS PART OF THE STOCK IN TRADE FOR INCOME TAX PURPOSES. ITA NOS.21, 235, 236/PN/2014 ITA NOS.522, 523 AND 1872/PN/2013 JANATA SAHAKARI BANK LTD. 22 B. THE ENTRIES IN THE BOOKS OF ACCOUNTS WERE NOT DE TERMINATIVE OF THE CORRECT NATURE OF THE SECURITIES PURCHASED BY THE BANK AND HENCE, THE CLASSIFICATION OF THE SECURITIES MADE BY THE ASSESS EE IN THE BOOKS WAS NOT RELEVANT. C. THE ACTIVITY OF PURCHASE AND SALE OF SECURITIES WAS IN THE COURSE OF THE NORMAL BANKING BUSINESS OF THE ASSESSEE BANK AND HE NCE, THE SAID SECURITIES WERE IN THE NATURE OF STOCK IN TRADE. D. EVEN THOUGH THE SECURITIES WERE CLASSIFIED IN HT M CATEGORY, THE BANK WAS PERMITTED TO SELL THEM BEFORE THE MATURITY DATE AND HENCE, IT WAS NOT CORRECT TO HOLD THAT HTM SECURITIES WERE CAPITAL AS SETS OF THE ASSESSEE BANK. E. THE ISSUE INVOLVED WAS COVERED IN FAVOUR OF THE ASSESSEE BANK BY VARIOUS DECISIONS AND THE DECISIONS RELIED UPON BY THE LEAR NED CIT (A) WERE DISTINGUISHABLE ON THE FACTS OF THE PRESENT CASE. 6. THE LEARNED C.I.T APPEALS HAS ERRED IN LAW AND F ACTS IN NOT ALLOWING THE ADDITIONS OF RS.7,40,292/- MADE BY THE ASSESSING OF FICER ON ACCOUNT OF NON RECONCILIATION OF TRANSACTIONS REFLECTED IN INT ERNATIONAL TRANSACTIONS OF THE APPELLANT BANK WITH THE ENTRIES IN THE BOOKS OF ACCOUNT AND INSTEAD DIRECTING THE ASSESSING OFFICER TO EXAMINE THE CLAI M AND DELETE THE ADDITIONS AFTER VERIFICATION. 7. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL. 47. THE ISSUE IN GROUNDS OF APPEAL NOS.1 TO 5 IS ID ENTICAL TO THE ISSUE RAISED BY THE ASSESSEE IN ASSESSMENT YEARS 2007-08 AND 2009-1 0. FOLLOWING OUR DECISION IN ITA NOS.522 & 523/PN/2013, WE REMIT THE ISSUE BACK TO THE FILE OF ASSESSING OFFICER TO ALLOW THE CLAIM OF THE ASSESSEE AFTER VERIFYING THE STAND OF THE ASSESSEE IN LINE WITH THE DIRECTIONS HEREINABOVE. 48. THE ISSUE RAISED IN THE GROUND OF APPEAL NO.6 I S AGAINST THE ADDITION OF RS.7,40,292/-. THE SAID ADDITION WAS MADE IN THE H ANDS OF THE ASSESSEE ON ACCOUNT OF NON RECONCILIATION OF TRANSACTIONS REFLECTED IN INTERNATIONAL TRANSACTIONS OF THE ASSESSEE WITH THE ENTRIES IN THE BOOKS OF ACCOUNT. THE CIT(A) HAD DIRECTED THE ASSESSING OFFICER TO EXAMINE THE CLAIM OF THE ASSES SEE AND DELETE THE ADDITION AFTER VERIFICATION. WE FIND NO MERIT IN THE GROUND OF AP PEAL NO.6 IN THIS REGARD AS THE CIT(A) HAD DIRECTED THE ASSESSING OFFICER TO CARRY OUT THE VERIFICATION EXERCISE AND AFTER RECONCILIATION, THE ASSESSING OFFICER MAY DEC IDE THE ISSUE. WE UPHOLD THE DIRECTIONS OF CIT(A) IN THIS REGARD AND DIRECT THE ASSESSING OFFICER TO CARRY OUT THE RECONCILIATION EXERCISE AND AFTER VERIFICATION DECI DE THE ISSUE. ITA NOS.21, 235, 236/PN/2014 ITA NOS.522, 523 AND 1872/PN/2013 JANATA SAHAKARI BANK LTD. 23 49. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO .21/PN/2014 AND APPEAL OF THE REVENUE IN ITA NO.235/PN/2014 RELATING TO ASSESSMEN T YEAR 2005-06 ARE DISMISSED, APPEAL OF REVENUE IN ITA NO.236/PN/2014 RELATING TO ASSESSMENT YEAR 2006-07 IS DISMISSED, APPEALS OF THE ASSESSEE IN ITA NOS.522 & 523/PN/2013 RELATING TO ASSESSMENT YEARS 2007-08 & 2009-10 ARE PARTLY ALLOW ED AND APPEAL OF THE ASSESSEE IN ITA NO.1872/PN/2013 RELATING TO ASSESSMENT YEAR 2010-11 IS ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED ON THIS THE 25 TH DAY OF FEBRUARY, 2015. SD/- SD/- (G.S. PANNU) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 25 TH FEBRUARY, 2015. GCVSR COPY OF THE ORDER IS FORWARDED TO: - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-I, PUNE; 4) THE CIT-I, PUNE; 5) THE DR B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T., PUNE