COMMISSIONER OF INCOME TAX vs M/S SYNDICATE BANK

IN THE HIGH COURT OF KARNATAKA AT BENGALURU

DATED THIS THE 7TH DAY OF SEPTEMBER 2020

PRESENT

THE HON’BLE MR. JUSTICE ALOK ARADHE

AND

THE HON’BLE MR. JUSTICE H.T.NARENDRA PRASAD

I.T.A. NO.351 OF 2014

BETWEEN:

COMMISSIONER OF INCOME TAX

C.R. BUILDING, ATTAVARA

MANGALORE.

DEPUTY COMMISSIONER OF INCOME TAX

CIRCLE-1, UDUPI-576101. ... APPELLANTS (BY SRI. E.I. SANMATHI, ADV.)

AND:

M/S. SYNDICATE BANK CENTRAL ACCOUNTS DEPARTMENT TAX CELL, HEAD OFFICE MANIPAL-576104. ... RESPONDENT (BY SRI. T. SURYANARAYANA, ADV.,) - - -

THIS I.T.A. IS FILED UNDER SECTION 260-A OF I.T.ACT, 1961, ARISING OUT OF ORDER DATED 14-03-2014 PASSED IN ITA NO.680/BANG/2012 AND I.T.A. NO.708/B/2012, FOR THE ASSESSMENT YEAR 2008-09, PRAYING TO:

I. DECIDE THE FOREGOING QUESTION OF LAW AND/OR SUCH OTHER QUESTIONS OF LAW AS MAY BE FORMULATED BY THE HON’BLE COURT AS DEEMED FIT. II. SET ASIDE THE APPELLATE ORDER DATED 14-03-2014 PASSED IN ITA NO.680/BANG/2012 AND ITA NO.708/B/2012 BY THE ITAT, ‘C’ BENCH, BANGALORE.

THIS I.T.A. COMING ON FOR HEARING, THIS DAY, ALOK ARADHE J., DELIVERED THE FOLLOWING:

JUDGMENT

Mr.E.I.Sanmathi, learned counsel for the revenue. Mr.T.Suryanarayana, learned counsel for the assessee.

This appeal under Section 260-A of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’, for short) has been preferred by the revenue which was admitted by a Bench of this Court on 16.12.2014 to consider the following substantial questions of law: 1. “Whether on the facts and in the circumstances of the case, the Tribunal were justified in law in allowing assessee’s claim for reversal of interest of Rs.12,80,483/- credited to its income?”

1(a) “Whether on the facts and in the circumstances of the case, the Tribunal were right in law in not appreciating that the assessee has only reversed the earlier years’ income by treating the account as NPA and such reversal of interest does not fall within the purview of sec.36(1)(vii) r.w.s. 36(2) of the I.T. Act, 1961?” 1(b) “Whether on the facts and in the circumstances of the case, the Tribunal were justified in law in not considering that as per guidelines of Reserve Bank of India which is binding on the assessee u/s.43D, once the debt becomes NPA, only the interest credited in the current year can be reversed and interest already credited in the previous year cannot be reversed?” 2. “Whether on the facts and in the circumstances of the case, the Tribunal were right in law in not considering the fact that the amount incurred for issue of bonds is in fact incurred for expansion of capital and has to be considered as a capital expenditure and not an admissible revenue expenditure?”

“Whether on the facts and in the circumstances of the case, the Tribunal were justified in law in allowing assessee’s claim on the point of accrued interest on securities amounting to Rs.16,76,60,611/- offered on cash basis?” 3(a) “Whether on the facts and in the circumstances of the case, the Tribunal were justified in law in not appreciating the fact that the assessee is following mercantile system of accounting in respect of interest from securities for the purpose of final accounts as per annual report under the Companies Act but had deviated and sought to reduce a sum of Rs.16,76,60,611/- as interest accrued but not fallen due for the purpose of final accounts as per annual report under the Companies Act but had deviated and sought to reduce a sum of Rs.16,76,60,611/- as interest accrued but not fallen due for the purpose of taxation under the Income Tax Act?” 3(b) “Whether on the facts and in the circumstances of the case, the Tribunal were justified in law in not appreciating the fact

that the assessee while acknowledging the interest income as accrued in the annual report for the year ending 31.3.2008 and the basis on which accounts finalized and dividends paid, has sought to defer the taxation under the I.T. Act of the above amount of the ground that it is yet to be received which represents dual treatment of the same income under different Acts and the assessee has followed receipt or cash system of accounting in respect of interest accrued during A.Y. 2008-09 by offering it for taxation in the subsequent year which is not permissible under the amended provisions of sec.145?” 4. “Whether on the facts and in the circumstances of the case, the 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-in-trade once the RBI Master Circular read with CBDT Circular NO.665 came into force?”. 4(a) “Whether on the facts and in the circumstances of the case, the Tribunal was

correct in accepting assessee’s claim that the assessee has traded in securities, shown as investments in the Balance Sheet and that the assessee has incurred loss of Rs.30,21,30,325/- on account of revaluing the investments as on 31.3.2008 at cost or market value whichever is less? 4(b) “Whether on the facts and in the circumstances of the case, the Tribunal was justified in not considering the fact that during the year the assessee has made profit of Rs.196,09,30,654/- on sale of investments, which is credited to P & L A/c as against loss of Rs.30,21,30,325/- claimed?” 5. “Whether on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that provisions of section 115JB of the Act are not applicable to the assessee which is a banking company in contrary to its own decision in previous years wherein it has directed the AO to decide the issue afresh on the basis of the P & L account and Balance Sheet redrawn by

