Depreciation on investments cannot be denied for a marginal delay in board approval for shifting securities classification.

Depreciation disallowance on investments was held unjustified where an assessee bank shifted securities classification with Board approval obtained in the first month of the accounting year. The applicable circular contemplated shifting at the beginning of the year, but the approval delay was only marginal and explained by the time needed for Board sanction. As the classification of the securities was not in dispute and the objection rested solely on the short delay, the deletion of the disallowance was upheld in favour of the assessee.

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Issues: Whether the disallowance of depreciation on investments was justified on the ground that the approval for shifting securities was taken 21 days after the beginning of the accounting year.

Analysis: The assessee bank had shifted the investment classification with Board approval taken in the first month of the year. The governing circular contemplated such shifting normally at the beginning of the accounting year, but the delay in obtaining approval was only marginal and was attributable to the time required for Board approval. The categorisation of securities itself was not disputed, and the disallowance rested only on the short delay.

Conclusion: The disallowance was not justified and the deletion made by the first appellate authority was upheld in favour of the assessee.

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