COMMISSIONER OF INCOME TAX vs. M/S. SYNDICATE BANK

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. 477 OF 2014

BETWEEN:

AND: M/S. SYNDICATE BANK CENTRAL ACCOUNTS DEPARTMENT, TAX CELL, HEAD OFFICE, MANIPAL-576104. …RESPONDENT BY SRI.T SURYANARAYANA, ADVOCATE)

THIS ITA IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961 PRAYING TO DECIDE THE

2 FOREGOING QUESTION OF LAW AND/OR SUCH OTHER QUESTIONS OF LAW AS MAY BE FORMULATED BY THE HON’BLE COURT AS DEEMED FIT AND SET ASIDE THE APPELLATE ORDER DATED 13.06.2014 PASSED IN ITA NO.681/BANG/2012 BY THE INCOME TAX APPELLATE TRIBUNAL, ‘C’ BENCH, BANGALORE AS SOUGHT FOR, IN THE ABOVE CASE.

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

JUDGMENT

Sri. Jeevan J. Neeralgi, learned counsel for the appellants. Sri. T. Suryanarayana, learned counsel for the respondent. This appeal under Section 260A of Income Tax Act, 1961 has been filed by the revenue. It was admitted by the Bench of this Court vide order dated 17.07.2015 on 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 on the point of accrued interest on securities

3 amounting to Rs.31,20,45,192/- offered on cash basis? 2. 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.31,20,45,192/- as interest accrued but not fallen due for the purpose of the purpose of taxation under the Income Tax Act? 3. 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 31.03.2009 and the basis on which accounts finalized and

4 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 the received which represents dual treatment of the same income under different Act and the assesssee has followed receipt or cash system of accounting in respect of interest accrued during A.Y.2009-10 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? 5. Whether on the facts and in the circumstances of the case, the Tribunal was

5 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.337,17,48,455/- on account of revaluing the investments as on 31.03.2009 at cost or market value whichever is less? 6. 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.233,45,84,809/- on sale of investments, which is credited to P&L A/c as against loss of Rs.337,48,455/- claimed? 7. Whether on the facts and in the circumstances of the case, the Tribunal was right in accepting assessee’s claim that the provision for wage arrears was unascertained liability which was contingent upon the finality of the wage agreement between the management and the employees?

6 8. Whether on the facts and in the circumstances of the case, the Tribunla was justified in not considering the fact that the provisions of wage arrears was made on adhoc basis for an unascertained liability which is not an allowable expenditure? 9. 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? 10. 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

7 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?”

8 4. Learned counsel for the assessee has pointed out that substantial questions of law No.7 and 8 is covered by the decision of the Division Bench of High Court of Delhi in the case of ‘CIT VS. BHARAT HEAVY ELECTRICALS LTD.’, ‘(2012) 26 TAXMAN.COM 252 (DEL.)’. In view of the aforesaid submission, the substantial questions of law No.7 and 8 are answered in favour of the assessee.

Sd/-

JUDGE

Sd/-

JUDGE BVK