Law:

Section:

I. Section 28(i) of the Income-tax Act, 1961 - Business loss/deductions - Allowable as - Assessment year 1994-95 - Whether for purpose of computation of profit or loss in respect of unquoted securities, market value of which is not known, some method has to be adopted to fix market value and thereafter only lower of cost price or market value has to be taken - Held, yes - Assessee-bank held certain unquoted Government securities as current assets - It adopted RBI guidelines for valuation of said securities and based on same, it claimed substantial loss at end of year - Assessing Officer rejected assessee's claim holding that when shares were not quoted, cost price had to be adopted and going by cost price, assessee had not suffered any loss as claimed - Whether RBI being apex body issuing guidelines to banks for valuation of unquoted Government securities, it was rational basis which assessee was bound to adopt - Held, yes - Whether, further, since Assessing Officer also had not come out with any formula for computation of market value of unquoted securities and he had no case that RBI guidelines for valuation were irrational, assessee's claim for valuation of unquoted Government securities based on RBI guidelines, was to be accepted - Held, yes II. Section 36(1)(viia) of the Income-tax Act, 1961 - Bad debts - Assessment year 1994-95 - Whether 'place' referred to in definition of 'rural branch' under Explanation (ia) to section 36(1)(viia) for purpose of identifying branch of a bank as a rural branch with reference to its location is revenue village and not a ward of a local authority like Panchayat or Municipality - Held, yes - Whether, therefore, rural branches are such branches which are located in a village where population in village is less than 10,000 - Held, yes Words and Phrases : 'place' as occurring in Explanation (ia) to section 36(1)(viia) of the Income-tax Act, 1961. FACTS-I The assessee-bank treated the unquoted Government securities held by it as current assets and, therefore, it had to work out the profit or loss at the end of the year for the purpose of payment of tax. It adopted the RBI guidelines for valuation of the unquoted Government…

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