Ita/268/2009 Of The Commissioner Of Income Tax v. Corporation Bank

IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATEBD THIS THR [nd]DAY OF DECEMBER, 2014. PRESENT THR HON' BLE MR. JUSTICK N.KUMAR AND THR HON' BLE MR. JUSTICK B. MANOHAR INCOME TAX APPEAL No. 2608/200 BERITIWE 1.The Commissioner of Income Tax, C.R. Building,| AttavaraMangalore.Mangalore. a2The Asst. Commissioner of Income Tax, Circle-2(1),C.R. Building,|AttavaraMangalore. ... APPELLANTS (BY SRI K V ARAVIND, ADVOCATE) AND: Corporation Bank, Head Office, P.N. No.88&,Mangaladevi Temple Road,Mangalore-575 OO1.—. RBSPONDBENT (BY SRI G. SARANGAN, SR. ADVOCATE FORSRI BALRAM R. RAO, ADVOCATE)SRI BALRAM R. RAO, ADVOCATE) This ITA is filed under Section J6O0O-A of thIncome Tax Act, 1961 arising out of Order dated3.12.2008 passed in ITA No. 112/Bang/2008, for theassessment year 2004-05 praying to formulate the substantial questions of law stated therein and to allowthe appeal and set aside the order passed by the ITATBangalore in ITA No.112/Bang/2008, dated 3.12.2008.and confirm the order passed by the AssistantCommissioner of Income Tax, Central Cuircle-2(1),Mangalore, in the interest of justice and equity.| This Income Tax Appeal coming on for Hearingthis day, N. Kumar J., delivered the following: JUDGMENT Thisappeal1SpreferredbytheTEVENUC challenging the order passed by the Tribunal grantingrelief to the assessee. 2. The substantial question of law that arises for consideration in this appeal is as hereunder: “) Whether the Tribunal was correct in|holding that the Government securities:of Rs.5,21,96,937/- is an allowablededuction by following the view of theApex Court (not applicable) when it|was kept under the_ classification‘available for sale’, was not in thenature of stock-in-trade by ignoring the|subsequent RBI guidelines? u) Whether the Tribunal was correct in|allowing the claim of the assesseewithout taking into consideration theinstructions of the RBI dated 2.9.2003 and the CBDT Circular 665 dated05.10.1993 which did not contemplate|such an allowancer” 3. This Court had an occasion to consider similarquestions in the case ofKarnataka Bank Ltd. -vs-|Assistant Commissioner of Income Tax reported in [2013]596 ITR 549 (Kar)' where after considering the RBIdirections, guidelines and various judgments of theApex Court, it was held as under: “13.From the aforesaid Judgments ofthe Apex Court, now it is clear that amethod of accounting adopted by thetax payer consistently and regularlycannotbediscardedby|theDepartmental authorities on the viewthat he should have adopted a differentmethod of keeping the accounts or onvaluation. Financial institutions like.Bank,areexpectedtomaintainaccounts in terms of the RBI Act and its:regulations. The form in which, accountshave to be maintained is prescribedunderthe|aforesaid|legislation.Therefore, the account had to be inconformity with the said requirements. The RBI Act or Companies Act do notdeal with the permissible deductions orexclusion under the JI Act. For the'purpose of IT Act, if the assessee hasconsistently|treatingthe|value|of|investment for more than two decadesas investment as stock-in-trade andclaimed depreciation, it is not open to.the authorities to disallow the said'depreciation on the ground that in thebalance-sheet it 1s shown as investment|in terms of the RBI Regulations. The RBIRegulations, the Companies Act and ITAct operate altogether in different fields.The question whether the assessee isentitled to particular deduction or notwill depend upon the provision of lawrelating thereto and not the way, inwhich the entries are made in the booksof accounts. It is not decisive orconclusivein|thematter.Forthe|purpose of IT Act whichever method isadopted by the assessee, a true pictureof the profits and gains 1.e. real incomeis to be disclosed. For determining thereal income, the entries in the balance|sheet is required to be maintained in thestatutory form may not be decisive or conclusive. It is open to the Income TaxOfficer as well as the assessee to pointout true and proper income while.submitting the income tax returns. EvenurtheasSSCSSCEunderSOTNEmisrepresentation or mistake fails tomake an entry in the books of accounts,although under law, a deduction mustbe allowed by the Income Tax Officer,the assessee will not lose any right onclaiming or will be debarred from beingallowed the deduction. Therefore, theapproach of the authorities in thisregard is contrary to the well settledlegal position as declared by the ApexCourt. 14. In the instant case, the assesseehas maintained the accounts in terms ofthe RBI Regulations and he has shownit as investment. But consistently formore than two decades it has been’ShownhasStock-in-tradeanddepreciation is claimed and allowed.|Therefore, notwithstanding that in thebalancesheet,It|1S.shown.asinvestment, for the purpose of Income-tax Act, it is shown as _ stock-in-tradeTherefore, the value of the stocks being closely connected with the stock market,at the end of the financial year, whilevaluing the assets, necessarily theBank has to take into consideration themarket value of the shares. If themarket value is less than the cost price,in law, they are entitled to deductionsand.It cannot.be.deniedby|the|authorities under the pretext that it isSholwn as investment in the balancesheet.” a |Followingtheaforesaidjudgment,the| substantial questions of law are answered in favour of the assessee and against the revenue. Hence, we passthe following: ORDER Appeal is dismissed. ori Balram R. Rao, advocate is permitted to file hisVakalath within two weeks from today. Nsu/-. sd/-| Judge sd/-. Judge