Dismissed

The Commissioner of Income Tax v. M/S. Dhanalakshmi Bank Ltd.

Kerala HC17 Dec 2018ITA/550/2009

Case brief

AI extract

What is this about?

The High Court addressed the valuation of trading securities for tax purposes. Relying on prior precedents and RBI stipulations that mandate valuation at the lower of market price or cost price, the court held that unrealized appreciation in security value does not constitute income. Consequently, the court accepted the bank's valuation at cost price and dismissed the appeals filed by the Revenue.

What did the court decide?

The appeals filed by the Revenue against the Tribunal's orders allowing the assessee-banks' valuation of trading securities at cost price are dismissed.

The Commissioner of Income Tax Vs M/S. Dhanalakshmi Bank Ltd. — Income Tax | Kerala HC (2018)

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT:

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THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN

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THE HONOURABLE MR.JUSTICE ASHOK MENON

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MONDAY, THE 17TH DAY OF DECEMBER 2018 / 26TH AGRAHAYANA, 1940

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I.T.A.No.550 of 2009

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AGAINST THE ORDER IN ITA 1197/COCH/2004 DATED 29-12-2006 OF I.T.A. TRIBUNAL, COCHIN BENCH. [ASSESSMENT YEAR 1998-99]

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APPELLANT/RESPONDENT:

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THE COMMISSIONER OF INCOME TAX, TRICHUR.

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BY ADV. SRI.JOSE JOSEPH, SC FOR INCOME TAX.

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RESPONDENT/APPELLANT:

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M/S. DHANALAKSHMI BANK LTD., TAXATION DEPARTMENT, HEAD OFFICE, NAIKANAL, THRISSUR.

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BY ADV. SRI.P.BALAKRISHNAN (E)

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THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 17.12.2018, ALONG WITH ITA.86/2012, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

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ITA.550 of 2009 & 86 of 2012

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- 2 -

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT

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THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN

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THE HONOURABLE MR.JUSTICE ASHOK MENON

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MONDAY, THE 17TH DAY OF DECEMBER 2018 / 26TH AGRAHAYANA, 1940

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I.T.A.No.86 of 2012

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AGAINST THE ORDER IN ITA 133/COCH/2009 DATED 30-12-2011 OF I.T.A. TRIBUNAL, COCHIN BENCH [ASSESSMENT YEAR 2006-07]

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APPELLANT/APPELLANT:

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THE COMMISSIONER OF INCOME TAX, TRICHUR.

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BY ADVS. SRI.P.K.RAVINDRANATHA MENON (SR.) SRI.JOSE JOSEPH, SC FOR INCOME TAX

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RESPONDENT/RESPONDENT:

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THE DHANALEKSHMI BANK LTD., NAIKKANAL, TRICHUR-680001.

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BY ADVS.

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SRI.P.BALAKRISHNAN (E) SRI.MOHAN PULIKKAL

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THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 17.12.2018, ALONG WITH ITA.550/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

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ITA.550 of 2009 & 86 of 2012

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JUDGMENT

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[ ITA 550/2009, ITA.86/2012 ]

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Vinod Chandran,J.

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The issue arising in both these appeals are with respect to the appreciation of trading assets and the manner in which the value has to be credited to the profit and loss account. The assessee-Bank admittedly engages inter alia in making investments by way of purchasing securities. They are also treated as trading assets of the Bank. The question raised is as to the value to be taken when the securities appreciate in their market value.

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2. The issue has been considered by this Court in CIT v . Nedungadi Bank Ltd . [ (2003) 264 ITR 545 (Ker.) ] and CIT v . Lord Krishna Bank Ltd . [ (2011) 339 ITR 606 (Ker.) ]. There the question was with respect to the valuation of securities when there is a claim raised of depreciation or loss. This Court had approved the measure adopted by the assessee-Banks following the stipulations made by the Reserve Bank of India. RBI had directed the security to be valued at market price or cost price, whichever is lower. The stipulation was brought in force, to ensure that the Banks do not claim escalated book profits. Though in the present case

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ITA.550 of 2009 & - 4 - 86 of 2012

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a contrary situation has arisen, where there is an

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appreciation of the value of the security, the dictum squarely applies. Even when there is an appreciation of the value, it does not enure to the Bank as income and, hence, the valuation has to be made as stipulated by the RBI; at the market price or cost price, whichever is lower. Hence, the valuation carried out by the Bank at the cost price has to be accepted. The question of law is answered in favour of the assessee-Bank and against the Revenue.

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The appeal stands dismissed, leaving the parties to suffer their respective costs in these appeals.

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Sd/-

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K.VINOD CHANDRAN JUDGE

Sd/-

ASHOK MENON

JUDGE

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ITA.550 of 2009 & 86 of 2012

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APPENDIX OF ITA 550/2009

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APPELLANT'S ANNEXURES:

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ANNEXURE A TRUE COPY OF THE ORDER OF THE ASSESSING OFFICER U/S. 143(3) OF THE I.T.ACT DATED 16.11.2000. ANNEXURE B TRUE COPY OF THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN ITA NO.15/RI/JC/TCR/CIT-V/2000-01 DATED 10.09.2004. ANNEXURE C TRUE COPY OF THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL IN I.T.A.NO.1197/COCH/2004 DATED 29.12.2006.

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- 6 -

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ITA.550 of 2009 & 86 of 2012

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APPENDIX OF ITA 86/2012

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APPELLANT'S ANNEXURES:

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ANNEXURE-A COPY OF ASSESSMENT ORDER DATED 28/3/2008 ANNEXURE-B TRUE COPY OF THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) DATED 21/11/2008.

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ANNEXURE-C COPY OF THE ORDER OF THE TRIBUNAL DATED 31/12/2011.

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Vku/-

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[true copy]

The Commissioner of Income Tax v. M/S. Dhanalakshmi Bank Ltd.

Case brief

What is this about?

What did the court decide?

The Commissioner of Income Tax v. M/S. Dhanalakshmi Bank Ltd.

Case brief

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What did the court decide?

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