Banking Company Appeals Successful Ruling on Tax Loss Disallowance

The Tribunal allowed the appeal of a Banking Company, setting aside the CIT's order directing modification of the assessment order to disallow a loss on the transfer of securities. The Tribunal held that the claimed loss was allowable based on precedent, citing a previous case involving State Bank of Mysore where a similar issue was decided in favor of the assessee. The Tribunal restored the AO's decision, ruling that the loss on the transfer of securities was deductible.

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Issues involved: Appeal against order u/s 263 directing modification of assessment order to disallow loss on transfer of securities.

Summary:
1. The appeal was filed by a Banking Company against the order of the CIT directing the AO to modify the assessment order by disallowing a loss of Rs. 87.11 lakhs on the transfer of securities from "Available for Sale" to "Held to Maturity" category.
2. The CIT found the assessment order erroneous and prejudicial to revenue as the claimed loss was considered notional and not deductible. The RBI Circular allowing shifting of securities was cited by the assessee, but the CIT held that the reclassification of securities did not involve an actual loss.
3. The CIT directed the AO to revise the assessment order, disallowing the claimed loss. The assessee challenged this decision, arguing that the claim was allowable based on previous Tribunal decisions.
4. The Tribunal noted that a similar issue was decided in favor of the assessee in a previous case involving State Bank of Mysore. The Tribunal held that the claim for loss on the transfer of securities was allowable, following the precedent set in the earlier case.
5. Consequently, the Tribunal set aside the CIT's order u/s 263 and restored the AO's decision, allowing the appeal of the assessee.

Order pronounced on July 15, 2011.

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