2013 (8) TMI 954 - AT - Income Tax

Depreciation on the securities claimed by the assessee bank - Held that - The securities held under HTM category are part of stockin- trade of the bank and there is no justification to decline the claim of depreciation/loss on the valuation of the said securities.

Summary

Issues:
1. Allowability of depreciation on securities claimed by the assessee bank for the A.Y. 2009-10.

Analysis:
The main issue in this appeal before the Appellate Tribunal ITAT Pune was the challenge by the revenue against the order of the Ld. CIT(A)-I, Nashik regarding the allowance of depreciation on securities claimed by the assessee bank amounting to Rs. 50,24,000 for the A.Y. 2009-10. The Assessing Officer had disallowed this claim, stating it was not allowable under section 32 of the Act. However, the Ld. CIT(A) allowed the claim, citing guidelines issued by the RBI which required the bank to provide for depreciation on its investment portfolio. The Ld. CIT(A) referred to the RBI guidelines and noted that the assessee provided depreciation on investment and made other risk provisions totaling Rs. 50,24,000. The revenue, being aggrieved, appealed before the Tribunal.

In the case of The Sangli Bank Ltd, the ITAT Pune had considered the issue of allowability of loss towards diminution in the value of securities classified as Held Till Maturity (HTM). The Tribunal found that the bank followed RBI guidelines and made provisions for diminution in the value of securities. The Tribunal also noted that the method followed by the bank was consistent in preceding years, and there was no loss of revenue as per the working provided. The Tribunal disagreed with the CIT(A)'s reservation regarding revenue deferment and allowed the claim of the assessee.

Furthermore, in the case of The Thane Janata Sahakari Bank Ltd., the Tribunal considered the issue of allowability of depreciation on securities. The Tribunal held that all securities held by the bank were part of the stock-in-trade as per RBI guidelines. It was also noted that securities held under HTM category were part of the stock-in-trade, and there was no justification to decline the claim of depreciation/loss on the valuation of these securities. The Tribunal upheld the order of the CIT(A) on this issue following previous decisions and dismissed the revenue's appeal.

In conclusion, the Tribunal dismissed the revenue's appeal and upheld the order of the CIT(A) regarding the allowability of depreciation on securities claimed by the assessee bank for the A.Y. 2009-10, based on the consistent application of RBI guidelines and previous judicial decisions supporting the assessee's position.