2013 (11) TMI 1642 - AT - Income Tax

Deduction on account of amortization of depreciation claimed on investment in Govt - Held that - Merely because the Securities are kept under the head till the maturity the said Security cannot be treated as a purely investment. Law is well settled that the Securities held by the Bank are in the nature of Stock-in-Trade. Nomenclature cannot be decisive for the assessee Bank. We therefore hold that the loss on the sale of the Securities is revenue in nature and same is allowable.

Summary

Issues:
- Allowability of deduction on account of amortization of depreciation claimed on investment in Govt. Securities in the category of held to maturity (HTM).
- Nature of securities held under different categories and their treatment for deduction purposes.

Analysis:

Issue 1: Allowability of deduction on account of amortization of depreciation claimed on investment in Govt. Securities in the category of held to maturity (HTM):
The Appellate Tribunal ITAT Pune dealt with an appeal filed by the Revenue challenging the order of the Ld. CIT(A) regarding the allowance of deduction on account of amortization of depreciation claimed on investments in Government securities under the HTM category. The Assessing Officer disallowed the claimed amount of depreciation, considering the securities under HTM as capital assets. However, the Ld. CIT(A) deleted the addition based on a decision of the ITAT Pune in a similar case. The Tribunal, in line with previous judgments, held that the securities held by the Bank are part of the stock-in-trade, emphasizing that the nomenclature of the category does not determine the treatment of securities. The Tribunal referred to decisions of the Hon'ble High Court and the Supreme Court to support the allowability of the claimed deduction, concluding that the loss on the sale of securities is revenue in nature and hence allowable.

Issue 2: Nature of securities held under different categories and their treatment for deduction purposes:
The Tribunal relied on previous decisions in cases like Latur Urban Cooperative Bank Ltd. and The Sangli Bank Ltd. to support the position that securities held by the Bank are considered part of the stock-in-trade, irrespective of the category they are held under. The Tribunal emphasized that the treatment of securities should not be solely based on the category under which they are held, but rather on the nature of the securities as stock-in-trade. By confirming the Ld. CIT(A)'s decision and dismissing the Revenue's appeal, the Tribunal reiterated the principle that the loss on the sale of securities is revenue in nature and should be allowable, aligning with established legal precedents and interpretations.

This comprehensive analysis of the judgment highlights the key issues addressed by the Appellate Tribunal ITAT Pune regarding the allowance of deductions on investments in Government securities and the treatment of securities held under different categories for taxation purposes.