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TMI Blog2019 (6) TMI 926X X X X Extracts X X X X X X X X Extracts X X X X ..... oubt that proper disclosure of the claim of depreciation in the form of diminution of value of securities was made by the assessee in the regular return of income, specific query was raised by the Ld. A.O for the alleged claim and detailed reply was filed along with necessary evidences in the form of circular issued by RBI and the accounting standards applicable for disclosure of such type of investments. Thus Proviso of Section 147 is not applicable on the assessee and the reopening of the assessment by issuance of notice u/s 148 is bad in law and the assessment made u/s 147 r.w.s. 143(3) dated 13.12.2017 deserves to be quashed. In the result Ground No.1 of the assessee is allowed. Depreciation in the valuation of investment of securities - HELD THAT:- We observe that the assessee is engaged in the business of banking and providing credit facilities. As per the guidelines of RBI the assessee is required to invest in securities to be kept as fluid securities and are available for sale and are to valued every month on periodical basis. As per the RBI guidelines, circular named classification in valuation of investments dated 26.11.2008 vide instruction No.17/2008, such security are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im for allowance of depreciation. The claim of depreciation on investment of fluid asset may please be allowed. 4. Brief facts of the case are that the assessee is a co-op. society engaged in the business of banking and providing credit facilities. The activities of the society are governed by the directives of the RBI. The return of income was filed on 15.10.10 declaring the income of ₹ 45,66,540/-. The accounts are audited and the Tax Audit Report is filed. During the course of the assessment proceedings, the Ld AO specifically raised a query vide letter dated 22/10/2012 regarding the allowability of depreciation on investments and vide letter dated filed 11.12.2012, the assessee gave the reply and also drew attention to the RBI Circular. The original assessment was completed on 28/12/2012 determining the total income of ₹ 45,66,540/-. 5. Subsequently notice u/s 148 of the Act was issued on 25.11.2016 on the ground that the income has escaped the assessment. This notice was issued after the expiry of four years from the end of the Assessment Year 2010-11. The assessee raised objection and filed the return under protest. However the Ld. A.O reopened the assessment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd (2017) 82 taxmann.com 166 (Delhi High Court) Ranbaxy Laboratories Ltd Versus Deputy Commissioner of Income Tax and OTR 351 ITR 23 Delhi High Court. Rubamin Ltd. Vis. Love Kumar (253 ITR 432) (Guj.) Ashwamegh Co-operative Housing Society vis. DCIT (353 ITR 413) (Guj.) Metal Alloys Corporation v/s. ACIT (350 ITR 245) (Guj.) Mrs. Parveen P. Bharucha vis. CIT (348 ITR page 325) (Mumbai) NDT Systems vis. ITO (255 CTR page 113) (Born.) Vishwanath Engineers vis. ACIT (354 ITR page 211) (Guj.) Maruti Suzuki vis. DCIT (356 ITR page 209) 8. Per contra Ld. Departmental Representative vehemently argued and supported the orders of lower authorities. 9. We have heard rival contentions and perused the records placed before us and carefully gone through the judgment referred by Ld. Counsel for the assessee. In Ground No.1 the assessee has challenged the reopening of the assessment proceedings u/s 147 of the Act as bad in law. We find that the notices u/s 148 of the Act was issued on 25.11.2016 which is beyond four years from the end of the assessment year 2010-11. The proviso to Section 147 of the Act provides that where the assessment u/s 143(3) or u/s 147 has been made for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the course of its banking business and hence is an allowable expenditure. The same has been made for last many years and has been accepted by the Department for the preceding years." 11. Ld. A.O after considering the submissions of the assessee accepted the claim of diminution in the value of investment at ₹ 16,36,000/- and accepted the returned income of the assessee vide order u/s 143(3) of the Act dated 28.12.12. There remains no doubt that proper disclosure of the claim of depreciation in the form of diminution of value of securities was made by the assessee in the regular return of income, specific query was raised by the Ld. A.O for the alleged claim and detailed reply was filed along with necessary evidences in the form of circular issued by RBI and the accounting standards applicable for disclosure of such type of investments. 