Depreciation can be allowed on Factual aspects under CBDT Instruction, even If the Value is not Recorded in Books of Account: ITAT [Read Order]

The Amritsar bench of the Income Tax Appellate Tribunal ( ITAT ) has held that depreciation can be allowed on factual aspects under CBDT instruction, even if the value is not recorded in the books of account

The Pathankot Hindu Urban Co-operative Bank Ltd, the assessee is that the assessee is a cooperative bank and claimed the depreciation or diminution and value of investment or securities held under “available for sale”. The value of diminution was as per the circular of the Reserve Bank of India (in short RBI) on the investment made by Primary Urban Cooperative Bank Ltd. on the date of order 01.07.2019.

The claim was made at the end of the year, so there was no effect on the books of account. The amount was finally deducted from the computation of income during the filing of the return. u/s 139. The value of the diminution amount of Rs.22,13,000/- was duly added back to the total income of the assessee. The  CIT(A) upheld the order of the AO. 

The assessee made the valuation of the investment at the end of the year based on the “cost and market value whichever is the lower”. The assessee took the chance and valued the saleable investment under the market price.

The main grievance of the revenue is that this particular value was not taken in the books of accounts. But factually correct that the circular of the CBDT has directed the acceptance proposition of the diminution value on basis of the factual aspect.

A Coram comprising of Dr M L Meena, Accountant Member and Sh. Anikesh Banerjee, Judicial Member observed that only the reflection in the books of account during the year cannot be the reason for the nonacceptance of the depreciation. The depreciation in stock or the selling investment has a clear effect on the net profit which is after all taken into the computation of the assessee. The provision of depreciation/diminution in the value of the investment is acted through an “investment fluctuation reserve account”.

While allowing the appeal, the Tribunal set aside the matter to the CIT(A) to decide the issueafter considering the evidence.

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