TaxTMI 
TaxTMI 
2020 (7) TMI 523
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.... account of diminution in the market value of Government securities classified under the category 'Held to Maturity'. 3. Briefly stated, the facts of the case are that the assessee, a co-operative bank, claimed deduction in the computation of income amounting to Rs. 2,65,85,621/- on account of diminution in value of Government securities - "Held till Maturity". Such securities were purchased at premium. The assessee separately amortized the premium to the tune of Rs. 7,00,000/- in Profit and Loss Account. Thereafter, the assessee computed difference between the face value of the securities "Held till Maturity" and their market value as at the year end. Such difference amounting to Rs. 2,65,85,621/- was claimed as deduction in the comp....
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....me is recorded in the books of account. If a particular amount is deductible as per law, the same has to be allowed as deduction irrespective of the fact that it was not recorded in the books of account. It is further noticed that the assessee did not record such diminution of value of securities to the extent of Rs. 2.65 crores in its books of account so as to satisfy the RBI norms, which provide for valuing the securities as such without any diminution in their value at the year end. The RBI guidelines mandate reflection of certain transactions in a certain way and do not supersede the taxing principles. 5. The second point of controversy is the treatment of the securities as investment or stock-in-trade. Whereas the case of Assessing ....
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....reflected on market value in the books of account. In this regard, the ld. AR was required to place on record trail of event till sale qua the securities. On the next date of hearing, such details were placed on record, as per which, it is evident that the securities which were valued at Rs. 80/- at the year-end, when sold in a year later, say at Rs. 105/-, the assessee reflected profit at Rs. 25/-, which shows that the reduced market value was considered by the assessee at the time of computation of income from sale of such securities. Not only this, the assessee reflected such profit on sale as `Business income' and not Capital gain. 7. The Ld. DR harped on the point that in addition to the diminution in the value of such securities, t....
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.... tune of Rs. 6,69,000/-. Considering the mandate of section 36(1)(viia) of the Act, he allowed deduction only to the extent of provision made and the excess amount of Rs. 37,56,718/- was disallowed u/s 36(1)(viia) read with section 36(2)(v) of the Act. The ld. CIT(A) echoed the assessment order on this count. 10. We have heard both the sides and gone through the relevant material on record. Section 36(1)(viia) of the Act specifically provides for allowing deduction `in respect of any provision of bad and doubtful debts made' by the assessee. It is seen that similar issue came up for consideration before the Pune Benches of Tribunal in Addl.CIT Vs. Bank of Maharashtra (2014) 41 CCH 108 (Pune-Trib.), a copy of which has been placed on reco....