Ita/86/2012 Of The Commissioner Of Income Tax, Trichur v. The Dhanalakshmi Bank Ltd., Trichur

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR.JUSTICE ASHOK MENON MONDAY, THE 17TH DAY OF DECEMBER 2018 / 26TH AGRAHAYANA, 1940 I.T.A.No.550 of 2009 AGAINST THE ORDER IN ITA 1197/COCH/2004 DATED 29-12-2006 OF I.T.A. TRIBUNAL, COCHIN BENCH. APPELLANT/RESPONDENT: THE COMMISSIONER OF INCOME TAX,TRICHUR. BY ADV. SRI.JOSE JOSEPH, SC FOR INCOME TAX. RESPONDENT/APPELLANT: M/S. DHANALAKSHMI BANK LTD.,TAXATION DEPARTMENT, HEAD OFFICE, NAIKANAL, THRISSUR. BY ADV. SRI.P.BALAKRISHNAN (E) THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 17.12.2018, ALONG WITH ITA.86/2012, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ITA.550 of 2009 & 86 of 2012 - 2 - IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR.JUSTICE ASHOK MENON MONDAY, THE 17TH DAY OF DECEMBER 2018 / 26TH AGRAHAYANA, 1940 I.T.A.No.86 of 2012 AGAINST THE ORDER IN ITA 133/COCH/2009 DATED 30-12-2011OF I.T.A. TRIBUNAL, COCHIN BENCH APPELLANT/APPELLANT: THE COMMISSIONER OF INCOME TAX, TRICHUR. BY ADVS. SRI.P.K.RAVINDRANATHA MENON (SR.)SRI.JOSE JOSEPH, SC FOR INCOME TAX RESPONDENT/RESPONDENT: THE DHANALEKSHMI BANK LTD.,NAIKKANAL, TRICHUR-680001. BY ADVS.SRI.P.BALAKRISHNAN (E)SRI.MOHAN PULIKKAL THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 17.12.2018, ALONG WITH ITA.550/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: JUDGMENT [ ITA 550/2009, ITA.86/2012 ] Vinod Chandran,J. The issue arising in both these appeals are withrespect to the appreciation of trading assets and the mannerin which the value has to be credited to the profit and lossaccount. The assessee-Bank admittedly engages inter alia inmaking investments by way of purchasing securities. They arealso treated as trading assets of the Bank. The questionraised is as to the value to be taken when the securitiesappreciate in their market value.2. The issue has been considered by this Court inCITv. Nedungadi Bank Ltd. [(2003) 264 ITR 545 (Ker.)] andCITv. Lord Krishna Bank Ltd. [(2011) 339 ITR 606 (Ker.)].There the question was with respect to the valuation ofsecurities when there is a claim raised of depreciation orloss. This Court had approved the measure adopted by theassessee-Banks following the stipulations made by the ReserveBank of India. RBI had directed the security to be valued atmarket price or cost price, whichever is lower. Thestipulation was brought in force, to ensure that the Banks donot claim escalated book profits. Though in the present case ITA.550 of 2009 & 86 of 2012 - 4 - a contrary situation has arisen, where there is anappreciation of the value of the security, the dictumsquarely applies. Even when there is an appreciation of thevalue, it does not enure to the Bank as income and, hence,the valuation has to be made as stipulated by the RBI; at themarket price or cost price, whichever is lower. Hence, thevaluation carried out by the Bank at the cost price has to beaccepted. The question of law is answered in favour of theassessee-Bank and against the Revenue.The appeal stands dismissed, leaving the parties tosuffer their respective costs in these appeals. Sd/- K.VINOD CHANDRAN JUDGE Sd/- ASHOK MENONJUDGE APPENDIX OF ITA 550/2009 APPELLANT'S ANNEXURES: ANNEXURE A TRUE COPY OF THE ORDER OF THE ASSESSING OFFICER U/S. 143(3) OF THE I.T.ACT DATED 16.11.2000. ANNEXURE B TRUE COPY OF THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN ITA NO.15/RI/JC/TCR/CIT-V/2000-01 DATED 10.09.2004. ANNEXURE C TRUE COPY OF THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL IN I.T.A.NO.1197/COCH/2004 DATED 29.12.2006. APPENDIX OF ITA 86/2012 APPELLANT'S ANNEXURES: ANNEXURE-ACOPY OF ASSESSMENT ORDER DATED 28/3/2008 ANNEXURE-B Sd/- K.VINOD CHANDRAN JUDGE Sd/- ASHOK MENONJUDGE APPENDIX OF ITA 550/2009 APPELLANT'S ANNEXURES: ANNEXURE A TRUE COPY OF THE ORDER OF THE ASSESSING OFFICER U/S. 143(3) OF THE I.T.ACT DATED 16.11.2000. ANNEXURE B TRUE COPY OF THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN ITA NO.15/RI/JC/TCR/CIT-V/2000-01 DATED 10.09.2004. ANNEXURE C TRUE COPY OF THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL IN I.T.A.NO.1197/COCH/2004 DATED 29.12.2006. APPENDIX OF ITA 86/2012 APPELLANT'S ANNEXURES: ANNEXURE-ACOPY OF ASSESSMENT ORDER DATED 28/3/2008 ANNEXURE-B TRUE COPY OF THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) DATED 21/11/2008. ANNEXURE-C COPY OF THE ORDER OF THE TRIBUNAL DATED 31/12/2011. Vku/- [true copy]