April 2019

Bank Valuation of closing stock Securities held to maturity Constitute stock-in-trade Valuation at lower of cost or market value Proper Classification in accordance with Reserve Bank of India guidelines Not relevant for purposes of income chargeable to tax

K. B. Bhujle
Advocate

2.       Principal CIT vs. Bank of Maharashtra; 410 ITR 413 (Bom): Date of order: 27th February, 2018 A. Y.: 2005-06

 

Bank Valuation of closing stock Securities held to maturity Constitute stock-in-trade Valuation at lower of cost or market value Proper Classification in accordance with Reserve Bank of India guidelines Not relevant for purposes of income chargeable to tax

 

The assessee claimed that the held-to-maturity securities constituted stock-in-trade and were to be valued at cost or market value whichever was less. The Assessing Officer disallowed the claim on the ground that the assessee had shown the value at cost for earlier assessment years and therefore it could not change the valuation. The Commissioner upheld the decision of the Assessing Officer. The Tribunal held that irrespective of the basis adopted for valuation in earlier years, the assessee had the option to change the method of valuation of its closing stock to the lower of cost or market value provided the change was bonafide and followed regularly thereafter, that the held-to-maturity securities were held by the assessee as stock-in-trade and that the receipts therefrom were business income.

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