High Court upholds depreciation claim on investments as stock-in-trade

The High Court of Karnataka dismissed the Revenue's appeal against the Income-tax Appellate Tribunal's decision on valuing investments as stock-in-trade. The court upheld the allowance of a depreciation claim on 'held on maturity' investments treated as stock-in-trade, following a precedent set in a prior case. The judgment favored the assessee, affirming their right to claim depreciation on such investments despite not being regularly traded as per regulatory circulars.

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Issues:
- Appeal by Revenue challenging order of Income-tax Appellate Tribunal regarding valuation of investments as stock-in-trade
- Substantial question of law: Allowing depreciation claim on 'held on maturity' investments treated as stock-in-trade

Analysis:
The High Court of Karnataka heard an appeal by the Revenue against the order of the Income-tax Appellate Tribunal regarding the valuation of investments as stock-in-trade. The Tribunal had allowed the assessee to value investments at cost price or market value, whichever is lower. The main issue revolved around whether the Tribunal was correct in permitting a depreciation claim of Rs. 39,21,52,485 on 'held on maturity' investments by treating them as stock-in-trade, despite not being traded regularly in accordance with RBI and Central Board of Direct Taxes Circulars.

In a related case, Karnataka Bank v. CIT, the High Court had already addressed a similar substantial question of law and ruled in favor of the assessee against the Revenue. Citing the precedent set in the aforementioned case, the High Court dismissed the current appeal, affirming its decision to allow the depreciation claim on 'held on maturity' investments treated as stock-in-trade. The judgment was delivered in favor of the assessee and against the Revenue, based on the reasons stated in the earlier case. The court ordered accordingly, upholding the decision in favor of the assessee.

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