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TMI Blog2015 (12) TMI 1420X X X X Extracts X X X X X X X X Extracts X X X X ..... a investments and not as 'stock-in-trade'? - Held that:- Admittedly in the instant case, assessee was following the method of accounting namely, "at cost or market value, whichever is lower". Further, it is not in dispute that this practice was accepted by the Revenue throughout. Thus, in the light of the above pronouncement in the case of United Commercial Bank (1999 (9) TMI 4 - SUPREME Court) notwithstanding the preparation of the balance sheet and describing the security under a particular nomenclature in compliance with the directions/instructions issued by the RBI, the assessee would be lawfully entitled to submit the tax returns on the real taxable income in accordance with the method of accounting consistently and regularly adopted.- Decided in favor of assessee - ITA No. 100014/2014 c/w. ITA No.100013/2014, ITA No. 100013/2014 - - - Dated:- 14-12-2015 - S. Abdul Nazeer And P. S. Dinesh Kumar, JJ. For the Appellant : Sri Y V Raviraj, Adv For the Respondent : Sri A Shankar, Adv JUDGMENT Though these two appeals are listed for admission, with consent of learned Counsel for the parties, they are taken up for final disposal. 2. Both appeals have been pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubballi. Commissioner by Order dated 30.11.2011 allowed the said appeals in part by deleting disallowance claimed towards depreciation on investment and Locker Rent in respect of assessment year 2007-08 and deductions claimed under Section 36(1)(viia), 36(1)(viii) and Loss on Sale of Assets for the assessment year 2008-09. 6. Aggrieved by the Order passed by CIT (Appeals), both Revenue and Assessee preferred appeals before the Tribunal. Assessee presented ITA No.112/BANG/2012 for the year 2007-08 and ITA No.113/BANG/2012 for the year 2008-09. Revenue presented ITA No.226/BANG/2012 for the year 2007-08 and ITA No.227/BANG/2012 for the year 2008-09. All the four appeals were disposed of by the common impugned order. 7. Tribunal, by the impugned order upheld the contentions of assessee and deleted the addition made by the assessing authority: (i) under Section 41(1) of the Income Tax Act, 1961 ('Act' for short) towards unclaimed 'Stale Drafts and Pay Orders' whereunder assessing authority had disallowed a sum of ₹ 58,31,851/-; (ii) disallowance of ₹ 17,59,00,087/- towards depreciation on investment. 8. Challenging the order passed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng it as 'Loss on Valuation of Securities'. The said figure was arrived at by the assessee on the premise that the market value of the securities held as on 31.3.2007 was less than the cost of securities. Accordingly, the assessee had written off the same in its Books of Accounts on the principle of Cost or Market Value, whichever is less applicable to the valuation of closing stock . Learned Counsel strongly assailing the correctness of assessee's claim on depreciation, submitted that the same runs counter to the CBDT's instruction No.17/2008 dated 26.12.2008, which was correctly applied by the assessing authority. He further submitted that the securities were admittedly held to maturity and therefore could not have been subjected to depreciation. The reasoning adopted by the First Appellate Authority as also the Tribunal defeats the logic in as much as the concept of held to maturity would loose its sanctity and relevance if the assessee is permitted to claim depreciation having declared the securities under the said nomenclature. He contended that the classification held to maturity displays a glowing description that the assessee would get back the realiz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cordance with the consistent method of accounting adopted by the assessee. He further submitted that this judgment of the Hon'ble Supreme Court has been followed by a Division Bench of the Principal Bench of this Court in ITA No.172/2009 (The Karnataka Bank Limited v. the Assistant Commissioner of Income Tax) disposed of on 11.3.2013 . Thus, the contention of assessee is that although assessee had declared the securities as held to maturity , in view of the authoritative pronouncement of the Apex Court, assessee was entitled to claim depreciation as was rightly held by the CIT (Appeals) and confirmed by the Tribunal by the impugned order. Accordingly, he prayed for dismissal of these appeals. 16. We have bestowed our careful consideration to the rival contentions urged by the parties and perused the material papers and the judgments relied upon by the learned Counsel for the assessee. 17. Re-question with regard to 'stale drafts and pay orders'. It is not in dispute that the sum of ₹ 58,31,581/- had remained in the hands of the assessee upon the drafts and pay orders issued by the Bank having been rendered stale. The assessing authority sought to categor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal. The amounts were not in the nature of security deposits held by the assessee for performance of contract by its constitutents. As it appears from the facts of the case, the amounts were depleted by adjustments made from time to time. The CIT(A) found that the assessee wrote back the amounts to its P L a/c because the various trading parties did not claim these amounts for a long time. The amounts represented credit balances in the name of the trading parties and was taken to its P L a/c. The CIT(A) held that these amounts were not revenue receipts but were of capital nature. The provisions of s.41(1) were not attracted in the facts of this case because the assessee's liability to pay back the amounts to its customers had not ceased. The Tribunal agreed with this view. (underlining is by us) 19. The Tribunal adverting to the above ruling has rightly deleted the sum of ₹ 58,38,581/- added by the assessing authority by holding it as unsustainable in law. 20. Re-depreciation claimed on securities held to maturity . The assessee's claim on depreciation of ₹ 17,59,00,087/- and consequential write off in the Books of Accounts was disallo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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