Dismissed

The Commissioner of Income-Tax v. M/S Canara Bank

Karnataka HC10 Feb 2023ITA/346/2018

Case brief

AI extract

What is this about?

The Karnataka High Court dismissed an appeal by the Income Tax Commissioner. The Bench held that the issues raised in the CIT's revision under Section 263 were either covered by decided precedents or did not render the Assessing Officer's order erroneous or prejudicial to revenue, sustaining the ITAT's decision.

What did the court decide?

The substantial questions of law were answered in favour of the assessee and against the Revenue.

The Commissioner of Income-Tax Vs M/S Canara Bank — Income Tax | Karnataka HC (2023)

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ITA No.346/2018

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 10^TH DAY OF FEBRUARY, 2023

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PRESENT

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THE HON’BLE MR. JUSTICE P.S. DINESH KUMAR

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AND

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THE HON’BLE MR. JUSTICE G BASAVARAJA

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ITA NO.346 OF 2018

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BETWEEN:

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THE COMMISSIONER OF INCOME-TAX LTU, 7^TH FLOOR, BMTC BUILDING 80 FEET ROAD, KORMANAGLA BENGALURU-560 095

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THE ADDL. COMMISSIONER OF INCOME-TAX LTU, 7^TH FLOOR, BMTC BUILDING 80 FEET ROAD, KORMANAGLA BENGALURU-560 095 …APPELLANTS

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(BY SHRI. E.I. SANMATHI, SENIOR STANDING COUNSEL AND SHRI. K.V. ARAVIND, SENIOR STANDING COUNSEL)

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AND:

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M/S. CANARA BANK BSCA SECTION, HEAD OFFICE J.C.ROAD BENGALURU - 560 002 PAN: AAACC 6106G …RESPONDENT

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(BY SHRI. T. SURYANARAYANA, SENIOR ADVOCATE FOR SMT. TANMAYEE RAJKUMAR, ADVOCATE)

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THIS ITA IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 06.112017 PASSED IN ITA NO.743/BANG/2013, FOR THE ASSESSMENT YEAR 2008-2009

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ITA No.346/2018

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(ANNEXURE-D) PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN AND ALLOW THE APPEAL BY SET ASIDE THE ORDERS PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, BENGALURU IN ITA NO. 743/BANG/2013 DATED 06.11.2017 (VIDE ANNEXURE-D) CONFIRMING THE ORDER OF THE APPELLATE COMMISSIONER AND CONFIRM THE ORDER PASSED BY THE ADDL. COMMISSIONER OF INCOME TAX, LTU, BENGALURU AND ETC.

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THIS ITA, HAVING BEEN HEARD AND RESERVED FOR JUDGMENT ON 10.01.2023 COMING ON FOR PRONOUNCEMENT OF JUDGMENT, THIS DAY, P.S. DINESH KUMAR J. , PRONOUNCED THE FOLLOWING:-

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JUDGMENT

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This appeal by the Revenue, directed against the order dated November 6, 2017 in ITAT No. 743/Bang/2013 has been admitted to consider following substantial questions of law:

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1. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in allowing appeal preferred by assessee by setting aside the CIT’s order of revision passed under Section 263 of the Act?

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2. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in holding that all the five issues take up for revision are debatable and the said five issues have been dealt by the Tribunal which are in favour of assessee?

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ITA No.346/2018

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3. Whether on the facts and circumstances of the case, the Tribunal is right in law in not appreciating that CIT had taken up revision under Section 263 of the Act as all the conditions for taking up such revision were satisfied and issues taken up for revision with regard to 36(1)(vii) and depreciation on investments have not reached finality and other two issues pertaining to non-levy of interest under Section 115P and expenses incurred towards new logo have not been considered by Tribunal in any of the earlier orders of the Tribunal?

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Heard Shri. T. Suryanarayana, learned Senior

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Advocate for the Assessee and Shri E. I. Sanmathi, learned Standing Counsel for the Revenue.

