THE KARUR VYSYA BANK LTD vs. THE ADDITIONAL COMMISSIONER

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TCA/733/2016HC Madras22 August 2025Bench: Honourable The CHIEF JUSTICE5 pages
AI SummaryRemanded

What did the High Court hold?

The High Court disposed of the appeal in light of its earlier order dated 08.02.2022 in TCA Nos.509 to 511 of 2010, which dealt with similar issues between the same parties for assessment years 1996-97, 1997-98, and 1998-99. The Court upheld the order of remand by the Tribunal. The Assessing Officer was directed to decide the issue, upon remand, strictly in accordance with the law laid down by the Supreme Court in the case of South Indian Bank Ltd. v. Commissioner of Income Tax. The Court noted that all other issues were left open for consideration by the Assessing Officer. No order as to costs was made. The operative direction was to remand the matter to the Assessing Officer for fresh consideration as per the Supreme Court's ruling.

What were the facts?

The appeal is filed by The Karur Vysya Bank Limited against the order dated 29.02.2016 passed by the Income Tax Appellate Tribunal (ITAT), B Bench, Chennai. The appeal concerns assessment years 1996-97, 1997-98, and 1998-99. The High Court had admitted the appeal on specific questions of law. The respondent, the Additional Commissioner of Income Tax, submitted that similar issues between the same parties for the aforementioned assessment years were previously dealt with by this Court in TCA Nos.509 to 511 of 2010, which were disposed of on 08.02.2022, relying on the Supreme Court decision in South Indian Bank Ltd. v. Commissioner of Income Tax. The appellant's counsel clarified that the earlier order directed the Assessing Officer to pass a fresh order strictly in accordance with the Supreme Court's verdict.

What were the issues?

The High Court framed the following questions of law for decision: 1. Whether the Tribunal was right in law in directing the Assessing Officer to work out the disallowance of expenses by applying Rule 8D(2)(iii) when the Assessing Officer himself had disallowed only 2% of the exempt income? (Question of law) 2. Whether, on the facts and in the circumstances of the case, in the assessee's appeal, the Tribunal can direct a reworking of disallowance which would result in an enhancement of the assessed income? (Question of mixed law and fact) 3. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that Rule 8D(2)(iii) would be applicable when the shares are held as stock-in-trade? (Question of mixed law and fact) Contentions: Assessee: The assessee's counsel clarified that the previous High Court order in similar matters directed the Assessing Officer to pass a fresh order strictly in accordance with the Supreme Court verdict in South Indian Bank Ltd. Revenue: The revenue's counsel submitted that similar issues had arisen between the same parties in earlier appeals (TCA Nos.509 to 511 of 2010) which were disposed of by this Court on 08.02.2022, relying on the Supreme Court decision in South Indian Bank Ltd.

Which sections of the Income-tax Act were involved?

Section 260A,Section 8D(2)(iii)

AI-generated summary — verify with the full judgment below

TCA No.733 of 2016 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 22.08.2025 CORAM : THE HONOURABLE MR. MANINDRA MOHAN SHRIVASTAVA, CHIEF JUSTICE AND THE HONOURABLE MR.JUSTICE SUNDER MOHAN TCA No.733 of 2016 The Karur Vysya Bank Limited Ltd. Erode Road Karur 639 001 PAN: AAACT3373J .. Appellant Vs. The Additional Commissioner of Income Tax Income Tax Range – 1 Tiruchirapalli. .. Respondent Prayer : Appeal under Section 260A of the Income Tax Act, 1961 against the order dated 29.02.2016 passed in ITA No.1640/Mds/2014 on the file of Income Tax Appellate Tribunal, B Bench, Chennai. For Appellant : Mr.R.Venkatanarayan For M/s. Subbaraya Aiyar Padmanabhan Ramamani For Respondent : Mr.J.Narayanasamy Senior Standing Counsel ____________ Page 1 of 5 https://www.mhc.tn.gov.in/judis ( Uploaded on: 23/09/2025 02:59:21 pm ) TCA No.733 of 2016 JUDGMENT (Judgment of the Court was delivered by the Hon'ble Chief Justice) The following questions of law have been framed by this Court while admitting this appeal: “(i) Whether the Tribunal was right in law in directing the Assessing Officer to work out the disallowance of expenses by applying Rule 8D(2)(iii) when the Assessing Officer himself has disallowed only 2% of the exempt income? (ii) Whether on the facts and in the circumstances of the case, in the assessee appeal the Tribunal can direct reworking of disallowance which will result in enhancement of assessed income? and (iii) Whether on the facts and in the circumstances of the case the Tribunal was right in holding that Rule 8D(2)(iii) would be applicable when the shares are held as stock in trade?” 2. At the outset, learned counsel for respondent would submit that similar issue had earlier arisen between the same parties in TCA Nos.509 to 511 of 2010. ____________ Page 2 of 5 https://www.mhc.tn.gov.in/judis ( Uploaded on: 23/09/2025 02:59:21 pm ) TCA No.733 of 2016 3. In respect of assessment years 1996-97, 1997-98 and 1998-99, those appeals have been finally disposed of by this Court vide order dated 08.02.2022, placing reliance on the decision of the Supreme Court in the case of South Indian Bank Ltd. v. Commissioner of Income Tax [(2021) 130 taxmann.com 178 (SC)]. 4. Learned counsel for appellant would submit that this Court only clarified that upon remand, as ordered by appellate Tribunal, the Assessing Officer shall pass fresh order strictly in accordance with Supreme Court verdict in South Indian Bank Ltd. 5. In the light of the order passed by this Court on 08.02.2022 in TCA Nos.509 to 511 of 2010, as between the present assessee and the revenue, this petition is disposed of upholding the order of remand by the Tribunal, with a direction to Assessing Officer to decide the issue, upon remand, strictly in accordance with law laid down by the Supreme Court in the case of South Indian Bank Ltd. ____________ Page 3 of 5 https://www.mhc.tn.gov.in/judis ( Uploaded on: 23/09/2025 02:59:21 pm ) TCA No.733 of 2016 6. Appeal is, accordingly, disposed. All other issues are left open for consideration by Assessing Officer. There shall be no order as to costs. (MANINDRA MOHAN SHRIVASTAVA, CJ) (SUNDER MOHAN,J)

22.08.2025 Index : Yes/No Neutral Citation : Yes/No kpl To 1. The Assistant Registrar Income Tax Appellate Tribunal Chennai. 2. The Additional Commissioner of Income Tax Income Tax Range – 1 Tiruchirapalli. ____________ Page 4 of 5 https://www.mhc.tn.gov.in/judis ( Uploaded on: 23/09/2025 02:59:21 pm ) TCA No.733 of 2016 THE HON'BLE CHIEF JUSTICE AND SUNDER MOHAN,J. (kpl)

TCA No.733 of 2016

22.08.2025 ____________ Page 5 of 5 https://www.mhc.tn.gov.in/judis ( Uploaded on: 23/09/2025 02:59:21 pm )

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