Bank investment portfolio valuation as stock-in-trade upheld under lower of cost or market value principle.

An assessee bank's investment portfolio was treated as stock-in-trade, permitting valuation at cost or market value, whichever is lower, for income-tax purposes. The Tribunal applied the principle that taxable income must reflect real income computed under the regularly employed accounting method and relied on its earlier decision on identical facts in the assessee's own case. On that basis, the bank's valuation method was accepted and the claimed deduction was allowed, while the Revenue's objections were rejected.

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Issues: Whether the assessee bank was entitled to value its investment portfolio as stock-in-trade at cost or market value, whichever was lower, and to claim the resultant deduction while computing taxable income.

Analysis: The Tribunal followed its earlier decision in the assessee's own case and the principle that, for income-tax purposes, what is taxable is the real income computed on the basis of the regularly employed accounting method. It accepted that the securities were treated as stock-in-trade and that valuation in accordance with the lower of cost or market value was permissible. The Tribunal also noted that the issue had already been decided consistently in favour of the assessee on identical facts.

Conclusion: The claim of the assessee was allowed and the Revenue's grounds were rejected.

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