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09-01-2019, Punjab and Sind the Bank, Section 14A, 115JB, Tribunal Delhi

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1 week 1 day ago #8333 by amit
Section - 14A, 115JB, 43(B), 36 (1)(iv)
Order Date - 09-01-2019
Favouring - Assessee
Court - Tribunal Delhi
Appellant - ACIT
Respondent - Punjab and Sind the Bank
Justice - PRASHANT MAHARISHI AM & K.NARASIMHA CHARY JM
Citation - 119Taxpundit129
Appeal No. - ITA Nos. 1441 & 1442/Del/2015
Asstt. Year - 2011-12 & 2012-13

Order

PER : K.NARASIMHA CHARY

Challenging the order dated 22.12.2014 in Appeal Nos.102/13-14 and 153/13-14 for the Assessment Years 2011-12 & 2012-13 respectively of the learned Commissioner of Income-tax (Appeals)-7, Delhi {for short “CIT(A), Revenue preferred these appeals.

2. Brief facts of the case relevant for the disposal of these two appeals are that the Punjab & Sind Bank (“the assessee”) is a wholly-owned Government of India undertaking. In respect of the assessment for the Assessment Years 2011-12 and 2012-13, Ld. AO made certain additions in respect of the depreciation on securities, contribution to PSB Employees Pension Fund Trust and under section 14 A of the Income-tax Act, 1961 (“the Act”) under the normal provisions of the Act and also while computing the book profits under section 115 JB of the Act.

3. Ld. CIT(A) in appeal deleted all these three additions. Hence the revenue is before us in these appeals. Ground 1: Depreciation on securities

4. Learned Assessing Officer found that the assessee had claimed deduction of Rs.167,45,36,493/- for the assessment year 2011-12 and Rs.348,36,62,436/- in respect of the assessment year 2012-13 on account of depreciation on investment on account of valuation of securities. Case of the assessee is banked upon the RBI guidelines and that the investment por folio of the banks is required to be classified under three categories, namely, held to maturity (HTM), held for trading (HFT) and available for sale (AFS); that in theinvestments classified under HTM category need not be marked to market and are carried at an acquisition cost unless these are more than the face value, in which case the premium should be amortised over the period remaining to maturity; that in case of HFT and AFS, that thedepreciation/appreciation is to be aggregated scrip wise and only netted appreciation, if any, is required to be provided for in the accounts; that the said treatment is also disclosed as per paragraph No 5 of significant accounting policies (schedule-17) adopted to the audited accounts. It was further submitted by the assessee that for the purpose of income tax, bank is treating all securities (except investment in subsidiaries and joint ventures) as stock in trade; that the interest received on such securities and profit/loss on sale of such securities irrespective of its categorisation into HTM, HFT and AFS in the books, is offered as business income/loss and the same is also being assessed by the Department as business income/loss; and the diminution in value of such securities is considered as business loss and likewise really beendepreciation on valuation of such securities, if any, is offered to tax. Assessee placed reliance on the decision of the Hon’ble Kerala High Court in the case of CIT vs. Nedungadi bank Ltd 264 ITR 545 for the principle that the depreciation/loss in the value of investment was allowable expenditure.

5. Ld. Assessing officer formed an opinion that though it is correct that the assessee has valued its securities scrip wise at lower of cost or market price, the fact remains that these investments have not been shown in the books as “stock in trade” and its resultant profits on sale are not enhanced by the value of depreciation in subsequent years when these investments are actually sold and on that premise he brought to tax the amount claimed by the assessee as depreciation on investment.

6. In appeal, Ld. CIT(A) considered this issue at length and by following the orders of his predecessor in assessee’s own case for the Assessment Years 2007-08 to 2009-10 and in the light of the decision of the Hon’ble Apex Court in the case of UCO Bank vs. CIT 240 ITR 355 (SC)decided the issue in favour of the assessee bank.

7. It is the argument of the learned DR that though the assessee has been relying on the orders of the tribunal for the assessment year 2007-08 to 2009-10
questions involved in those matters are entirely different from the facts involved in this matter. It is the submission of the Ld. DR that in the present appeal the
fact is that the revenue is challenging the deduction on the ground that the assessee on one hand is taking benefit of deduction on diminution of the value of securities in the closing stock and on the other hand not carrying forward the impact of this claim of diminution on the value of securities in the opening stock. Ld. DR placed reliance on the decision of the Hon’ble Apex Court in the case of Southern Technologies Vs. ACIT [2010] 187 Taxman 346 (SC).

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