Treatment of securities--Stock-in-trade or investment - Income Tax - 599/1991

Treatment of securities--Stock-in-trade or investment Circular No. 599 Dated 24/4/1991 Clarifications on the following issues have been sought by banks from the Central Board of Direct Taxes: (i) Whether the securities held by the banks constitute their stock-in-trade or investment, and consequently whether the loss claimed by the banks on the valuation of their securities should be allowed as a deduction in computing their taxable profits? (ii) Whether deduction claimed in respect of interest paid for broken period on the purchase of securities should be allowed as a deduction from the taxable profits? 2. The matter has been considered by the Board and it has been decided that the securities must be regarded as stock- in-trade by the banks. Therefore, the claim of loss, if debited in the books of account, would be given the same treatment as is normally given to the stock-in-trade. As far as the second issue is concerned, both the interest payments and receipts must be regarded as revenue payments/receipts, and only the net interest on securities shall be brought to tax as business income. (Sd.) Nishi Nair, Under Secretary, Central Board of Direct Taxes.