High Court affirms assessee's right to revalue securities for tax assessment years, rejects Revenue's appeal

The High Court dismissed the Revenue's appeals for the assessment years 1996-97 and 1997-98, affirming the assessee's right to revalue securities and reduce closing stock due to revaluation loss. The court relied on a Kerala High Court decision stating that securities maintained for the Statutory Liquidity Ratio must be treated as stock-in-trade, aligning with previous judgments. As no legal question arose, the appeals were rejected, allowing the assessee to adjust the closing stock for revaluation losses on securities.

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Issues:
1. Whether the assessee was entitled to revalue the securities and claim a reduction in the closing stock on account of loss on revaluation.

Analysis:
The judgment pertains to two appeals by the Revenue for assessment years 1996-97 and 1997-98. The main issue raised was regarding the entitlement of the assessee to revalue securities and claim a reduction in closing stock due to revaluation loss. The assessment order highlighted that the securities were retained by the assessee to maintain the Statutory Liquidity Ratio (SLR) as mandated by the Reserve Bank of India (RBI). The revaluation of securities was conducted in accordance with RBI guidelines to ensure compliance with the prescribed SLR. However, the assessment order lacked comprehensive details related to the issue at hand, and the appellate orders also did not provide a complete factual background.

The tribunal, in dismissing the appeal, relied on a judgment of the Kerala High Court in a similar case involving a bank and upheld the view of the first appellate authority. The Kerala High Court decision emphasized that securities retained by the bank to maintain SLR must be treated as stock-in-trade of the assessee. This interpretation was supported by previous judgments, including one affirmed by the Supreme Court. The reduction in the market price of securities held as stock in trade was deemed necessary and had to be reflected in the books.

Based on the clear legal position established by the Kerala High Court and supported by relevant precedents, the High Court concluded that no question of law arose for consideration in the present appeals. Therefore, the appeals were dismissed, affirming the assessee's entitlement to revalue securities and claim a reduction in closing stock based on the loss on revaluation.

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