PRINCIPAL COMMISSIONER OF INCOME TAX,BHUBANESWAR vs. INDUSTRIAL DEVELOPMENT CORPORATION OF ORISSA LTD.

The Commissioner of Income-tax,

The Additional Commissioner of

The appeal was admitted by this Court to consider the following substantial questions of law:-

"Whether on the facts and in the circumstances of the case, the Tribunal is right in law in setting aside the disallowance of

"Whether on the facts and in the circumstances of the case, the Tribunal is right in law in setting aside the disallowances of deprecation on HTM category of investments by erroneously holding that value of investments made pursuant to SLR requirements of RBI can be allowed as a deduction while computing business income of a banking company even though conversion of securities from investments to Stock in Trade attracts provision' of Section 45(2) and also that the Bank had no working regarding deprecated value of assets and capital gains on sale of such assets?

"Whether on the facts and in the circumstances of the case, the Tribunal is right in law in setting aside the addition made in respect of realization of assets of erstwhile Lakshmi Commercial Bank by erroneously holding that, when the excess of liabilities over assets is not

"Whether on the facts and in the circumstances of the case, the Tribunal is right in law in setting aside in allowing deprecation on assets leased to M/s. Rajinder Steel and M/s. Kedia Group of Companies by following earlier orders which has not reached finality even when the assessee is not entitled for deprecation on assets leased to others under the provisions of the Act?

"Whether on the facts and in the circumstances of the case, the Tribunal is right in law in setting aside that the provisions of Section 115JB are not applicable to banking companies as no accounts are drawn up as per the requirement of Schedule VI of the Companies Act 1956 by following its earlier orders which has not reached finality?

"Whether on the facts and in the circumstances of the case, the Tribunal is right in

"Whether on the facts and in the circumstances of the case, the Tribunal is right in law in holding that addition to book profits under Section 115 JB towards expenditure on exempt income is purely academic in nature as the Tribunal has held that no disallowances can be made under the provisions of Section 14A in respect of Exempt Income, the question of adding back the amount of disallowances to the book profits does not arise even though bank earned exempt income from tax and as such assessing authority rightly estimated 5% of exempt income as expenditure and disallowed the same under provisions of Section 14A of the Act?.

Learned counsel appearing for the revenue would

The assessee is a banking company. The Assessment Order under Section 143(3) of the Act was passed by the Assessing Officer denying the allowances claimed by the assessee. Being aggrieved, the assessee preferred appeal before the CIT(A), which came to be partly allowed. As such, both revenue and assessee preferred the appeal before the Tribunal. The Tribunal has allowed the appeal preferred by the assessee, rejecting the revenue's appeal. Being aggrieved by the same, the revenue has preferred this appeal.

Regarding the substantial questions of law No.1, the co-ordinate bench in the case of Commissioner of Income-tax Vs. Syndicate Bank reported in (2020) 115

In view of the ruling of the co-ordinate bench as aforesaid, following the law enunciated by the Hon'ble Apex

With regard to substantial question No.3, the Tribunal has observed that Lakshmi Commercial Bank (LCB) Ltd., was merged with assessee-Bank in the year 1985. On merger, there was excess of liabilities over assets. Consequently, there was loss of Rs.21.75 crores and the same was claimed as deduction, which was disallowed by the Assessing Officer and the same was confirmed by the learned CIT(A) as well as the Tribunal and the matter is pending adjudication before this Court. Having observed so, it has observed that in the year of merger of LCB with assessee-bank no deduction was allowed on the excess of liabilities over the assets, in such circumstances, the subsequent realization out of the assets of LCB cannot be brought to tax. But for want of such material evidence

It is well settled by law that if the disallowance is made at the time of merger of the LCB with the assessee- bank during the assessment year 1988-1989, the assessee was entitled to deduction claimed in the assessment year in question. In other words, no addition could be made in the assessment year in question, if such disallowance of loss has attained finality relating to the assessment year 1988- 1989. Thus, this matter requires re-consideration by the Assessing Officer, in as much as the finality of the matter, which was said to have been pending before this Hon'ble Court on this issue relating to assessment year 1988-1989. Hence, it is appropriate for this Court to set-aside the order impugned and to restore the file to the Assessing Officer to re-examine whether the loss suffered by the assessee was disallowed in the assessment year 1988-1989 and if found in the affirmative, no addition could be made in the assessment order under consideration or in other words, it is the other way if the loss suffered by the assessee has

With regard to substantial question of law No.4 - the learned counsel for the assessee has placed reliance on the decision of the co-ordinate bench of this Court in the case of The Commissioner of Income-Tax Vs. M/s. Canara Bank in ITA.No.332/2016 dated 02.11.2020, wherein the co-ordinate bench referred to the judgments of the Hon'ble Apex Court in the case of Santhosh Hazari vs. Purushottam Tiwari reported in (2001) 3 SCC 179 and a decision of this Court in CIT Vs. Soft Brands (P) Ltd., reported in (2018) 406 ITR 513, it has been held that the finding of the fact decided by the Tribunal cannot be interfered in exercise of the powers under Section 260-A of the Act and accordingly, answered the identical substantial question of law framed, against the revenue and in favour of the assessee. The co-ordinate bench has observed that, based on the material evidence, the CIT(A) and the Tribunal held that the transaction of the assessee with the Companies, M/s. Rajender Steels and M/s. Kedia Group