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TMI Blog2018 (3) TMI 1895X X X X Extracts X X X X X X X X Extracts X X X X ..... that the addition being unwarranted be deleted." 4. At the time of hearing, the learned AR of the assessee submitted that he is not pressing these grounds of appeal and also made endorsement to this effect on the copy of the additional ground of appeal filed before the Tribunal. Hence, they are dismissed for want of prosecution. 5. Ground no. 1 and 3of the appeal are general in nature and hence required no separate adjudication by us. 6. Ground no. 2 of the appeal is directed against the order of the learned CIT(A) confirming the order of the AO treating profit on sale of held to maturity category securities of Rs. 27,27,44,102/- as business income which was offered for tax under the head capital gains. 7. The facts of the case, are that, the assessee claimed deduction of Rs. 27,27,44,102/- from business income on account of profit on sale securities on held to maturity category. The same was offered to tax as short term and long term capital gains in the computation of income as under:- Capital Gains Amount (Rs.) Short Term @30% 4,35,43,224 Long Term @10% 22,92,00,878 Total 27,27,44,102 The AO observed that though the securities on which the above mentioned deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d over the period remaining to maturity. ii. Banks should recognize any diminution, other than temporary, in the value of their investments in subsidiaries/joint ventures which are included under Held to Maturity category and provide thereof. Such diminution should be determined and provided for each investment individually. Further, in the Balance Sheet for the previous ended 31st March, 2006, in Schedule 17- Significant Accounting Policies, on page No. 71 the policy for valuation of investment in different categories is disclosed. Valuation of investment held under HTM category valued as "Valued at acquisition cost unless more than the face/maturity values, in which cases the premium is amortized over the remaining years to maturity." The assessee further contended that submissions have been made before the AO during assessment proceedings that the bank treats investment under HTM category as Capital asset and offers the same for taxation under the head "Capital gains". The AO has observed as under:- "Whether any asset is stock in trade or capital asset depends upon a number of factors and dominantly depends upon the intention of the owner of the asset. If the intention of h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other words, it is not a case where the said securities were sold on one or two occasions during the year. It is a settled position of law that the nature of transactions is to be decided based on the frequency of transactions and the conduct of the appellant and not merely on the basis of the intention at the time of purchase. In the instant case, the presence of frequent trading in these securities indicates that the profits arising on such transactions are in the nature of business profits. The RBI has prescribed certain broad guidelines in respect of the classification of securities into three categories. However, there is no express bar on conversion of securities from one category to another category; the only requirement is that certain internal formalities have to be followed by the Board of Directors of the company. I, therefore, hold that the profit arising on sale of investment held under HTM category should be treated as Business Income and accordingly there is no reason to interfere with the view of the AO. This ground of appeal is rejected". 14. The AR reiterated the submissions of made before the learned CIT(A). On the other hand, the learned DR relied on the orders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hed the details of cost of acquisition and the selling price either in the return or during the assessment proceedings. The loss of Rs. 10,06,04,870/- is claimed in the computation of income but is not booked in the books of accounts. 18. On appeal before the learned CIT(A), the assessee submitted that full details were provided to the AO. The capital gain has been worked out by deducting the cost of securities from fair market value of the securities on the date of conversion of capital assets into stock-in-trade. Business loss of Rs. 10,06,04,870/- arising out of sale of such converted stock has been claimed as allowable deduction under the head business income. The assessee further stated that although the AO has not allowed business loss arising on conversion of capital assets into stock-in-trade but has accepted capital gains as offered by the assessee on conversion. Both capital gains and business income originate from the same transaction. And the assessee accepting one part of Section 45(2) and rejecting other part is itself a fit case for quashing of disallowance made by the AO. 19. The learned CIT(A), after considering the submissions of the assessee held as under:- & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has failed to produce any evidence either before the AO during assessment proceedings or before me during appellate proceedings that the appellant has suffered actual loss. In view of the above discussion, I do not find any infirmity in the action of the AO in disallowing the business loss of Rs. 10,06,04,870/- claimed on account of conversion of securities into stock-in-trade. Therefore, this ground of appeal is rejected." 