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TMI Blog2023 (6) TMI 1461X X X X Extracts X X X X X X X X Extracts X X X X ..... drop that Tribunal has held that the respondent had purchased securities to hold them as stock-in-trade. Therefore, interest paid on such securities would be an allowable deduction. We are in agreement with the finding returned by the Tribunal. Decided in favour of assessee. - Hon ble The Chief Justice Ujjal Bhuyan And Hon ble Sri Justice N. Tukaramji For the Petitioner : J V Prasad Sc For Income Tax For the Respondent : Karthik Ramana Puttamreddy JUDGMENT: PER THE HON BLE THE CHIEF JUSTICE UJJAL BHUYAN Heard Mr. J.V.Prasad, learned Standing Counsel, Income Tax Department, for the appellant and Mr. K.P.Amarnath Reddy, learned counsel for the respondent. 2. This appeal has been preferred by the revenue as the appellant under Section 260A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to as SLR ). For that purpose, every bank subscribes to Government securities. One such security is known as SGL (Subsidiary General Ledger). This ledger is maintained in the Public Debt Office in the Reserve Bank of India. Every bank is required, as a part of banking business, to subscribe to this loan. This loan/SGL is also transferable like any other security. In this case, for example, we are concerned with 4.75 per cent. Government of India Loan, 1980, f. v. Rs. 5 lakhs. On the SGL, the Reserve Bank of India pays half yearly interest. In the case of the said 4.75 per cent. Government of India Loan, 1980, f. v. Rs. 5 lakhs, the Reserve Bank of India was required to pay half yearly interest on May 12, 1976, and November 12, 1976. The Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h it bought the security on August 11, 1976. In the above example, since the security was sold/transferred on August 11, 1976 (i.e., after due date for payment of interest), interest had accrued to the transferor/seller from the last due date, i.e., May 12, 1976 up to August 11, 1976. 17. As explained by the Bombay High Court, every bank is required to maintain a Statutory Liquidity Ratio (SLR). For that purpose, every bank subscribes to government securities. One such security is known as Subsidiary General Ledger (SGL) which is maintained in the Public Debt Office in the Reserve Bank of India. Every bank is required as a part of its banking business to subscribe to this loan. Like any other security, such a loan/SGL is also transferable. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est which accrued on securities taken over by Vijaya Bank from Jayalakshmi Bank. Such amount was brought to tax by the assessing officer under Section 18 of the Act. However, assessee claimed that such amount was deductable under Sections 19 20 of the Act. It was in the light of such facts that the decision in Vijaya Bank Ltd. v. Additional Commissioner of Income Tax, Bangalore ((1991) 187 ITR 541 (SC)) was rendered. 20. Therefore, Bombay High Court in American Express International Banking Corporation v. Commissioner of Income Tax ((2002) 258 ITR 601 (Bom)), in the facts of that case, held that having assessed the income of the assessee under Section 28 of the Act, Revenue ought to have taxed the broken period interest received but at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchase of securities is an allowable deduction? Referring to the Circular dated 24.04.1991 issued by the CBDT, Kerala High Court held that securities held by banks constitute their stock-in-trade or investment and consequently loss claimed by banks on the valuation of their securities should be allowed as a deduction in computing the taxable profits. Therefore, Kerala High Court confirmed the view taken by the Tribunal that securities held by the assessee bank were stock-in-trade of the business of the assessee bank and that the notional loss suffered on account of revaluation of the said securities at the close of the year was an allowable deduction in the computation of profits of the assessee bank. Finally, in respect of the 4th questi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d circumstances of each case as to whether any particular security constitute stock-in-trade or investment taking into account the guidelines issued by Reserve Bank of India from time to time. 24. It is in the above back drop that Tribunal has held that the respondent had purchased securities to hold them as stock-in-trade. Therefore, interest paid on such securities would be an allowable deduction. 25. We are in agreement with the finding returned by the Tribunal. That apart, this is a finding of fact rendered by the Tribunal and in an appeal under Section 260A of the Act, we are not inclined to disturb such a finding of fact, that too, when the legal position is very clear. 26. For the aforesaid reason, we answer the above questions in fa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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