2014 (1) TMI 295

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.... the method of valuing the current assets at cost or market value whichever was lower. Your appellant reiterates that the non-SLR investments are stock in trade and current assets valued at cost or market value. 3. Your appellant submits that both Commissioner of Income Tax (Appeals) as well as Assessing Officer erred in concluding that the non- SLR investments on which depreciation in value was claimed as deduction belonged to "HTM" category where they actually belonged to "AFS" category. 4. Your appellant submits that the Commissioner of Income Tax (Appeals) erred in law and facts of the case in confirming that the action of the Assessing Officer in applying the decision of the Special Bench of ITAT Delhi Bench in the case of New India Industries Ltd. Vs Addl.CIT (18 SOT 51), which relates to Non- Banking Finance Companies and not to Co-Operative Banks. 5. Your appellant submits that the Commissioner of Income Tax (Appeals) erred in law and facts of the case in not following the principles laid down by Supreme Court in the case of United Commercial Bank vs CIT (240 ITR 355) (SC); Madras High Court in the case of CIT vs Karur Vysya Bank (273 ITR 510) (Mad); CIT vs City Union Ba....

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....rough the Primary Agricultural Credit Societies (PACS). Your Petitioner could not produce the copies of the Reserve Bank of India letter dated 25th April 2005, Board Resolutions, GOM's No. 53, Statement of SLR and Non-SLR as filed before the Regulator before the Assessing Officer, as the Assessing Officer had never called for the same. Your appellant prays the copies of the Reserve Bank of India letter dated 25th April 2005, Board Resolutions, GOM's No. 53, Statement of SLR and Non-SLR as filed before the Regulator, may be admitted as additional evidence. Your Petitioner submits that on a perusal of the same Hon'ble Member may consider the contention that the Non- SLR investments are current investments. This is further supported by the circular issued by NABARD. Hon'ble Member may admit the additional evidence and pass such orders deemed fit. Sd/- Authorised Representative 5. The AR submitted that the assessee is a co-operative bank sponsored by the Government of Andhra Pradesh. As part of its banking business the assessee apart from giving loans also makes investments. The investments are broadly categorised as SLR (Statutory Liquidity Ratio) investments and Non-SLR investm....

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....page 49 of the paper book gives the disclosure requirements of 'Non-SLR requirements'. In para 12.3 of the said circular at page 45 'All Non-SLR investments are to be categorized as Current Investments'. The assessee could, therefore, have the Non-SLR securities as stock-in-trade. 8. The AR submitted the following regarding the Method of Accounting followed by the assessee. The assessee has been treating Non-SLR investments as current investments consistently from year to year as detailed above from the accounting policy statements in 'Notes to Accounts'. Hence the same constitute his stock in trade. Regarding treatment of Non- SLR securities the AR submitted that according to the RBI and NABARD guidelines, all Non-SLR investments are to be classified as 'Current Investments'. Hence the Assessing Officer as well as the CIT(A) in the facts and circumstances of the case could not have held that the 'depreciation' provided is in respect of permanent securities to be valued at cost as securities under the HTM category. The AR submitted that the CBDT Circular No. 665 dated 3.10.1993 (at pages 62-63 of the paper book) clearly states in para (4) of the circular as under: "The question w....

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....ver was lower - Revenue had accepted said method for over last 30 years - whether preparation of balance sheet in accordance with statutory provision would not disentitle assessee in submitting income-tax return on real taxable income in accordance with method of accounting adopted by assessee consistently and regularly - Held, yes - Whether it could be said that assessee was following two different methods for valuing its stock-in-trade (investments) - Held, no - Whether, therefore, loss claimed in income-tax return could not be disallowed - Held, yes" 10. The AR submitted that the letter of RBI in pages 50 of the paper books clearly shows that the bonds of APPFC which is the main constituent of the Non-SLR securities cannot partake the character of SLR securities and hence the depreciation of investment in question is chargeable to Profit and Loss Account. In view of the above facts and circumstances of the case, the AR pleaded that the addition of depreciation on investments may be deleted. 11. The learned DR has not raised any objection for admission of the additional evidence and he submitted that the issue may be set aside to the AO for fresh consideration. 12. We have hea....