Fixed deposits that forms part of banking business is stock-in-trade: ITAT Surat

Surat National Co.op Bank Ltd Vs ACIT (ITAT Surat)

ITAT Surat held that the Fixed Deposits can be treated as stock-in-trade if it forms part of banking business. Further, held that deposits that forms part of banking business, write off such loss will be a loss arising in the course of carrying on banking business.

Facts- The assessee had filed its return of income for AY.2013-14 on 10.09.2013, declaring total income at Rs.5,03,65,950/-. Order u/s 143(3) was passed on 29.02.2016, determining total income at Rs.5,90,82,717/- by making various additions including disallowance of provision for bad and doubtful debts of Rs.35,00,000/-. The CIT(A) confirmed the disallowance of the above addition.

Conclusion- Held that the FDs can be treated as stock-in-trade if it forms part of banking business. Accepting deposits and giving of loans and advances, making investments, deposits etc. form part of core activity of banking business. Thus, the deposits placed with MMCB was wholly in the course of and for the purpose of business. Therefore, the deposits held by the assessee-bank cannot be treated as capital asset and they formed part of stock-in-trade. This is also fortified by the fact that the interests earned on such deposits are offered to tax and have been taxed by the Department as business income.