12. We are therefore of the view that the proviso of Section 147 of the Act as referred above is not applicable on the assessee and the reopening of the assessment by issuance of notice u/s 148 of the Act is bad in law and the assessment made u/s 147 r.w.s. 143(3) of the Act dated 13.12.2017 deserves to be quashed. In the result Ground No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stments. Ld. A.O also observed that the assessee has treated the investments as closing stock by valuing them at cost or market price, whichever is less basis. Ld. A.O therefore after disallowing ₹ 57,95,185/- towards depreciation of diminution in the value of investments, assessed loss of (-) ₹ 15,36,320/-. 18. Assessee preferred appeal before Ld. CIT(A) but failed to succeed as Ld. CIT(A) confirmed the disallowance observing as follows; "Ground l Nos. l& 2: Through these grounds of appeal. the appellant has challenged the addition ₹ 57,95,185/- on account of depreciation on the investment of fluid assets. The fluctuation in the value of investment is not acceptable because the appellant has shown its securities under the head investment in the assets side of the balance sheet. No basis or valuing. the securities have been furnished in order to arrive at a figure or depreciation on account or diminution in the value of investments. The balance sheet of the appellant reflects provision for 'investmcnt fluctuation reserve' to the tune of ₹ 62,19,218/- as on 31.3.11 and also on 31.3.12 which is higher than the amount claimed under depreciation on investment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of various High Courts directly on this point who have specifically held it that the difference in value of investments should be treated as depreciation and is allowable as a deduction:- CIT V/s. Nendugada Bank 182 CTR p.403 (Kar} Bank of Baroda V/s. CIT 262 ITR p.334 (Ker.) CIT V/s. Karur Vyasya Bank 273 ITR p.51 0 (Mad.)3 21. He further submitted that the assessee's case is squarely covered in its favour by the recent decision of Hon'ble Tribunal in the case of Jhabua Dhar Kshetriya Gramin Bank, Jhabua ITA No.106 to 114/Ind/2017 order dated 06.09.2018 deciding the similar issue in favour of the assessee placing reliance on the judgment of Hon'ble Gujarat High Court in the case of CIT V/s Rajkot Dist. Co-Op Bank Ltd Tax Appeal No.56/2013 dated 10.02.2014. 22. Per contra Ld. Departmental Representative though supported the orders of lower authorities but failed to controvert the submissions made by the Ld. Counsel for the assessee. 23. We have heard rival contentions and perused the records placed before us. The sole issue raised in this appeal of the assessee for Assessment year 2012-12 relates to the disallowance of depreciation in the valuation of investment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Dist. Co-Op Bank Ltd Tax Appeal No.56/2013 dated 10/02/2014 and following question was raised for consideration before the Hon'ble court; (i) Whether in the facts and circumstances of the case and in law, the Appellate Tribunal is justified in holding that the A.O and CIT(A) have erred in disallowing the amortization of security premium of ₹ 40,30,000/- ? (ii) Whether in the facts and circumstances of the case and in law, the Appellate Tribunal is justified in not considering that the securities held under "Held to maturity (HTM) category" as per RBI guidelines are not meant to earn profit but are required to be kept as they are till maturity?" 28. Further the facts in this case are mentioned below: "2.1 The respondent-assessee is a cooperative bank. As per the Reserve Bank of India guidelines, it is required to deposit certain amounts in Government securities and to hold the same till maturity in order to maintain Statutory Liquidity Ratio (SLR). In certain cases, the acquisition of such securities is at a value higher than the face value of the security itself. The respondent-assessee claimed such premium so paid in acquiring the securities as a loss amortized over ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cated by the Hon'ble High Court of Gujarat in the case of CIT V/s Rajkot Dist. Co-Op Bank Ltd (supra). Therefore Respectfully following the judgment of Hon'ble High Court of Gujarat, we are of the considered opinion that both the lower authorities erred in confirming the addition and the assessee has rightly claimed the amortization of loss in the value of government securities and the same is liable to be treated as business expenditure. In the result this common issue is decided in favour of the assessee and the relevant grounds raised in Assessment Year 2008-09 to Assessment Year 2012-13 in I.T.A. No. 107, 109, 111, 112, & 133/Ind/2017 stands allowed." 25. We therefore respectfully following the above decision of the Tribunal as well as judgments and decisions relied therein find that the issue raised in this appeal is squarely covered in favour of the assessee and both the lower authorities erred in disallowing the diminution in value of investment in securities. We accordingly set aside the orders of lower authorities and allow the appeal of the assessee and direct the revenue authorities to allow depreciation of diminution in the valuation of investment claimed by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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