Tribunal upholds CIT (A) decisions, dismisses Revenue appeal on ITAT Hyderabad orders

The Tribunal upheld the CIT (A)'s decisions on all three issues, dismissing the Revenue's appeal. The judgments referenced include ITAT Hyderabad orders and decisions from the Supreme Court and various High Courts. The order was pronounced on 25th March 2015.

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Issues Involved:
1. Disallowance of Depreciation on securities held as stock in trade.
2. Addition on account of disallowance of broken period interest on purchase of securities held as stock in trade.
3. Addition on account of disallowance of deduction claimed under Section 36(1)(viia) of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Disallowance of Depreciation on Securities Held as Stock in Trade:
The assessee, a regional rural bank, filed a revised return to claim depreciation of Rs. 976,74,332 on securities held as stock in trade, which was omitted in the original return. The AO rejected the revised return, arguing it did not meet the criteria under Section 139(5) of the Income Tax Act, citing the Assam High Court decision in Sunanda Rao Deka Vs. CIT. However, the CIT (A) found the AO's rejection to be factually incorrect, noting the AO's confusion between depreciation on fixed assets and securities. The CIT (A) held that the omission was a reasonable ground for filing a revised return within the due date and directed the AO to adopt the revised returned income. The Tribunal upheld this decision, finding no infirmity in the CIT (A)'s order, and referenced the ITAT Hyderabad order in the case of AP Grameen Vikas Bank and other relevant judgments.

2. Addition on Account of Disallowance of Broken Period Interest on Purchase of Securities Held as Stock in Trade:
The AO disallowed the claim of Rs. 373,12,444 towards broken period interest on securities, relying on the Supreme Court decision in Vijaya Bank Vs. CIT. The assessee contended that the securities were held as stock in trade, a position supported by previous ITAT Hyderabad rulings. The CIT (A) agreed with the assessee, distinguishing the Vijaya Bank case and noting that the investments were treated as stock in trade, thus making the broken period interest an allowable expense. The Tribunal upheld this view, referencing various High Court and Supreme Court decisions and the ITAT Hyderabad order in the case of AP Grameena Vikas Bank.

3. Addition on Account of Disallowance of Deduction Claimed under Section 36(1)(viia) of the Income Tax Act:
The AO disallowed the deduction of Rs. 4,44,52,560 claimed under Section 36(1)(viia), arguing that the provision was created without necessity and was not reflected in the books of account. The assessee argued that the deduction was permissible under the statutory provisions, supported by ITAT Hyderabad and Karnataka High Court rulings. The CIT (A) held that the deduction was claimed as per the provisions of Section 36(1)(viia) and found no infirmity in the claim, noting that no other deductions were claimed under Section 36(1)(vii). The Tribunal upheld this decision, referencing the ITAT Hyderabad order in the case of State Bank of Hyderabad and other relevant judgments.

Conclusion:
The Tribunal dismissed the Revenue's appeal, upholding the CIT (A)'s decisions on all three issues. The judgments referenced include the ITAT Hyderabad orders in the cases of AP Grameena Vikas Bank and State Bank of Hyderabad, as well as decisions from the Supreme Court and various High Courts. The order was pronounced in the Open Court on 25th March 2015.

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