P.D. Dinakaran, J.
1. Heard. The appeal is preferred against the order of the Income Tax Appellate Tribunal Madras 'A' Bench, dated 25.11.2002 in ITA No. 4108/1989.
2. The assessee is a banking company. In the course of the assessment for the assessment year 1986-87, the assessing officer found that the assessee, who had been earlier valuing the investment on government securities at cost price, valued the same at market price, and claimed the difference between the cost price and market price as depreciation. The assessing officer made an order of Rs. 11,19,327/- by disallowing the same. Aggrieved by the same, the assessee filed an appeal before the Commissioner of Income Tax (Appeals), who held that the Government Securities form part of stock-in-trade of the assessee, who had been adopting the market price for its stock in trade since 1983. Accordingly, he allowed the depreciation claimed on the investments, against which the revenue preferred an appeal before the Income Tax Appellate Tribunal. The tribunal held that the finding of the Commissioner of Income Tax (Appeals) that the government securities in trade was not controverted, dismissed the appeal. Hence, the present appeal by the appellant/revenue raising the following substantial questions of law.
1. Whether in the facts and circumstances of the case, the Tribunal had enough material to hold, and was right in law in holding that the government securities held by the assessee bank are to be treated as stock in trade and not investment?
2. Whether in the facts and circumstances of the case, the Tribunal was right in law in holding that the assessee is entitled to change the method of valuation of government securities to market value from cost, and claim depreciation on the difference?
3. The first substantial question of law raised in this appeal is a question of fact, which has not been disputed by the departmental representative before the Commissioner of Income Tax (Appeals) and also before the tribunal. Hence, the same is answered against the appellant/revenue.
4. The second substantial question of law raised in this appeal has been answered against the appellant/revenue by the Apex Court in 'United Commercial Bank -vs- Commissioner of Income Tax' reported in 240 ITR 355, wherein it is held as follows:-
1. For valuing the closing stock, it is open to the assessee to value it at the cost or market value, whichever is lower;
2. In the balance sheet, if the securities and shares are valued at cost but from that no firm conclusion can be drawn. A taxpayer is free to employ for the purpose of his trade, his own method of keeping accounts, and for that purpose, to value stock-in-trade either at cost or market price.
3. A method of accounting adopted by the taxpayer consistently and regularly cannot be discarded by the departmental authorities on the view that he should have adopted a different method of keeping accounts or of valuation.
4. The concept of real income is certainly applicable in judging whether there has been income or not, but, in every case, it must be applied with care and within their recognised limits.
5. Under Section 145 of the Income Tax Act, in a case where accounts are correct and complete, but the method employed is such that in the opinion of the Income-tax Officer, the income cannot be properly deduced therefrom, the computation shall be made in such manner and on such basis as the Income-tax officer may determine.
5. Accordingly, following the decision of the Supreme Court cited supra, the substantial questions of law raised in this appeal are answered against the appellant/revenue and the appeal stands dismissed.