THE KRANTHI CO-OPERATIVE URBAN BANK LIMITED,HYDERABAD vs. ASST. COMMISSIONER OF INCOME TAX, CIRCLE-11(1), HYDERABAD

ITA 1650/HYD/2017Status: DisposedITAT Hyderabad22 June 2018AY 2013-144 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that interest on zero coupon bonds is not taxable on an accrual basis, following the Delhi High Court and a coordinate bench of the ITAT. The CBDT circular cannot override the legal provisions of the Income Tax Act to the disadvantage of the assessee.

What were the facts?

The assessee, a cooperative bank, purchased zero coupon bonds. The Assessing Officer taxed the interest income on an accrual basis, relying on a CBDT circular. The assessee contended that no income had accrued as the market value of the bonds remained the same from purchase to the financial year-end.

What were the issues?

Whether interest income on zero coupon bonds is taxable on an accrual basis, and the applicability of CBDT circulars in this regard.

Which sections of the Income-tax Act were involved?

Section 2(48),Section 2(42A)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, HYDERABAD BENCH “B”, HYDERABAD

Before: SHRI J. SUDHAKAR REDDY & SMT. P. MADHAVI DEVI

For Appellant: Shri P. Rajeswar Rao
For Respondent: Smt. Geetinder Mann

PER J. SUDHAKAR REDDY, A.M.:

This is an appeal filed by the assessee directed against the order the Ld. CIT(A) - 5, Hyderabad, dated 25/07/2017 passed u/s 250 of the IT Act, 1961 (the Act), for AY 2013-14. 2. Assessee in this case is a cooperative society, engaged in the banking business. The sole issue that arises for our consideration is whether interest income is taxable on accrual basis on ‘zero coupon bonds’ purchased by the assessee. Section 2(48) defines ‘zero coupon bond’, as under:

"zero coupon bond" means a bond— (a) issued by any infrastructure capital company or infrastructure capital fund or public sector company or scheduled bank on or after the 1st day of June, 2005; (b) in respect of which no

The order continues below.

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