2021 (9) TMI 484 - HC - Income Tax

Additions made on the interest on securities - HELD THAT - As decided in CITY UNION BANK LIMITED. 2007 (2) TMI 187 - MADRAS HIGH COURT held that the assessee is taxable for interest on securities only on specified dates when it becomes due for payment, in view of third proviso to s.145(1) of the Act, which was in force during the relevant assessment years. Loss on revaluation on securities - HELD THAT - As decided in CITY UNION BANK LIMITED. 2007 (2) TMI 187 - MADRAS HIGH COURT held that when investments are made in accordance with the requirements of the Act, wherein the market price changed from the value shown in the opening balance and at the end of the year, the same could be allowed as depreciation. Substantial questions of law are answered against the revenue

Summary

Issues Involved:
- Appeal filed by revenue challenging order passed by Income Tax Appellate Tribunal for assessment years 1992-93 and 1993-94.
- Substantial questions of law related to deletion of additions made on interest on securities and revaluation of securities.
- Interpretation of provisions under Income Tax Act regarding interest income and valuation of securities for tax purposes.

Analysis:

Issue 1: Appeal against ITAT order
The appeals were filed by the revenue under Section 260A of the Income Tax Act, 1961, challenging the common order passed by the Income Tax Appellate Tribunal for the assessment years 1992-93 and 1993-94. The substantial questions of law raised in the appeals pertained to the treatment of interest on securities and the revaluation of securities for tax purposes.

Issue 2: Treatment of interest on securities
The first substantial question of law revolved around the deletion of additions made on interest on securities. The Tribunal had ruled in favor of the assessee, citing the accrual of interest income on a day-to-day basis as per the mercantile system of accounting. The Court referred to previous judgments and held that the assessee is taxable for interest on securities only on specified dates when it becomes due for payment, in accordance with the provisions of the Act.

Issue 3: Revaluation of securities
The third substantial question of law concerned the treatment of loss on the revaluation of securities. The Tribunal had allowed the loss on revaluation of securities, stating that when investments are made in accordance with the Act and the market price changes, such changes could be allowed as depreciation. The Court upheld this decision, citing precedents and finding no infirmity in the Tribunal's decision.

Conclusion
Based on the decisions in similar cases, the Court dismissed the tax case appeals and answered the substantial questions of law against the revenue. The judgments in favor of the assessee were supported by legal interpretations and precedents, leading to the dismissal of the appeals without costs.