THE COMMISSIONER OF INCOME TAX vs. KERALA FINANCIAL CORPORATION, TVM

ITA/126/2008HC KeralaKLHC01027031200805 November 2008Author: HONOURABLE THE CHIEF JUSTICE MR.H.L.DATTU,HONOURABLE MR.JUSTICE A.K.BASHEER3 pages
AI SummaryDismissed

What were the facts?

The Revenue, Commissioner of Income Tax, Thiruvananthapuram, is aggrieved by the order dated July 1, 2005, passed by the Income Tax Appellate Tribunal (ITAT), Cochin Bench, in Int.T.A.No.82/2004 for the assessment year 1999-2000. The ITAT had confirmed the direction of the Commissioner of Income Tax (Appeals) to exclude interest on deposits received from banks from chargeable interest. The ITAT relied on its earlier decision in Int.T.A.Nos.12, 13 and 14 of 1998, dated April 23, 2002. The Revenue had appealed that earlier decision before the High Court in I.T.A.No.275 of 2002 and connected cases, but their appeals were rejected by a Division Bench of the High Court on June 4, 2008. The parties in the present appeal are the same as in the earlier High Court case.

What did the High Court hold?

The High Court held that the questions of law framed by the Revenue required to be answered against the Revenue and in favour of the assessee. The Court noted that the ITAT had followed its earlier decision in Int.T.A.Nos.12, 13 and 14 of 1998, dated April 23, 2002. Crucially, this earlier decision of the ITAT had been confirmed by the same High Court in I.T.A.No.275 of 2002 and connected cases, decided on June 4, 2008. Since the present appeal involved the same parties and the issue was identical to the one previously decided by the High Court in favour of the assessee, the High Court found no reason to deviate from its prior ruling. Therefore, the appeal was rejected, and the questions of law were answered against the Revenue.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, interest on deposits with banks (other than Reserve Bank) is exempt under section 2(7) of the Interest Tax Act? 2. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in confirming the direction of the Commissioner of Income Tax (Appeals) to exclude the interest on deposits received from banks from the chargeable interest holding that the interest on deposits with the banks are outside the provisions of Section 2(7) and Section 5 of the Interest Tax Act? Assessee's Contentions: The judgment does not record specific contentions made by the assessee (Kerala Financial Corporation) before the High Court. However, it is implied that the assessee supported the ITAT's decision. Revenue's Contentions: The Revenue argued that interest on deposits with banks (other than the Reserve Bank) is not exempt under Section 2(7) of the Interest Tax Act and that the ITAT was wrong in confirming the exclusion of such interest from chargeable interest, as it falls within the purview of Sections 2(7) and 5 of the Interest Tax Act.

Which sections of the Income-tax Act were involved?

Section 2(7),Section 5,Section 260A

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE THE CHIEF JUSTICE MR.H.L.DATTU & THE HONOURABLE MR. JUSTICE A.K.BASHEER WEDNE AY, THE 5TH NOVEMBER 2008 / 14TH KARTHIKA 1930 I.T.A.No.126 of 2008 ------------------------------------ (ORDER DATED 1.7.2005 OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH, IN INT.T.A.No.82/2004) (ASSESSMENT YEAR 1999-2000) .................... APPELLANT/APPELLANT/REVENUE:- ------------------------------------------------------- COMMISSIONER OF INCOME TAX, THIRUVANANTHAPURAM. BY STANDING COUNSEL FOR I.T. SRI.JOSE JOSEPH SRI.GEORGE K.GEORGE, SC FOR IT. RESPONDENT/RESPONDENT:- -------------

The order continues below.

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