In an appeal preferred by the Revenue against an order of the Tribunal, the Hon’ble Telangana High Court had to decide whether the broken period interest which is paid on purchase of securities is revenue expenditure, more so when such securities constitute the stock-in-trade of the assessee. The Hon’ble Court observed that the assessee had been holding its securities all along as stock-in-trade which is not in dispute. For successive assessment years, the Revenue has accepted the fact that the assessee had been holding the securities as stock-in-trade. In this backdrop, the Hon’ble Court placed further reliance on Circular No. 665 dated October 5, 1993 ([1993] 204 ITR (St.) 39) which clarified that where the banks are holding securities as stock-in-trade and not as investments, principles of law enunciated in Vijaya Bank Ltd. v. Addl. CIT would not be applicable. Therefore, the CBDT has clarified that the AO should determine on the facts and circumstances of each case as to whether any particular security constitutes stock-in-trade or investment considering the guidelines issued by the Reserve Bank of India from time to time. In light of this, the Hon’ble Court found no infirmity with decision of the Tribunal and accordingly, the appeals were dismissed.  (AY.1996-97)