the assessee in accordance with the provisions of Companies Act 1956?” 5(a) “Whether on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that provisions of section 115JB of the Act are not applicable to the assessee which is a banking company without taking into consideration the provisions of section 115JB r/w Explanation (3) to section 115JB of the Act and recorded a perverse finding?” 6. “Whether on the facts and in the circumstances of the case, the Tribunal was correct in law in allowing disallowance of loss of Rs.30,21,30,325/- as per investment trading account in computing Book Profit u/s.115JB, when the same is provision made against assets and cannot be considered as an ascertained liability falling within the purview of explanation (c) below second proviso to sec.115JB and in view of amended section 115JB by Finance (No.2) Act, 2009?” 6(a) “Whether on the facts and in the circumstances of the case, the Tribunal was correct in law in allowing the depreciation on

valuation of investment portfolio in computing Book Profit u/s. 115JB by treating the investments held by the assessee bank as stock-in-trade once the RBI Master Circular read with CBDT Circular NO.665 came into force?” 6(b) “Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in allowing assessee’s claim on account of loss of Rs.30,21,30,325/- claimed in computing Book Profit u/s. 115JB by not appreciating the fact that during the year the assessee has made profit of Rs.196,09,30,654/- on sale of investments, which is credited to P & L A/c as against loss of Rs.30,21,30,325/- claimed?” 7. “Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in allowing assessee’s claim on account of addition u/s.14A of the IT Act in computing Book Profit u/s.115JB by not taking cognizance of the fact that clause (f) under Explanation to section 115JB explicitly states that amount of expenditure relatable to any income which do not form part of

total income has to be added to net profit to arrive Book Profit?” 8. “Whether on the facts and in the circumstances of the case, the Tribunal was correct in law in allowing assessee’s claim on account of provision for future interest sacrifice in CDR accounts in computing Book Profit u/s.115JB when the provision is created against the assets and not created against any liability and hence is a provision for dimunition in the value of the asset and cannot be considered as an ascertained liability falling within the purview of explanation (c) below second proviso to sec.115JB and in view of amended section 115JB by Finance (No.2) Act, 2009?” 9. “Whether on the facts and in the circumstances of the case, the Tribunal were justified in law in allowing assessee’s claim on account of provision for reward points on credit card in computing Book Profit u/s.115JB when it cannot be considered as an ascertained liability falling within the purview of explanation (c) below second proviso to sec. 15JB and in view of amended

section 115JB by Finance (No.2) Act, 2009?”.

When the matter was taken up today, learned counsel for the parties submitted that the substantial question of law Nos.1, 1(a) and 1(b) have already been answered in ‘THE COMMISSIONER OF INCOME TAX- III & ORS. Vs. M/s. SYNDICATE BANK’ in ITA No.260/2011 decided on 23.01.2020. For the reasons assigned in the aforesaid order, the substantial question of law Nos.1, 1(a) and 1(b) are answered against the revenue and in favour of the assessee.

It is also urged that the substantial question of law No.2 has been answered by this Court in ‘COMMISSIONER OF INCOME-TAX Vs. ITC HOTELS LTD.’ (2010) 190 TAXMAN 430 (KAR).

For the reasons assigned in the aforesaid order, the substantial question of law Nos.2 is answered against the revenue and in favour of the assessee.

It is also pointed out that the substantial question of law Nos.3, 3(a) and 3(b) are answered against the revenue in ‘THE COMMISSIONER OF INCOME TAX & ANR. Vs. THE KARNATAKA BANK LTD.’ decided on 12.09.2012 in ITA No.433/2006 and connected matters. For the reasons assigned in the aforesaid order, the substantial question of law Nos. 3, 3(a) and 3(b) are answered against the revenue and in favour of the assessee.

It is also pointed out that the substantial question of law Nos.4, 4(a) and 4(b) are answered against the revenue in ‘KARNATAKA BANK LTD. Vs. ASSISTANT COMMISSIONER OF INCOME-TAX,

CIRCLE 2(1), (2013) 34 TAXMANN.COM 150 (KAR). For the reasons assigned in the aforesaid order, the substantial question of law Nos. 4, 4(a) and 4(b) are answered against the revenue and in favour of the assessee.

It is also pointed out that the substantial question of law Nos.5 and 5(a) are answered against the revenue in ‘THE COMMISSIONER OF INCOME TAX Vs. ING VYSYA BANK LIMITED’ in ITA No.18/2014 and connected matters decided on 16.01.2020. For the reasons assigned in the aforesaid order, the substantial question of law Nos.5 and 5(a) are answered against the revenue and in favour of the assessee.

In view of the fact that the substantial question of law Nos.5 and 5(a) have been answered in favour of

the assessee, the substantial question of law Nos.6, 6(a), 6(b), 7, 8 and 9 are rendered academic. In the result, the appeal is dismissed.

Sd/- JUDGE

COMMISSIONER OF INCOME TAX vs. M/S SYNDICATE BANK