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

1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU

ON THE 18TH DAY OF DECEMBER, 2018

BEFORE

THE HON'BLE MR. JUSTICE RAVI MALIMATH

AND

THE HON’BLE MR. JUSTICE K.NATARAJAN

INCOME TAX APPEAL NO.228 OF 2011

BETWEEN:

(BY SRI JEEVAN J. NEERALGI, ADVOCATE)

AND:

M/S. KARNATAKA BANK LIMITED, HO NEAR MAHAVEERA CIRCLE, PUMPWELL, MANGALURU. ... RESPONDENT

2 (BY SRI K. P. KUMAR, SENIOR ADVOCATE ALONG WITH SRI BALRAM R. RAO, ADVOCATE)

THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260-A OF THE INCOME-TAX ACT 1961, ARISING OUT OF ORDER DATED 25/02/2011 PASSED IN INCOME TAX APPEAL NO.430/BANG/2010, FOR THE ASSESSMENT YEAR 2006-2007, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN; SET ASIDE THE COMMON APPELLATE ORDER DATED 25/02/2011 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, 'B' BENCH, BENGALURU IN APPEAL PROCEEDINGS INCOME TAX APPEAL NO.430/BANG/2010, AS SOUGHT FOR IN THIS APPEAL, IN THE INTEREST OF JUSTICE AND EQUITY.

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THIS INCOME TAX APPEAL COMING ON FOR HEARING THIS DAY, RAVI MALIMATH J., DELIVERED THE FOLLOWING:

JUDGMENT

The appeal was admitted to consider the following substantial questions of law: “i. Whether on the facts and 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

3 read with CBDT Circular No.665 came into force?

ii. Whether on the facts and circumstances of the case, the Tribunal was right in law in deleting the addition representing expenditure relating to earning of exempt income ignoring the provisions of Section 14A(1) of the Act which does not allow any such deduction?

iii. Whether on the facts and circumstances of the case, the Tribunal was right in law in deleting the addition representing excess claim of bad debts written off under Section- 36(1)(vii) of the Act, exceeding the credit balance of the provision made under Section- 36(1)(viia) of the Act when the provisions of this Section does not permit such an action?

iv. Whether on the facts and circumstances of the case, the Tribunal was justified in dismissing the appeal preferred by the revenue by holding that the depreciation on valuation of investment portfolio is allowable by treating the investments held by the assessee – bank as stock in trade even when the same was not

4 permitted under the provisions of the I.T. Act and, as such, whether the order of the Tribunal can be said to be perverse in nature?

v. Whether on the facts and circumstances of the case, the Tribunal was right in holding that interest on Government securities is assessable on receipt (cash) basis even though the assessee has accounted the interest on securities on accrual basis?”

(iv) are covered by the judgment of this Court in the case of KARNATAKA BANK LIMITED VS. ASSISTANT COMMISSIONER OF INCOME TAX, reported in (2013) 356 ITR 549 (KAR), wherein the very same questions of law was answered in favour of the assessee and against the revenue. Hence, following the aforesaid judgment, the substantial questions of law are answered accordingly.

5 Court in the case of COMMISSIONER OF INCOME TAX vs. KARNATAKA BANK LIMITED, reported in 226 Taxman 187, wherein the very same question of law was answered in favour of the assessee and against the revenue. Hence, following the aforesaid judgment, the aforesaid substantial question of law is answered accordingly.

6 Court in the case of COMMISSIONER OF INCOME TAX vs. KARNATAKA BANK LIMITED in Income tax Appeal No.166 of 2009, disposed off on 25.11.2014, wherein the very same question of law was answered in favour of the assessee and against the revenue. Hence, following the aforesaid judgment, the aforesaid substantial question of law is answered accordingly.

The writ petition stands disposed off accordingly. All contentions of the parties are kept open.

The writ petition is delinked from the other connected writ petitions.

Sd/-

Sd/- JUDGE

JUDGE