TaxTMI 
TaxTMI 
2019 (6) TMI 926
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....f appeal have been raised. ITA No. 441/Ind/2019 Assessment Year 2010-11 1. The Ld. CIT(A) has erred in upholding the re-opening of assessment when all necessary facts were disclosed in the return and during the course of the assessment proceedings. The reopening u/s 147/148 is bad in law and hence the assessment be quashed. 2. The Ld. CIT(A) has erred in upholding the addition of Rs. 16,36,000/- being the amount of depreciation claimed as per the RBI guidelines. 3. The Ld. CIT(A) erred in not following the judgments cited before him for allowance of depreciation. The claim of depreciation on investment of fluid asset may please be allowed. 4. Brief facts of the case are that the assessee is a co-op. society engaged in the business of banking and providing credit facilities. The activities of the society are governed by the directives of the RBI. The return of income was filed on 15.10.10 declaring the income of Rs. 45,66,540/-. The accounts are audited and the Tax Audit Report is filed. During the course of the assessment proceedings, the Ld AO specifically raised a query vide letter dated 22/10/2012 regarding the allowability of d....
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....aim was allowed by the Ld AO. Now the reopening of the assessment is a mere change of opinion and as such it is submitted that the action of reopening is bad in law and without jurisdiction: In this connection, attention is drawn to the following cases. District Cooperative Bank Ltd V/s DCIT (All) CIT Versus Fujistu Optel Ltd (359 ITR 67) Madhya Pradesh High Court CIT v/s. Trimurti Builders (M.P.) (246 CTR 308) CIT Vs. Kelvinator of India Ltd. (256 ITR (Del) CIT v/s Orient Craft Ltd (354 ITR 536) (Del) DIT vs. Rolls Royee Industrial Power India Ltd (2017) 82 taxmann.com 166 (Delhi High Court) Ranbaxy Laboratories Ltd Versus Deputy Commissioner of Income Tax and OTR 351 ITR 23 Delhi High Court. Rubamin Ltd. Vis. Love Kumar (253 ITR 432) (Guj.) Ashwamegh Co-operative Housing Society vis. DCIT (353 ITR 413) (Guj.) Metal Alloys Corporation v/s. ACIT (350 ITR 245) (Guj.) Mrs. Parveen P. Bharucha vis. CIT (348 ITR page 325) (Mumbai) NDT Systems vis. ITO (255 CTR page 113) (Born.) Vishwanath Engineers vis. ACIT (354 ITR page 211) (Guj.) Maruti Suzuki vis. DCIT (356....
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....f Depreciation on investment, it is submitted that the diminution in the value of investments of Rs. 16,36,000/- has been debited to the P&L A/c. The same represents the diminution in the value of investments in Govt. Securities. The securities which are not kept by the bank as HTM (held till maturity) are valued every month and the same are marked to market as per the RBI Circular. Any diminution in the value of the securities as on the valuation date are debited to P&L A/c. As depreciation on investments. The same is done on the basis of Circular of the TBI named as "Classification and valuation of Investments". The same is a business expenditure and incurred during the course of its banking business and hence is an allowable expenditure. The same has been made for last many years and has been accepted by the Department for the preceding years." 11. Ld. A.O after considering the submissions of the assessee accepted the claim of diminution in the value of investment at Rs. 16,36,000/- and accepted the returned income of the assessee vide order u/s 143(3) of the Act dated 28.12.12. There remains no doubt that proper disclosure of the claim of depreciation in the form of diminuti....
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....ted financial statements were placed on record. Ld. A.O on observing that the assessee has claimed depreciation on investment of Rs. 57,95,185/- directed the assessee to justify the claim. Assessee made necessary reply giving reference to the Reserve Bank of India guidelines which are statutorily required to be adhered by the assessee being engaged in the business of banking and providing credit facilities. However Ld. A.O did not allow this claim of Rs. 57,95,185/- observing that the security wise valuation of investments were not furnished and no basis of valuing securities have been furnished in order to arrive at a figure of depreciation on account of diminution in the value of investments. Ld. A.O also observed that the assessee has treated the investments as closing stock by valuing them at cost or market price, whichever is less basis. Ld. A.O therefore after disallowing Rs. 57,95,185/- towards depreciation of diminution in the value of investments, assessed loss of (-) Rs. 15,36,320/-. 18. Assessee preferred appeal before Ld. CIT(A) but failed to succeed as Ld. CIT(A) confirmed the disallowance observing as follows; "Ground l Nos. l& 2: Through these grounds ....
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....are valued at the prevailing rates and the difference of cost and market value is charged as depreciation as per the RBI guidelines. The Id. AO' has made the additions merely on the ground that these are investments and the details are not filed. But complete details were filed before Ld. AO explaining the nature of the depreciation, its working and proper explanation was given. However, no efforts were made by him to understand the facts and no cognizance has been taken by him for any of the assessee's submissions. The additions made are totally baseless and deserves to be deleted. In this connection, we would like to draw your honour's kind attention to the decisions of various High Courts directly on this point who have specifically held it that the difference in value of investments should be treated as depreciation and is allowable as a deduction:- CIT V/s. Nendugada Bank 182 CTR p.403 (Kar} Bank of Baroda V/s. CIT 262 ITR p.334 (Ker.) CIT V/s. Karur Vyasya Bank 273 ITR p.51 0 (Mad.)3 21. He further submitted that the assessee's case is squarely covered in its favour by the recent decision of Hon'ble Tribunal in the case of Jhabua D....
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....ive Bank engaged in the business of banking is required to deposit certain amount in government securities as per the guidelines of Reserve Bank of India and to hold such securities till the maturity so as to maintain the Statutory Liquidity Ratio (SLR). In some cases value of acquisition of such securities is higher than the face value and such premium so paid is amortized as loss during the entire period of security. Assessee made similar claim but both the lower authorities did not allowed. 27. We find that the assessee has referred to various judgments placed in the paper book No.2 dated 26.4.2018. Similar facts came up for adjudication before Hon'ble Gujarat High Court in the case of CIT V/s Rajkot Dist. Co-Op Bank Ltd Tax Appeal No.56/2013 dated 10/02/2014 and following question was raised for consideration before the Hon'ble court; (i) Whether in the facts and circumstances of the case and in law, the Appellate Tribunal is justified in holding that the A.O and CIT(A) have erred in disallowing the amortization of security premium of Rs. 40,30,000/- ? (ii) Whether in the facts and circumstances of the case and in law, the Appellate Tribunal is justif....