The Commissioner Of Income Tax & Another. ……… v. M/S Nainital Bank Ltd

IN THE HIGH COURT OF UTTARAKHAND AT NAINITAL Income Tax Appeal No. 81 of 2007 The Commissioner of Income Tax & another. ………. Appellants Versus M/s Nainital Bank Ltd. ..………. Respondent Mr. H.M. Bhatia, Advocate for the appellants. Mr. S.K. Posti, Advocate for the respondent. JUDGMENT Coram: Hon’ble Barin Ghosh, C.J. Hon’ble U.C. Dhyani, J. BARIN GHOSH, C. J. (Oral) A similar question of law arose in respect of Assessment Year 1997-98 and the said question of law has been answered by this Court in favour of the assessee and against the appellants. We, accordingly, feel that the question of law raised herein is covered by the judgment rendered by this Court in Income Tax Appeal No. 182 of 2005, rendered on 23[rd] March, 2007. 2. In the instant case, the Tribunal has held, to which there appears to be no dispute, that the functioning of the assessee requires compliance of the provisions contained in the Banking Regulations Act and the guidelines issued by the Reserve Bank of India from time to time, where under, the assessee is required to keep certain portion of its securities in Government approved securities and, in compliance thereof, investment was made by it in UTI’s US-64 Scheme. In December, 2001, Government of India announced a scheme, whereby it agreed that US-64 units held by the investors can be redeemed on 31[st] May, 2003, either at ` 10/- or at Net Asset Value as on that date, whichever is higher. Reserve Bank of India allowed the assessee and other banks to shift investments in the units of UTI’s US-64 Scheme to ‘held to maturity’ category at book value vide direction dated 9[th] January, 2002. That direction was subject to the condition that the assessee would be required to amortize the premium over the face value over a period upto 31[st]May, 2003. The same was the concession, which was in furtherance to guidelines issued by the Reserve Bank of India on 16[th] October, 2000. The net effect of the said directions was to hold US-64 units to ‘held to maturity’ category at book value and amortizing the premium over the face value equally in Assessment Years 2002-2003 and 2003-2004. Those directions were mandatory in nature. The expression “which desire to do so” was used in the direction dated 9[th] January, 2002. Prior thereto, on 16[th] October, 2000, Reserve Bank of India issued guidelines for classification and valuation of investments. On the strength thereof, assessee decided to shift the investments in UTI’s US-64 Scheme to ‘held to maturity’ category, it became obliged to amortize the premium amount over the period upto 31[st]May, 2003. This having been done, in fact, no question of law arose pertaining to change in the method of valuation of investments not issued under Chapter IIIB of Reserve Bank of India Act and, similarly, no question of law arose, whether fall of value of UTI’s US-64 investments was deductible expenditure in computing total income and, at the same time, no question of law arose to the effect that, when income from UTI investment was not taxable, whether reduction in the value of the capital invested in UTI could be treated as a loss, inasmuch as, the fact remains that the value of the investment in UTI’s US-64 stood reduced to the extent the same was shown as loss , inasmuch as, the asset of the assessee lost its value to the extent the same was shown and, to the extent of the loss, thus, shown, there is no factual dispute. The same argument applies in relation to reduction in the value of HDC debentures. 3. We, accordingly, dismiss the appeal. (U.C. Dhyani, J.) (Barin Ghosh, C. J.) 26.11.2012 26.11.2012