2013 (10) TMI 1030 - HC - Income Tax

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. ... Depreciation on securities - Whether depreciation claim of ₹ 39,21,52,485 on 'held on maturity' investments by treating it as stock-in-trade despite the same not being traded on a regular basis by the assessee in accordance with the RBI and the Central Board of Direct Taxes Circulars – Held that:- Relying upon the judgment in the case of Karnataka Bank v. CIT reported in [2013 (7) TMI 656 - KARNATAKA HIGH COURT], decided in favor of assessee. 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-tradeAnalysis: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.