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TMI Blog2015 (1) TMI 1012X X X X Extracts X X X X X X X X Extracts X X X X ..... trading, and hence had to be valued at cost. 2. The Appellant, prays that the disallowance of loss of Rs. 7,23,65,168/ - be deleted. 3. Without Prejudice to above, if the revaluation loss is disallowed, profit on sale/redemption of these securities ought to be reduced by the amount of the disallowance, else it would lead to double disallowance of the same amount. WITHOUT PREJUDICE TO GROUND I: GROUND II: 1. On the facts and in the circumstances of the case and in law, the Learned CIT(A) erred in comparing the valuation of securities as on March 31, 2006 as per the NSDL statement with the valuation carried out by the Appellant as per the Master Circular on Valuation of Reserve Bank of India. 2. The Appellant prays that the valuation of securities as on March 31, 2006 as per the Master Circular of Reserve Bank of India be upheld. WITHOUT PREJUDICE TO GROUND I: GROUND III: 1. On the facts and in the circumstances of the case and in law, the Learned CIT(A) erred in disregarding the classification of securities into Available for Sale and Held for Trading carried out by the Appellant. 2. The Appellant prays that the classification of securities into Available for Sale and Held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee in the appeal for A.Y.2007-08 (i.e. ITA No.2629/Mum/2013) has taken following grounds :- GROUNDS OF APPEAL GROUND I: DISALLOWANCE OF LOSS AMOUNTING TO Rs. 3,09,75,500/- ARISING ON THE YEAR-END REVALUATION OF SECURITIES: 1. On the facts and circumstances of the case and in law, the Learned CIT(A) erred in upholding the action of the Assistant Commissioner of Income-tax - 7(3), Mumbai („the AO") of disallowing loss of Rs. 3,09,75,500/ - arising on the year-end revaluation of securities on the alleged ground that the securities were held as investment and hence had to be valued at cost. 2. He further erred in holding that since the Appellant is not engaged in the business of share trading, the securities held by the Appellant at the end of the year were not required to be valued at cost or market value whichever is lower. 3. The Appellant therefore prays that the disallowance of loss of Rs. 3,09,75,500/- be deleted. 4. Without Prejudice to above, if the revaluation loss is disallowed, profit on sale/ redemption of these securities ought to be reduced by the amount of the disallowance, else it would lead to double disallowance of the same amount. GROUND II: 1. On the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cord we found that the entire investment portfolio of the banks (including SLR securities and non-SLR securities) are required to be classified under three categories viz. 'Held to Maturity', 'Available for Sale' and 'Held for Trading'. However, in the balance sheet, the investments will continue to be disclosed as per the existing six classifications viz. a) Government securities, b) Other approved securities, c) Shares, d) Debentures & Bonds, e) Subsidiaries/ joint ventures and f) Others (CP, Mutual Fund Units, etc.). As per RBI guidelines, Banks have to decide the category of the investment at the time of acquisition and the decision should be recorded on the investment proposals. The securities acquired by the banks with the intention to hold them up to maturity will be classified under Held to Maturity. The securities acquired by the banks with the intention to trade by taking advantage of the short-term price/ interest rate movements will be classified under Held for Trading. Profit or loss on sale of investments in both the categories will be taken to the Profit & Loss Account. 7. However, Banks may shift investments to/from Held to Maturity category ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Banking Regulations Act, does not envisage any heading as "stock-in-trade". Therefore, all investments are to be disclosed under the head "investments" on the asset side irrespective whether they are held as "stock-in-trade" or as "capital assets". We found that the significant accounting policy stated in the audited accounts state that the investments are valued in accordance with the RBI guidelines and that Securities held under "Available for Sale" (AFS) and "Held for Trading" (HFT) are valued script wise and depreciation and appreciation is aggregated for each category and that net depreciation, if any, is ignored. On the other hand securities that are classified and held under the category "Held to Maturity" ("HTM") are not allowed to be depreciated. The profits and loss on sale of securities have always been treated as "business income" and never as "capital gains" in the assessee's assessments. This is evident from the computation of income wherein the entire profits as per the profit and loss account are reflected under the head "Business" and that the gross total income does not include any capital gains whatsoever. As per Schedule 13 to Profit and Loss Account the ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd any merit in the action of lower authorities for disallowing loss arose on the year end revaluation of securities. Our view is supported by decision of Hon'ble Bombay High Court in the case of CIT Vs. HDFC Bank Ltd., passed in ITA No.330 of 2012; United Commercial Bank Vs. CIT, 240 ITR 355(SC); Investment Ltd. Vs. CIT, 77 ITR 533 (SC); and CIT Vs. Bank of Baroda, 262 ITR 334 (Bom). Respectfully following the decision of Hon'ble Supreme Court and Hon'ble Bombay High Court and considering the classification of security so made and the loss arose on account of revaluation of securities are required to be allowed. Accordingly, we set aside the order of both the lower authorities and matter is restored back to the file of AO for deciding afresh in the light of our above observation. We direct accordingly. 14. The assessee is also aggrieved for disallowance u/s.14A r.w.Rule 8D. During the course of scrutiny assessment the AO found that the assessee-bank has declared dividend income of Rs. 17,86,785/- and claimed it as exempt u/s10(35). In view of the claim of the exempt income a query was raised regarding disallowance u/s 14A of the Act. It wa submitted by the assessee that it had ra ..... X X X X Extracts X X X X X X X X Extracts X X X X
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