Case Law Details
Kankaria Maninagar Nagarik Sahakari Bank Ltd. Vs DCIT (ITAT Ahmedabad)
In a recent decision by the Income Tax Appellate Tribunal (ITAT) Ahmedabad, the Kankaria Maninagar Nagarik Sahakari Bank Ltd. contested against orders passed by the Commissioner of Income Tax (Appeals) concerning the Assessment Year 2012-13. The bank filed two appeals challenging the disallowance of loss on the sale of Government securities and the disallowance of depreciation on the same securities.
The first appeal (ITA No. 2349/Ahd/2018) focused on the disallowance of a loss amounting to Rs. 38,55,000 incurred from the sale of Government securities. The bank argued that these securities were held in compliance with regulatory guidelines set by the Reserve Bank of India (RBI) and were integral to meeting its liquidity requirements. Additionally, the bank contended that the securities were part of its banking business stock and should be treated as such for tax purposes.
The ITAT ruled in favor of the bank, citing Circular No. 599 issued by the Central Board of Direct Taxes (CBDT), which clarified that securities held by banks must be regarded as stock-in-trade. Therefore, the loss incurred on the sale of Government securities was deemed a business loss and allowable under the Income Tax Act. The tribunal directed the Assessing Officer (AO) to allow the claimed loss as a business deduction.
In the second appeal (ITA No. 2350/Ahd/2018), the bank challenged the disallowance of depreciation amounting to Rs. 34,48,500 claimed on Government securities. The AO and the Commissioner of Income Tax (Appeals) contended that depreciation could only be claimed on business assets, not investments. However, the ITAT relied on its previous decision in the bank’s own case for A.Y. 2013-14, where it was established that Government securities held by banks were part of their liquid assets and stock-in-trade. Following this precedent, the ITAT allowed the depreciation claimed by the bank, considering it as a business loss deductible under Section 37 of the Income Tax Act.
Please become a Premium member. If you are already a Premium member, login here to access the full content.
Author Bio
