2017 (1) TMI 1262 - HC - Income Tax

Addition towards the provision on account of diminution in the value of securities - Held that - We are in complete agreement with the view taken by the learned Tribunal for the diminution in the value of securities for earlier years, the assessee was required to claim the loss in those years, which he did not claim, because in the relevant years, his income was deducted u/s. 80 P of the Act. The learned Tribunal has rightly observed that, by claiming the diminution in the value of securities during the year under consideration, the assessee is trying to get the benefit which he did not get u/s. 80 P of the Act in the earlier years. In view of the above foregoing reasons, we see no reason to interfere with the order passed by the learned Tribunal. No substantial question of law arise

Summary

Issues:
1. Addition of ?45 lakhs towards provision on account of diminution in the value of securities for A.Y. 2003-04 to 2006-07.
2. Justification of confirming the addition by the Appellate Tribunal.
3. Perversity in the conclusion reached by the Income Tax Appellate Tribunal.

Analysis:
1. The case involved the appellant, a Cooperative Bank, declaring total income for A.Y. 2008-09 at ?19,46,684. The Assessing Officer (A.O.) observed a claimed depreciation of ?31,92,600 and sought clarification. The appellant explained the depreciation on fixed assets and the value of Government securities. The Bank had classified Government Securities into Held To Maturity and Available For Trade categories. The appellant claimed a loss of ?40,44,000 on the sale of Government Securities for the year under consideration. However, provisions made for diminution in the value of securities in previous assessment years were also questioned by the A.O., leading to a dispute.

2. The CIT (A) confirmed the A.O.'s order, emphasizing that the claimed depreciation was on securities held for trading, constituting stock in trade, and not on securities held to maturity. The Tribunal upheld the addition of ?45 lakhs, stating that the loss due to a decrease in market price should have been claimed in the respective years of diminution and not in the current year. The appellant's attempt to claim the loss in the current year, after not doing so in earlier years when deductions were available, was deemed incorrect.

3. The appellant argued that the loss suffered on the sale of securities during the year should be considered separately from provisions for diminution in value. However, the Tribunal and the High Court agreed that the appellant's attempt to claim the loss based on previous diminution in value, after not doing so in relevant years, was not permissible. The Court dismissed the appeal, stating that no substantial question of law arose, and upheld the Tribunal's decision to confirm the addition of ?45 lakhs.

This detailed analysis highlights the key points of the judgment, focusing on the issues raised by the appellant and the reasons behind the decisions made by the authorities and the Court.