2017 (12) TMI 1681 - AT - Income Tax

Depreciation claimed on HTM category investments - AO disallowed the claim for depreciation on investments categorized as Held To Maturity securities stating that the RBI guidelines do not allow depreciation to HTM category of investments - HELD THAT - The assessee-bank had treated securities which are HTM as current assets / stock-in-trade. The value of the current assets / stock-in-trade was calculated at the end of the each financial year on cost or market price whichever is lower. By adopting such valuation of security, the depreciation / appreciation was duly offered for taxation under the Income-tax Act. The bank was consistently adopting the above method of valuation of security as per the RBI Guideline. The Income-tax Appellate Tribunal in assessee s own case for earlier assessment years 2011 (5) TMI 988 - ITAT COCHIN by following the judgment of the Hon ble jurisdictional High Court in the case of CIT v. Nedungadi Bank Ltd. Reported 2002 (11) TMI 29 - KERALA HIGH COURT had held that the depreciation on investment which are Held to Maturity and forming part of stock-in-trade is entitled to claim the same as a deduction. - decided against revenue

Summary

Issues: Appeal against disallowance of depreciation on HTM category investments for assessment years 2010-2011 and 2011-2012.

Analysis:
1. Common Issue Raised in Appeals: The appeals by the Revenue challenge the orders of the CIT(A) for assessment years 2010-2011 and 2011-2012 regarding the disallowance of depreciation on HTM category investments.

2. Factual Background: The assessee, a banking company, faced disallowance of depreciation on HTM investments totaling significant amounts for both assessment years. The CIT(A) decided in favor of the assessee based on previous Tribunal orders in the assessee's own case for earlier assessment years.

3. Arguments by Revenue and Assessee: The Revenue relied on a judgment of the Karnataka High Court, while the assessee argued that the issue was settled in their favor by Tribunal orders not overturned by the High Court.

4. Tribunal's Decision: The Tribunal noted the assessee's consistent treatment of HTM securities as stock-in-trade for valuation purposes, in line with RBI guidelines. Relying on previous Tribunal orders and the judgment of the High Court, the Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeals.

5. Conclusion: The Tribunal dismissed the Revenue's appeals, affirming the CIT(A)'s decision to allow depreciation on HTM investments, citing consistency with previous Tribunal orders and the absence of any High Court judgments overturning those orders.

This detailed analysis outlines the key legal issues, factual background, arguments presented by both parties, the Tribunal's reasoning, and the final decision in the judgment.