COMMISSIONER OF INCOME-TAX-III, vs. M/S SYNDICATE BANK

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ITA/154/2012HC KarnatakaKAHC01026987201231 January 2020Bench: ALOK ARADHE,RAVI V HOSMANI6 pages
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What did the High Court hold?

The High Court, based on previous judgments and submissions by counsel, answered substantial questions of law 1(a) and 1(b) in favor of the assessee. Question 2 was answered in terms of another judgment, and questions 4 and 5 were rendered academic.

What were the facts?

The Revenue appealed against an ITAT order concerning Syndicate Bank's assessment year 2005-2006. The appeal raised several substantial questions of law regarding bad debts, provision for bad and doubtful debts, depreciation on investment portfolio, and revaluation of securities.

What were the issues?

The key issues involved the allowability of write-offs for bad debts, the claim for provision for bad and doubtful debts, depreciation on investments treated as stock-in-trade, and the treatment of revaluation losses on securities.

Which sections of the Income-tax Act were involved?

Section 36(1)(vii),Section 36(1)(viia),Section 115JB

AI-generated summary — verify with the full judgment below

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1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU

DATED THIS THE 31ST DAY OF JANUARY 2020 PRESENT THE HON’BLE MR. JUSTICE ALOK ARADHE AND

THE HON’BLE MR. JUSTICE RAVI V. HOSMANI

ITA NO. 154 OF 2012

BETWEEN:

1.

COMMISSIONER OF INCOME-TAX-III, CENTRAL REVENUE BUILDINGS, QUEENS ROAD, BANGALORE-560 001

2.

THE DEPUTY COMMISSIONER OF INCOME- TAX CIRCLE-1, UDUPI ...APPELLANTS (BY SRI.E I SANMATHI, ADVOCATE)

AND: M/S SYNDICATE BANK H.O.MANIPAL …RESPONDENT (BY SRI.T SURYANARAYANA, ADVOCATE)

THIS ITA IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961 PRAYING TO DECIDE THE FOREGOING QUESTION OF LAW AND/OR SUCH OTHER QUESTIONS OF LAW AS MAY BE FORMULATED

2 BY THE HON’BLE COURT AS DEEMED FIT AND SET ASIDE THE ORDER OF THE TRIBUNAL IN ITA NO.492/BANG/2009 & ITA NO.504/BANG/2009 DATED 13.01.2011, FOR THE ASSESSMENT YEAR 2005-2006, IN THE INTEREST OF JUSTICE AND EQUITY.

THIS APPEAL COMING ON FOR HEARING, THIS DAY, ALOK ARADHE J., DELIVERED THE FOLLOWING:

JUDGMENT Sri. E.I. Sanmathi, learned counsel for the appellants. Sri. T. Suryanarayana, learned counsel for the respondent.

This appeal under Section 260 A of the Income Tax Act, 1961 has been filed by the revenue which was admitted by a Bench of this Court by an order dated 29.11.2012 on following substantial questions of law. “1(a) Whether on the facts and in the circumstances of the case, the Hon’ble tribunal were justified in law by restoring the issue of write off of bad debts to assessing authority ignoring the provisions of Section 36(1)(vii) which doesn’t allow write off bad debts relating to urban branches and under

3 prudential write off without first setting off them against the credit balance in the Provision for Bad and doubtful Debts A/c? 1(b) Whether on the facts and in the circumstances of the case, the Hon’ble tribunal were right in not considering the decision of the Full Bench of Kerala High Court in South Indian Bank Ltd., Vs/. CIT(2010) 191 Taxman 272 on the above issue which was pleased in favour of Revenue?

2.

Whether on the facts and in the circumstances of the case, the Hon’ble tribunal were justified in law in allowing in full the assessee’s claim for Provision for Bad and Doubtful Debts u/s.36(1)(viia) amounting to Rs.399,43,71,239/- being 10% at average rural advances, even though the assessee has debited only Rs.1,35,81,39,669/-?

4 3. Whether on the facts and in the circumstances of the case, the Hon’ble tribunal was correct in holding that depreciation on valuation of investment portfolio is allowable by treating the Investments held by the assessee bank as stock-trade once the RBI Master Circular read with CBDT Circular No.665 came into force?

4.

Whether on the facts and in the circumstances of the case, the Hon’ble tribunal was justified in not deciding about the loss of revaluation of securities Rs.383,21,79,828/- which represent provision made to cover up the probable diminution in the value of assets, ignoring in the process the amended provisions of section 115JB?

5.

Whether on the facts and in the circumstances of the case, the Hon’ble

5 tribunal was justified in not deciding about the amortization loss on revaluation of securities Rs.25,86,63,483/- which represent provision made to cover up the probable diminution in the value of assets, ignoring in the process the amended provisions of section 115JB?”

2.

When the matter was taken up today, the learned counsel jointly submitted that the substantial question of law No.1(a) and No.1(b) were answered by the judgment dated 21.10.2014 passed in ITA No.1066/2008.

3.

Accordingly, the aforesaid substantial questions of law are answered in favour of the assessee.

4.

It is further submitted that the substantial question of law No.2 is covered by judgment dated 24.01.2020 passed in ITA No. 258/2011 has been answered. Accordingly, substantial question of law is

6 answered in terms of judgment dated 24.01.2020 passed in ITA No. 258/2011.

5.

Learned counsel for the parties jointly submitted that the substantial question of law No.3 has been answered against the revenue in a decision rendered by this Court in case of KARNATAKA BANK LTD., VS. ASSISTANT COMMISSIONER CIT (34 TAXMAN.COM 150 (KAR.)).

6.

Lastly it is urged that in view of the answer to the substantial question of law No.3, substantial questions of law No.4 and 5 have been rendered academic.

Accordingly, the appeal is disposed of.

Sd/-

JUDGE

Sd/-

JUDGE

BVK

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