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TMI Blog2019 (1) TMI 943X X X X Extracts X X X X X X X X Extracts X X X X ..... ssue in accordance with law. - ITA No.1249/Ahd/2016 - - - Dated:- 17-1-2019 - SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER For The Assessee : Smt.Arti N. Shah, AR For The Revenue : Shri S.K. Dev, Sr.DR ORDER PER RAJPAL YADAV, JUDICIAL MEMBER: Present two appeals are directed at the instance of the assessee against orders of the ld.CIT(A)-10, Ahmedabad dated 10.3.2016 and 25.1.2017 passed for the Asstt.Years 2011-12 and 2012-13. Since common issue is involved in both the appeals, therefore we heard them together and deem it appropriate to dispose of them by this common order. 2. A perusal of the ground would indicate that they are verbatim same except variations of figures in both the assessment years. Sole grievance of the assessee is that the ld.CIT(A) has erred in law as well as on facts in confirming disallowance of the claim for deduction of ₹ 3,16,00,000/- and ₹ 3,03,14,000/- in respect of investment depreciation reserve in the Asstt.Year 2011-12 and 2012-13. 3. Facts on all vital points are common. Therefore, for the facility of reference, we take up the facts mainly from Asstt.Year 2011-12. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led to claim depreciation on it. Further, there is no provision in the Income tax Act to allow investment depreciation reserve on account of diminishing the value of investment. Though, the assessee has specifically asked to explain how the same is allowed in the computation of the total income. But the assessee has not explained under which section the same is allowable. Moreover, in the earlier year, though there was investment, the assessee has not created any investment depreciation reserve and claims the same in the profit and loss account. Further, at the time of sale of investment naturally the income may be considered being difference between face value of investment and safe consideration because the investment is not considered as depreciable assets. 5.4 Considering the above facts, it is held that the investment depreciation reserve has been debited only for the purpose to reduce the tax liability which is not permissible as per decision of Hon'ble Supreme Court in the case of McDowell and Co. Ltd. vs. Commercial Tax Officer (SC) 154 ITR 148. Therefore, the investment depreciation reserves amounting to ₹ 3,16,00,000/- is disallowed and added to the total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal s order. She also contended that CBDT has issued a circular bearing no.17/2008 dated 26.11.2008. This circular provided certain guidelines for granting deduction to the bank while their assessment is being undertaken. For the purpose of present controversy, instructions at serial no.8 are relevant. She took us through these instructions. She further contended that these very instructions were considered by the Hon ble Gujarat High Court in the case of CIT Vs. Rajkot District Cooperative Bank and Hon ble Gujarat High Court has upheld amortization of premium paid by the bank while acquiring securities which was held upto the maturity. This premium was to be spread over. During period of security a proportionate deduction is to be allowed in each year. Though judgment is on a different issue, but it deals with security held by the bank under different category. On the basis of these instructions, deduction qua one of the limb of these securities has been allowed. If the instruction is being applied in same spirit, the depreciation on the securities held for trading or available for sale is to be allowed. In other words, judgment of Hon ble Gujarat High Court ought to be read in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loss has been claimed by the assessee as depreciation. She has explained other securities in a similar manner. 7. The ld.DR on the other hand, contended that this aspect was neither pleaded by the assessee before the AO nor before the ld.CIT(A). This security was purchased in 2009. The statement of investment as on 31.3.2009 is available at page no.137 of the paper book. The assessee has shown face value of this security at ₹ 1,000 lakhs; book value at ₹ 1022 lakhs and market value at ₹ 1014 lakhs. There was a difference of Rs.(-)7.16 lakhs, but it was not claimed as a deduction. Security was categorized under the head investment and not under head stock-in-trade. Had it been shown as stock-in-trade or available for sale, then it could have been shown under the above heads, and this difference in the value could have been claimed by the assessee as deduction in the year ending on 31.3.2009. Thus, what is evidence available on record demonstrating the fact that when this security was converted in stock-in-trade, and if it was treated as a stock-in-trade, what treatment was given in the accounts ? According to him, there is nothing available to this effect, nor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de of the bank, the depreciation/ appreciation is to be aggregated scrip-wise and only net depreciation, if any, is required to be provided for in the accounts. The latest guidelines of the RBI may be referred to for allowing any such claims. 7. The instructions clearly provide for amortisation of premium paid on acquisition of securities when the same are acquired at the rate higher than the face value. Such amortisation would have to be for the remaining period of maturity. This precisely the Tribunal had directed in the impugned order. Though contended, no contrary instructions of CBDT are brought to our notice. The instruction in question having been issued under section 119(2) of the Income-tax Act, 1961, would bind the Revenue. No question of law, therefore, arises. 9. Question before us, is whether the assessee has produced demonstrative evidence indicating that securities on which depreciation has been claimed were categorized under HFT or AFS. In the year in which securities was acquired, it was shown under the head investment without specifying category. It is quite difficult for us to conclusively to hold that these securities were held in HFT or AFS. Orders ..... X X X X Extracts X X X X X X X X Extracts X X X X
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