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Briefly stated facts of the case are, assessee is a public sector bank engaged in the business of banking. It filed returns for the A.Y.¹ 2008-09 declaring an income of Rs. 6,19,24,037/-. The AO² vide order dated November 19, 2010 made certain disallowances in the total income. The CIT³ , suo-moto took up the matter under Section 263 of the

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1 Assessment Year

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2 Assessment Officer

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3 Commissioner of Income Tax

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Income Tax Act, 1961⁴ and held that the order passed by AO was erroneous and prejudicial to the interest of the Revenue. On appeal, ITAT⁵ , allowed assessee’s appeal holding that the CIT(A) ought not to have exercised the jurisdiction under Section 263 of the Act. Hence, this appeal.

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Shri E. I. Sanmathi, for the Revenue submitted

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that:

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the conditions required under Section 263 of the Act were satisfied;

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the Tribunal erred in allowing the appeal even though CIT(A) had taken revision proceedings in respect of five issues which were not properly considered by AO;

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the Tribunal ought to have only examined whether the conditions for invoking power under Section 263 of the Act was valid and ought not to have considered the matter on merits.

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4 the ‘Act’ for short

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5 Income Tax Appellate Tribunal

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In support of his contentions, he placed reliance on

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Cognizant Technology Solutions India (P) Ltd. Vs. Deputy Commissioner of Income-Tax, LTU, Chennai .⁶

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Opposing the appeal, Shri. T. Suryanarayana, for

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the assessee submitted that the CIT(A) erred in exercising its jurisdiction under Section 263 of the Act since all the issues have been covered by the various decisions and statutory authorities.

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We have carefully considered the rival contentions and perused the records.

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The five issues which were raised for CIT(A)’s

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consideration are:

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i) “Excess allowance of deduction under Section 36(1)(viii) of Rs. 181.52 crores.

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ii) Wrong disallowance of liability in respect of contribution to gratuity fund and pension fund of Rs. 59.72 crores and Rs.66.99 crores respectively.

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6 (2019) 106 taxmann.com 388

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iii) Allowance of provisions for depreciation on investments of Rs. 19,70,96,145/-.

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iv) Interest under Section 115P of Rs. 5,38,130/was not levied on the delay in payment of dividend tax.

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v) Allowance of expenditure incurred on new logo was allowed as deduction.”

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Re. issue i:

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Shri. Suryanarayana, submitted that the issue involved is covered by the decision in Vijaya Bank .⁷ Though Revenue challenged the said order, this issue was not challenged. Thus, it has attained finality.

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Re. issue ii :

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Assessee has followed AS-15 throughout to

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recognise the liability, which is binding on the assessee and has made remittances for the same. Since, the payment is made by the assessee, deductions under Section 43B of the Act are required to be allowed.

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7 ITA No. 578 and 653/Bang/2012 decided on 27.02.2015

ITA No.346/2018

Re. issue iii:

Shri. Suryanarayana, submitted that this issue

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involved is covered by the decision in assessee’s own case in ITA No. 567/Bang/1999, ITA No. 591/Bang/2000 and ITA No. 516/Bang/2014⁸ .

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Re. issue iv:

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Shri. Suryanarayana, submitted that Section

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143(3) of the Act deals with computation of an assessee’s total income, whereas interest under Section 115-O of the Act pertains to a third party’s liability, and therefore the same cannot be levied under Section 143(3) of the Act.

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Re. issue v:

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In CIT v. Finlay Mills Ltd.⁹ , the Apex Court held that the expenses incurred towards registration of trademark is revenue in nature. Therefore, allowance of

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8 Canara Bank Vs. CIT, Order dated 30.12.2014

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9(1951) 20 ITR 475 (SC)

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expenditure incurred on new logo has to be allowed as deduction.

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Section 263 of the Act reads as follows:

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“263. Revision of orders prejudicial to revenue:

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The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he, may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment.”

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Out of the five issues taken up under Section 263

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of the Act, issues no. i, iii and v are covered by decisions noted supra . The issue no. ii is with regard to the accounting standards and Assessee is following AS-15 and made remittances in respect of contribution to gratuity fund, therefore, it is entitled for deduction in terms of Section 43B

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of the Act. With regard to issue no. iv, Shri. Suryanarayana is

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right in his submission that a separate order is required with

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regard to interest and the same cannot be computed in order

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passed under Section 143(3) of the Act. Thus, in our considered view, the conclusions arrived by the AO is neither

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