THE COMMISSIONER OF INCOME TAX vs. M/S MANIPAL FINANCE CORPORATION

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ITA/150/2010HC KarnatakaKAHC01091630201020 November 2018Bench: RAVI MALIMATH,K.NATARAJAN4 pages
AI SummaryAllowed

What did the High Court hold?

The High Court followed its previous order in similar appeals filed by the Revenue against the same assessee. This order had held in favour of the assessee, treating the amounts as capital receipts.

What were the facts?

The Revenue appealed against an ITAT order that treated forfeited deposits and debentures, along with a cessation of bank liability, as a capital receipt. The Revenue argued this should be treated as income under Section 28(iv) read with Section 41 of the Income Tax Act.

What were the issues?

Whether forfeited deposits/debentures and cessation of bank liability constitute capital receipts or taxable income under the Income Tax Act.

Which sections of the Income-tax Act were involved?

Section 28(iv),Section 41

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

ON THE 20TH DAY OF NOVEMBER, 2018

BEFORE THE HON'BLE MR. JUSTICE RAVI MALIMATH

AND

THE HON'BLE MR. JUSTICE K. NATARAJAN

INCOME TAX APPEAL NO.150 OF 2010

BETWEEN:

1.

THE COMMISSIONER OF

INCOME-TAX, C.R. BUILDING,

ATTAVARA,

MANGALORE.

2.

THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE 1,

UDUPI. ... APPELLANTS

(BY SRI K.V. ARAVIND, ADVOCATE)

AND:

M/S. MANIPAL FINANCE CORPORATION MANIPAL HOUSE, MANIPAL.

... RESPONDENT

(BY SMT. JINITA CHATTERJEE, ADVOCATE, FOR SRI S. PARTHASARATHI)

THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260-A OF THE INCOME TAX ACT, 1961, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN AND ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME-TAX APPELLATE TRIBUNAL, BANGALORE, IN I.T.A. NO.542/BANG/2009 DATED 27-11-2009 AND CONFIRM THE ORDER OF THE APPELLATE COMMISSIONER CONFIRMING THE ORDER PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1, UDUPI.

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

J U D G M E N T

By the order dated 10-11-2010, this appeal was admitted to consider the following substantial questions of law:

i. Whether the Appellate Authorities were correct in holding that the principal portion of the deposit and debentures forfeited and cessation of bank liability is a capital receipt in the hands of the assessee and not liable to tax?

ii. Whether the Appellate Authorities were correct in holding that the principal portion of the deposit/debentures taken by the company and subsequently foregone by the depositor and cessation of bank liability does not constitute income contrary to Section 28(iv) read with Section 41 of the Act and the judgments of the Apex Court in the case of Lakshmi Vilas Bank reported in 220 ITR 305 and in the case of T.V. Sundaram Iyengar & Son Ltd. reported in 222 ITR 344?

2.

Learned counsel for the appellants submits that the matter could be disposed of on a short issue. He submits that the Tribunal followed the earlier orders in the case of the assessee as noted by it in paragraph No.6 of its order. Aggrieved by the said order, the Revenue had filed I.T.A. Nos.794 and 795 of 2008. By the order dated 7-10-2014, the appeals were held in favour of the assessee and against the Revenue.

Against the said order, a Special Leave Petition was filed and leave being granted, the appeals were dismissed on the ground of the monetary limits. Therefore, he pleads that the substantial questions of law are since covered by the order of this Court dated 7-10-2014 passed in I.T.A. Nos.794 and 795 of 2008.

3.

In view of the submission made, the substantial questions of law are answered in favour of the assessee and against the Revenue by following the order dated 7-10-2014 passed in I.T.A. Nos.794 and 795 of 2008. The appeal is, accordingly, disposed off.

SD/-

SD/- JUDGE

JUDGE

kvk

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