9911796707
TMI Blog2017 (5) TMI 838X X X X Extracts X X X X X X X X Extracts X X X X ..... bad in law and contrary to the provisions of law & facts. 2. The learned CIT(A) erred in law as well as on facts in confirming the disallowance made by AO with respect to provision for depreciation in value of government securities as per RBI guidelines for a sum of Rs. 35,45,050/-. 2.1. The learned CIT(A) as well as AO erred in treating stock in trade of the appellant bank as investment. The CIT(A) failed to understand that as per the Banking Regulation Act and guidelines issued by the RBI trading stock has to be shown investment. 2.2. Your appellant submits that such depreciation in value is allowable as business expenditure/business loss u/s.28 r.w.s.37 of the Act. It is submitted that it be so held now. 2.3. The learned CIT(A) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) and (c) Banking Regulation Act and as per guideline issued by the Reserve Bank Of India, investment activities is normal banking activity and should be treated as banking stock in trade. The format of balance sheet has been prescribed by legislature and bank has to report their financial result in that format only. As per this format, investment in Government security though treated as banking assets (stock in trade) has to be shown in the balance sheet as investment. Further, banks are showing gain or loss arises from sale of security as business income/loss rather than capital gain. The above position has also been clarified by Circular no. 665 dated 05-10-1993. "The question whether a particular item of investment in securities cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar and the instruction of the board as quoted above are squarely applicable in this case, where the provision for depreciation on the "available for sale' category of securities has correctly been claimed. So, claim of assessee is allowable as per circular and instruction. Similar claim of depreciation and value of Government securities was made and allowed in earlier assessment year. In such circumstances, same method of accounting has been followed and disallowed from year to year. Such claim has been allowed by various judicial pronouncements. Hon'ble Mumbai High court in case of CIT vs Bank of Baroda (2003) 262 ITR 334 has held that "Depredation in value of investment held by bank was allowable as deduction more so when the loss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is not expressly allowed as per Income Tax Act, but as per section 36(1)(viia) banks are allowed to claim provision of bad and doubtful debts subject to 7.5% of the Gross total income and 10% of average rural advances. In this case, the assessee bank while computing the total income added back provision of Rs. 1,50,000/- and claimed as deduction under s.36(1)(viia) which well within the limits prescribed. It is further contended on behalf of assessee that the purpose of creating the provisions on the standard assets is to provide for bad debts components in it. 8.2. The Ld.AR for the Assessee relied upon the decision of the Coordinate Bench of Tribunal in its own case in assessment years 2007-08 and 2009-10. 8.3. The Ld.DR for the reven ..... X X X X Extracts X X X X X X X X Extracts X X X X
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