20. Before us, the AR of the assessee reiterated the submissions made before the learned CIT(A). On the other hand, the learned DR supported the orders of the authorities below. 21. After hearing the rival submissions and perusing the orders of the lower authorities and materials available on record. We find that the Assessing Officer as well as the learned CIT(A) has disallowed the deduction for the loss of Rs. 10,6,04,870/- on the ground that the assessee failed to substantiate the claim and has not furnished the details of cost of acquisition and the selling price either in the return or during the assessment proceedings. Before us also, these details have not been furnished. We, therefore, find no good reasons to interfere with the order of the learned CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submission of the AR of the assessee. We find that the Tribunal in the AY 2005-06 held as under:- "33. The facts of the case of the assessee are exactly similar to the facts before the Hon'ble Calcutta High Court in the case of Betts Hartley Huett and Co. Ltd. (supra). In that case, it was held that the transaction between the head office of the assessee and its branch in India was a transaction between the principal and principal. In law, there cannot be a valid transaction of sale between the branch and its head office. As it is ultimately based on a proposition that no person can enter into contract with one self. Debiting or crediting one's account cannot alter the legal position. Applying the same principle as enunciated by the Hon'ble Calcutta High Court, it cannot be said that the transactions between the branches gave rise to an income assessable under the Income-tax Act. The substance of the entire transaction, in our view, appears to be pure accounting lapses on the part of the bank or its branches to properly reconcile the transactions. In fact, it is always understood that all these accounts must have cancelled each other. It did not take place that way du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e bank. We must appreciate that these transactions in the inter branch accounts are mere accounting entries. When the transactions were made to these accounts initially, these were not in the nature of income either of the branches involved or of the bank as a whole. It is a part of transactions on the real accounts and not on what is known as revenue accounts. Therefore, it is difficult to say that the amounts in question bear the same character as unclaimed deposit received from the customers by the assessee T.V.Sundaram Iyengar & Sons Ltd. 34. In the light of the discussions of these facts, it is difficult to say that either the decision of the Apex Court in the case of T.V.Sundaram Iyengar & Sons Ltd. (supra) or other decisions including the decision of Hon'ble Delhi High Court in the case of CIT Vs. Rajasthan Golden Transport Co.(P) Ltd. - 249 ITR 723 are applicable to the facts of the case. In fact, the Hon'ble Delhi High Court in the case of Rajasthan 'Golden Transport Co.(P) Ltd. (supra) was concerned with the amounts received in the course of trade transactions. In the decision of the Hon'ble Delhi High Court, the amounts in question were held to be taxable u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d out on the basis of various guidelines issued by the Reserve Bank of India and the AO has not disputed the basis of working out the market value. The method has been consistently and regularly followed and the same has been accepted at the appellate stage for the last so many years. The investments are stock-in-trade in the case of the appellant and the same has to be valued on cost or market price whichever is lower, which is a recognized principle for working out the value of closing stock in the mercantile system of accounting. Reliance was placed on the ratio of the judgment of Hon'ble Apex Court in the case of UCO Bank vs. CIT 240 ITR 355 (SC) wherein it has been held that the investment is to be valued at cost or market price, whichever is lower. 31. The learned CIT(A), after considering the submissions of the assessee observed that this is a recurring issue in the case of the appellant Bank and his predecessor have allowed this ground in favour of the appellant right from AY 2000-01 to 20005-06. Moreover, this issue is squarely covered by the above mentioned Apex Court's decision, reported in 240 ITR 355. The facts remaining the same in this year also, the issue is decide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... find that the issue is fully covered by the earlier years' orders right from AY 2001-01 to 2004-05. The learned CIT(A) has only followed the principle laid down by the Apex Court in the case of UCO Bank - 240 ITR 355. In the light of the aforesaid binding decision of the Apex Court, we do not find any infirmity in the order of CIT(A). The same is dismissed. 