DCIT CIRCLE 2(1), TRICHY vs. THE KARUR VYSYA BANK LTD., KARUR

This appeal by the Revenue is arising out of the order of Commissioner of Income Tax (Appeals)-1, Tiruchirapalli in Ord. No.154/1/CIT(A)-1/Try/2018-19, vide order dated 18.05.2018. The original assessment was framed by the DCIT, Circle 2(1), Chennai for the assessment year 2013-14 vide order dated

The first issue in this appeal of Revenue is as regards to the order of CIT(A) in upholding the issues (i) depreciation on investment and (ii) deduction u/s.36(1)(viia) of the Act, as highly debatable and does not fall under the mistake apparent from record. For this, Revenue has raised Ground Nos.6, 7 & 9 as under:- “6. The Ld.CIT(A) erred and failed to appreciate that non following of Instruction No.17/2008 dated 26.11.2008 during the course of appeal proceedings constitute a mistake apparent from records u/s 154.

We have heard rival contentions and gone through facts and circumstances of the case. We have perused various orders passed by the AO under original assessment, rectification orders and various orders of CIT(A) as noted above. Before us, the ld.DR could not make out any case as how the provisions of section 154 of the Act, i.e., rectification of mistake apparent from record will apply in the case of depreciation on investments and the claim of deduction u/s.36(1)(viia) of the Act on merits. The ld.AR just relied on the grounds raised by the Revenue.

The ld.AR for assessee took us to the application moved by the AO u/s.154 of the Act requesting the CIT(A) to rectify the mistake apparent from record in the order passed by CIT(A) dated 14.09.2017 in ITA No.37/CIT(A)-1/TRY/2016-17. The ld.AR drew our attention to the following two issues:-

The ld.AR also raised the issue on merits that the issue of depreciation on investments amounting to Rs.41,80,57,696/-. The issue is covered by the decision of Hon’ble Jurisdictional High Court in the assessee’s own case, as reported in [2005] 273 ITR 510 (Mad) and even the SLP filed by the Department has been dismissed vide SLP No.9458/2010. The ld.AR stated that this decision has been followed by the Tribunal, Chennai Bench in assessee’s own case for assessment year 2007-08 in dated 28.02.2019, as reported in [2019] 72 ITR (Trib) 26. The ld.AR stated on merits that the issue is covered by the decision of Hon’ble Supreme Court in the case of CIT vs. Nawanshahar Central Co-opertive Bank Ltd., [2007] 289 ITR 6 (SC), wherein the Board Circular No.18/2015 dated 02.11.2015 has clarified that the investments held by the banking concern are part of business of banking and therefore, the income from the same is taxable under the head ‘profits and gains of business’. According to him, the natural corollary of the circular and the decision of Hon’ble Supreme Court is that the investments remained at the end of the year has to be treated as stock-in-trade and the settled principle is that the stock-in-trade should be valued

As regards to the claim of deduction u/s.36(1)(viia) of the Act, it was argued that the issue is squarely covered by Co-ordinate Bench decision of ITAT in assessee’s own case in for assessment year 2007-08 vide order dated 28.02.2019 and moreover this issue is covered by the decision of Hon’ble High Court of Calcutta in the case of PCIT vs. Uttarbanga Kshetriya Gramin Bank [2018] 408 ITR 393. In view of the above, the ld.counsel for the assessee stated that both the issues are covered, as noted above, the issue cannot be taken up under rectification proceedings.

We noted from the above that the issue is first of all highly debatable and requires legal arguments. Even otherwise both the issues i.e., depreciation on investments and claim of deduction u/s.36(1)(viia) of the Act, both are covered in assessee’s own case by Tribunal Benches as well as by the Hon’ble Jurisdictional High Court in assessee’s own case and the Hon’ble High Court of 7 Calcutta. Hence, we find no error in the order of CIT(A) and hence, the appeal of Revenue is dismissed.

In the result, the appeal filed by the Revenue is dismissed.