TaxTMI 
TaxTMI 
2009 (7) TMI 1210
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....as allowed by the Tribunal. Aggrieved against the said order of the Tribunal, the Revenue has come forward with the present appeal with the below-mentioned questions of law : "1. Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the diminution in the value of securities held by the bank should be allowed as deduction disregarding the method prescribed in the RBI circular as per which "permanent" investments had to be valued only at cost and only 'current' investments were to be valued at market price at the close of the accounting year ? 2. Whether....
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....he close of the accounting year". The very same issue came up for consideration before this Court in the decision reported in CIT vs. Karur Vysya Bank Ltd. (2005) 273 ITR 510, 511 (Mad) which was rendered by relying upon the decision of the Supreme Court reported in United Commercial Bank vs. CIT (1999) 156 CTR (SC) 380: (1999) 240 ITR 355(SC). In that case, the Hon'ble Supreme Court categorically formulated the principles as under : 1. That for valuing the closing stock, it is open to the assessee to value it at the cost or market value whichever is lower ? 2. In the balance sheet, if the securitie....
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.... revenue loss considering that the securities are trading assets and not investments. Hence, this question of law is answered in favour of the assessee and against the Revenue. 4. The next question of law is as to "whether the Tribunal was right in law in holding that the interest paid on charge of investment is allowable as revenue expenditure disregarding the principle that the interest paid on charge of investments categorized as 'permanent' are to be treated as capital expenditure and not as revenue expenditure". As far this question of law is concerned, the main contention raised by various parties in respect of the Government securities held by the banks are to be treated as stock-in-trade, came up for consideration before ....
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.... 240 ITR 355(SC) (supra) has arrived at the conclusion that the interest paid will not be a capital expenditure and only a revenue expenditure. Hence, we hold that the Tribunal's finding is legal, valid and correct. Therefore, this question is also answered against the Revenue and in favour of the assessee following the above decisions of this Court and the Hon'ble Supreme Court. 5. The third question of law raised by the Revenue is "whether the Tribunal was right in holding that the loss on sale of security incurred by the assessee bank was allowable as revenue loss ignoring the fact that loss on sale of securities categorised as 'permanent assets' 'cannot be treated as business loss". As far as this question of law ....
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.... banking business hitherto, having been required by the subsequent operation of law to pay authorisation fee to SEBI has paid the same and hence, the expenses have to be viewed only as having been incurred to facilitate the carrying on of an existing business and it is in the nature of revenue expenditure. The Hon'ble Supreme Court in the case cited above had categorically held that where the assessee has an existing right to carry on a business, any expenditure made by it during the course of business for the purpose of removal of any restriction or obstruction or disability would be on revenue account, provided the expenditure does not acquire any capital asset. Payments made for removal of restriction, obstruction or disability may r....