35. The learned DR could not pointed out any specific error in the order of the learned CIT(A). He also could not bring any material on record to show that the order of the Tribunal for AY 2005-06 was varied in appeal before any higher authorities. Hence, we find that no good reasons to interfere with the orders of learned CIT(A) which is confirmed and the grounds of appeal of the Revenue is dismissed. 36. In ground no. 3 of the appeal of the Revenue in deleting the addition of Rs. 42,33,78,370/- made on account of recovery in Written off account. The brief facts of the case, are that, the Assessing Officer observed that the assessee has added back a sum of Rs. 42,33,78,370/- to the income declared as per the Profit & Loss Account in the computation income filed with the return. However, deduction of similar amount has been cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cess of that amount i.e. relating to those provisions which were allowed as deduction to the assessee are to be treated as taxable income of the assessee. We find that neither of the lower authorities have examined the issue from this angle therefore, in our considered view, it will be just and fair to restore the matter back to the file of the AO to re-adjudicate the issue afresh in light of the observation made hereinabove after allowing reasonable and proper opportunity of hearing to the assessee. Thus, this ground of appeal of the Revenue is allowed for statistical purposes. 40. In ground nos. 4 and 5 of the appeal of the Revenue, the grievance of the Revenue is that the learned CIT(A) erred in deleting the addition of Rs. 4,31,00,000/- on account of contribution of PNB Employees Pension Fund Trust. The brief facts of the case, are that, the AO observed that contribution made to PNB Employees Pension Fund Trust was not contribution to the Pension Fund. According to him, the provisions of Section 43(b) are not applicable to the assessee bank. According to the AO, no deduction of such payment of Rs. 431 crores is allowable to the assessee bank, even though the same is actually p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tting telephone connection and Rs. 3,330/- relates to telephone charges which were wrongly debited under the head "Safe, furniture and fixture". Since the expenses were of revenue nature, the same were not offered for tax. 46. The learned CIT(A), after considering the submissions of the assessee deleted the addition by observing that he agreed with the submission of the assessee that the amount of Rs. 71510/- is revenue nature. 47. The learned DR relied on the order of the AO and the learned AR relied on the order of the learned CIT(A). The DR could not point out any specific error in the order of the learned CIT(A) by bringing any material on record, therefore, we find that no good reasons to interfere with the orders of learned CIT(A) which is confirmed and the grounds of appeal of the Revenue is dismissed. 48. In ground no. 7 of the appeal of the Revenue, the grievance of the Revenue is that the learned CIT(A) erred in deleting the addition of Rs. 6,12,00,000/- being depreciation on Goodwill. 49. The AO observed that the detailed discussion is made in AY 2003-04 and 2004-05 on this issue. It was observed by the AO in those years that goodwill cannot be considered as business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le asset is eligible for depreciation under section 32 of the Income Tax Act. This is similar to Ground no. 12 which has been decided in favour of the appellant. Moreover, there has been no addition on this issue in the preceding years and later years by the AO himself. Accordingly, this issue is decided in favour of the appellant even on the principle of the precedence and consistency. 55. The learned DR relied on the order of the AO and the learned AR relied on the order of the learned CIT(A). The DR could not point out any specific error in the order of the learned CIT(A) by bringing any material on record, therefore, we find that no good reasons to interfere with the orders of learned CIT(A) which is confirmed and the grounds of appeal of the Revenue is dismissed. 56. Ground no. 9 of the appeal of the Revenue, the grievance of the Revenue is that the learned CIT(A) erred in deleting the addition of Rs. 1,65,13,445/- made on account of set off of loss from venture capital funds. 57. The brief facts of the case, are that, the AO observed that since long term capital gain on venture capital fund with securities transaction tax is claimed as exempt, any loss arising out of such ..... X X X X Extracts X X X X X X X X Extracts X X X X
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