THE COMMISSIONER OF INCOME TAX,TRICHUR vs. THE SOUTH INDIAN BANK LTD.,TRICHUR
What did the High Court hold?
The Tribunal answered the first issue in favour of the assessee, following the High Court's decision in CIT v. State Bank of Travancore [228 ITR 40 (Kerala)]. The High Court agreed with the Tribunal's finding on this issue. Regarding the second issue, the Tribunal had also ruled in favour of the assessee based on the Revenue's concession before it. The Revenue's counsel before the High Court submitted that the concession was made under a mistaken impression and sought permission to make an application for rectification/review before the ITAT. The High Court, while rejecting the Revenue's appeal, permitted the Revenue to make an appropriate application before the ITAT if permissible under law, without causing prejudice to any party.
What were the facts?
The Revenue, Commissioner of Income Tax, Thrissur, has filed an appeal under Section 260A of the Income Tax Act against an order dated April 27, 2007, passed by the Income Tax Appellate Tribunal (ITAT), Cochin Bench. The appeal pertains to assessment year 1999-2000 and was disposed of along with a similar appeal for assessment year 2000-2001. The assessee is The South Indian Bank Ltd., Thrissur. The dispute before the ITAT involved two issues raised by the assessee concerning interest tax.
What were the issues?
1. Whether interest paid on refinance availed of from financial institutions is subject to interest tax in the hands of the assessee-Bank, as the first credit institution receiving interest? The assessee contended that it is not liable for interest tax on such refinance. The Revenue contended otherwise. 2. Whether the institution providing funds goes out of the ambit of Interest Tax on interest received from the banking company, due to specific exemption in the Interest Tax Act, given that chargeable interest of a credit institution is the total interest accruing to it? The Revenue conceded before the Tribunal that this issue was covered by a High Court decision. The assessee argued in line with the exemption provisions. The Revenue later sought to withdraw its concession, claiming it was made under a mistaken impression.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Cause title — parties, addresses and appearances
JUDGMENT H.L.Dattu, C.J. Revenue has preferred this Income Tax Appeal under Section 260A of the Income Tax Act (“Act” for short), being aggrieved by the orders passed by the Income Tax Appellate Tribunal, Cochin Bench in I.T.A.No.18/Coch/2006 dated 27th April, 2007, for the assessment year 1999-2000, which was disposed of along with I.T.A.No.19/Coch/2006 for the assessment year 2000-2001. 2. Before the Tribunal, the assessee had raised two issues. The first one was with regard to: Whether the interest paid on refinance availed of from financial institutions will have to be subjected to interest tax in the hands of the assessee-Bank, which being the first credit institution receiving interest?
The Tribunal has answered the issue in favour of the assessee and against the Revenue, following the decision of this Court in the case of CIT v. State Bank of Travancore [228 ITR 40 (Kerala)].
Therefore, in our opinion, the first issue has been rightly answered by the Tribunal in favour of the assessee.
The second issue that was canvassed by the assessee before the Tribunal was as under: “The chargeable interest of a credit institution shall be the total amount of interest accruing or arising to the credit institution in the relevant previous year and that the institution providing funds goes out of the ambit of Interest Tax on interest received from the banking company on account of specific exemption provided in the Interest Tax Act”.
I.T.A.No.76 of 2008
Before the Tribunal, the Representative of the Revenue had conceded that the issue is squarely covered by the decision of this Court in CIT v. State Bank of Travancore [228 ITR 40 (Kerala)]. In view of the concession so made by the Representative of the Revenue, the Tribunal has answered the second issue also in favour of the assessee and against the Revenue.
Sri.George K.George, learned counsel appearing for the Revenue, would submit that the concession so made by the Revenue's Representative is under a mistaken impression and, therefore, this Court, while disposing of this Income Tax Appeal, may permit the Revenue to make an appropriate application, either for rectification/review of the orders passed by the Income Tax Appellate Tribunal.
In our opinion, while disposing of this appeal if permission is granted, it may not cause any prejudice to any one of the parties.
Therefore, while rejecting the Income Tax Appeal, we permit the Revenue to make an appropriate application for appropriate orders before the Income Tax Appellate Tribunal, if the same is permissible under law. Ordered accordingly.
H.L.Dattu Chief Justice
A.K.Basheer Judge vku/-
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