1. All these Appeals arise under the Income Tax Act, 1961 (for short, the Act). The main question involved in all these cases is as to whether the Government securities held by the appellants as required under the provisions of the Banking Regulation Act, 1949 are stock-in-trade of the assessee Banks and consequently the assessee Banks are entitled to re-value the said securities at the close of the assessment year and claim depreciation in respect of the notional loss suffered by the assessee Banks in respect of the said securities in the assessment under the Act. The other questions in some of the Appeals are (1) regarding the validity of the assessments made under S.147 of the Act and (2) regarding the entitlement for deduction of the interest paid for the broken period claimed by the assessee.

2. All these appeals are filed by the Revenue challenging the orders of the Income Tax Appellate Tribunal, Cochin Bench. The Nedungadi Bank Ltd., Calicut is the respondent assessee in I.T.A. Nos. 157/01,17/02,5/02,39/02,48/02,.32/02,89/02,95/02,92/02 and 4/02. The Dhanalakshmi Bank Ltd. is the respondent assessee in I.T.A. Nos. 214/01, 62/02, 21/02, 33/02 and 14/02. The South Indian Bank Limited is the respondent assessee in I.T.A. Nos. 47/02,13/02,63/02,51/02,65/02,38/02,59/02 and 90/02. The Catholic Syrian Bank is the respondent/ assessee in ITA No. 25/02. Various assessment years ranging from 1981-1982 upto 1992-93 are involved in these Appeals. It is not necessary to give all the details of the assessment years, for nothing turns on the relevant assessment years in deciding the issue involved.

3. Since the Income Tax Appellate Tribunal has passed a detailed order in the case of Nedungadi Bank Ltd. in I.T.A. Nos. 848, 841 and 842/94 for the assessment years 1982-83 and 1984-85, we are taking I.T.A. No. 157/01 arising from the said order as the leading case.

4. The assessment of the respondent Nedungadi Bank Limited, Calicut for the year 1982-83 was originally completed on 24.3.1985. Subsequently, the assessing authority issued a notice under S.148 of the Act on 22.3.1993 to assess escaped income in the light of the Supreme Court Judgment in Vijaya Bank Ltd. V. Commissioner of Income Tax (Addl.) (197 ITR 541). In the return filed by the assessee it claimed depreciation in the value of stock-in-trade computed as the difference between market value of the securities and their costs. The assessing authority has, however, taken the view that any depreciation in the value cannot be adjusted against the business income as an item of revenue expenditure as the securities purchased to meet the Statutory Liquidity Requirement (hereinafter referred to as SLR), was an investment by the Bank and not a stock-in-trade intended for trading and disallowed the assessee's claim for depreciation. The assessee filed appeal against the said order before the Commissioner of Income Tax (Appeals) who relying on the provisions of S.6 read with S.5(b) and (c) of the Banking Regulation Act, held that the transaction of securities forms part of the banking business and Banks can purchase and sell securities without affecting the statutory SLR. The first appellate authority accordingly held that the securities purchased by the assessee constitute stock-in-trade of the Bank. The Department took up the matter in appeal before the tribunal and the tribunal dismissed the appeal confirming the order of the first appellate authority.

5. The Revenue contended before the tribunal that as per S.24 of the Banking Regulation Act, every Scheduled Bank has to maintain a fixed SLR by depositing any gold or cash in any unencumbered approved Government securities, and that approved securities are risk-free investments which give rise to definite income at definite intervals and redeem the interest on a definite interval. It was specifically contended that the purchase of Government Securities by the Bank for the purpose of maintaining the SLR was only in the nature of