During the year, assessee bank had shifted certain securities from Account for Sale (AFS) to Held to Maturity (HTM) in order to comply with the RBI guidelines in preparation of accounts. AO disallowed the claim on the ground that RBI guidelines are not binding while computing taxable income and the CIT(A) confirmed the same.

Before the Tribunal, assessee submitted that as on date of shifting of securities, the diminution in the value of securities was claimed as deduction and investments held by the banking companies are treated as stock in trade and therefore fall in value of securities should be allowed as deduction based on the principle of statutory valuation stock that stock in trade should be valued at cost or market whichever is less.

Relying on assessee’s own case for previous year and Madras High Court decision in case of  CIT v.  Karur Vysya Bank Ltd, (2005) 273 ITR 510 (Mad.)(HC), Tribunal held that the fact that the assessee bank has shifted the investment from one category to another is of no relevance, in as much as, fall in value of investment is held to be allowable as deduction.  (AY.  2012-13, 2014-15)