TaxTMI 
TaxTMI 
2024 (5) TMI 537
X X X X Extracts X X X X
X X X X Extracts X X X X
....me Tax (Appeals)-6, Ahmedabad grievously erred in law as well as in facts in upholding disallowance of loss on sale of Government Securities of Rs. 38,55,000 claimed by the Assessee Bank. a. Ld. Commissioner of Income Tax (Appeals)-6, Ahmedabad was not correct in disallowing loss claimed in respect of sale of Government Securities held by the Assessee Bank in compliance of the regulatory guidelines of the Reserve Bank of India and provisions of the Banking Regulation Act, 1949 to meet its liquidity requirements. b. Ld. Commissioner of Income Tax (Appeals)-6, Ahmedabad was not correct in disallowing loss in respect of sale of Government Securities held by the Assessee Bank as stock for its banking business. c. Ld. Commissioner of Income Tax (Appeals) - 6, Ahmedabad was not correct in upholding that investments were under HTM category merely because balance sheet of the bank does not specify anything and maturity is of 2028 and 2034 and the contention of ld. Appellate Authority was presumptive and factual. Ld. Commissioner of Income Tax (Appeals)6, Ahmedabad was not correct in linking the classification of the security with the year of its maturity. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e reason recorded by the AO, such claim of depreciation was admissible only in respect of business assets. Accordingly, the loss of Rs. 38,55,000/- on sale of Government securities was disallowed in re-assessment proceeding which was upheld by the CIT(A) vide the impugned order. 4. Shri Rahul Patel, ld. AR appearing for the assessee Bank submitted that the AO was not correct in disallowing the loss claimed in respect of sale of Government securities as the securities were held in compliance to the regulatory guidelines of the Reserve Bank of India and the provisions of the Banking Regulation Act, 1949 to meet its liquidity requirements. He further submitted that the ld. CIT(A) was not correct in holding that the investments were under HTM category merely because balance sheet of the bank did not specify anything and on the ground that the maturity of the security was of 2028 and 2034. He contended that the ld. CIT(A) was not correct in linking the classification of the security with the year of its maturity. The Ld. AR further submitted that ld. CIT(A) was also wrong in upholding that none of the investments were in AFS category merely because the bank was mandated by Reserve Ba....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... money from the public, repayable on demand or otherwise, and withdrawable by cheque, draft, order or otherwise. Further, as per Section 6 of the Banking Regulation Act, in addition to the business of banking, a banking company may also engage in buying and selling of securities and such buying and selling is considered as part of its business activities. Therefore, the investment in Central and State Government Securities as appearing in the balance sheet of the company were its business assets and in the nature of stock-in-trade. Merely because they were shown as investment in the balance sheet they don't become capital asset, as buying and selling of the securities including Government securities is part of business activity of the assessee company. Further, the CBDT had issued a Circular No.599 dated 24.04.1991 giving clarification regarding treatment of securities as stock-in-trade or investment by the Banks which is reproduced below: "Clarification regarding treatment of securities as stock-in-trade or investment 1. Clarifications on the following issues have been sought by banks from the Central Board of Direct Taxes: (i) Whether the securities hel....
X X X X Extracts X X X X
X X X X Extracts X X X X
....(A)-6, Ahmedabad vide order dated 27.09.2018 and the order of the AO was confirmed. 11. In the appeal filed against this order, the assessee has raised the following grounds: "1. Commissioner of Income Tax (Appeals)-6, Ahmedabad grievously erred in law as well as in facts in upholding the disallowance of depreciation of Rs. 34,48,500 claimed by the Assessee Bank in respect of the Government Securities. a. Ld. Commissioner of Income Tax (Appeals)-6, Ahmedabad was not correct in disallowing depreciation in respect of the Government Securities held by the Assessee Bank in compliance of the regulatory guidelines of the Reserve Bank of India and provisions of the Banking Regulation Act, 1949 to meet its liquidity requirements. b. Ld. Commissioner of Income Tax (Appeals)-6, Ahmedabad was not correct in disallowing depreciation in respect of the Government Securities held by the Assessee Bank as stock for its banking business. c. Ld. Commissioner of Income Tax (Appeals)-6, Ahmedabad was not correct in disallowing depreciation in respect of the Government Securities provided for by the Assessee Bank on mark-to-market basis. d. Ld. Commissione....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ee by the decision of the Co-ordinate Bench of the Tribunal in assessee's own case for A.Y. 2013-14. 13. The ld. DR, on the other hand, supported the order of the AO and the CIT(A). 14. We have carefully considered the facts of the case. It is found that identical issue was involved in assessee's own case for A.Y. 2013-14 which was decided by the Co-ordinate Bench of this Tribunal in ITA No. 2928/Ahd/2017 dated 29.01.2020. The findings given by the Co-ordinate Bench in that case is reproduced below: "8. We have gone through the relevant record and impugned order. Assessee is a Co.op. Bank and as per mandate assessee has to keep certain investment with itself in order to maintain Statutory Liquidity Ratio (SLR) and Cash Reserve Ratio (CRR) if any loss or deterioration is caused to the value of stock, it is charged to profit and loss account. In our considered opinion, same is allowable as deduction u/s. 37 as Govt. Securities are part of liquid assets, stock in trade. 9. We draw support from a case of Punjab and Haryana High Court High Court in the matter of Pr. CIT, Patiala vs. State Bank of Patiala order dated 30.01.2017 where in similar facts and circumsta....