Partly allowed

The Commissioner of Income Tax v. M/S.Catholic Syrian Bank

Kerala HC3 Dec 2018ITA/65/2010

Case brief

AI extract

What is this about?

Bank taxation disputes concerned deductions, securities valuation, minimum alternate tax and advance-tax interest. The court upheld the deductions and valuation treatment, remanded the book-profit issue for reconsideration, and restored determination of Section 234C interest. All other Revenue appeals were rejected.

What did the court decide?

ITA No.88/2010 partly allowed: Assessing Officer to determine Section 234C interest. ITA No.23/2010 remanded to the Tribunal for fresh consideration.

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

¶1

IN THE HIGH COURT OF KERALA AT ERNAKULAM

¶2

PRESENT

¶3

THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN

¶4

¶5

THE HONOURABLE MR. JUSTICE ASHOK MENON

¶6

MONDAY ,THE 03RD DAY OF DECEMBER 2018 / 12TH AGRAHAYANA, 1940

¶7

ITA.No. 3 of 2010

¶8

AGAINST THE ORDER/JUDGMENT IN ITA 919/COCH/2007 of I.T.A.TRIBUNAL,COCHIN BENCH DATED 30-06-2009

¶9

APPELLANT/S:/RESPONDENT/REVENUE:

¶10

THE COMMISSIONER OF INCOME TAX, TRICHUR.

¶11

BY ADV. SRI.PKR MENON, SR. COUNSEL, GOI (TAXES)

¶12

SRI.JOSE JOSEPH, SC, FOR INCOME TAX

¶13

RESPONDENT/S:

¶14

CATHOLIC SYRIAN BANK LTD.,TRICHUR.

¶15

BY ADVS.SRI.JOSEPH MARKOSE (SR.)

¶16

SRI.ABRAHAM JOSEPH MARKOS

¶17

SRI.ISAAC THOMAS

¶18

SRI.V.ABRAHAM MARKOS

¶19

THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 03.12.2018, ALONG WITH ITA Nos.23, 58, 65, 81, 82, 85, 88, 97, 100 and 104 of 2010, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

¶20

ITAs3/2010 & conns.

¶21

-2

¶22

IN THE HIGH COURT OF KERALA AT ERNAKULAM

¶23

PRESENT

¶24

THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN

¶25

¶26

THE HONOURABLE MR. JUSTICE ASHOK MENON

¶27

MONDAY ,THE 03RD DAY OF DECEMBER 2018 / 12TH AGRAHAYANA, 1940

¶28

ITA.No. 23 of 2010

¶29

AGAINST THE ORDER/JUDGMENT IN ITA 879/COCH/2004 of I.T.A.TRIBUNAL,COCHIN BENCH DATED 30-06-2009

¶30

APPELLANT/S:/RESPONDENT/REVENUE:

¶31

THE COMMISSIONER OF INCOME TAX, THRISSUR.

¶32

BY ADV. SRI.PKR MENON, SR.COUNSEL, GOI (TAXES) SRI.JOSE JOSEPH, SC, FOR INCOME TAX

¶33

RESPONDENT/S:/APPELLANT/ASSESSEE:

¶34

M/S. CATHOLIC SYRIAN BANK LTD., THRISSUR.

¶35

BY ADVS.

¶36

SRI.JOSEPH MARKOSE (SR.)

¶37

SRI.ABRAHAM JOSEPH MARKOS

¶38

SRI.ISAAC THOMAS

¶39

SRI.V.ABRAHAM MARKOS

¶40

THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 03.12.2018, ALONG WITH ITA.3/2010 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

¶41

ITAs3/2010 & conns.

¶42

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¶43

IN THE HIGH COURT OF KERALA AT ERNAKULAM

¶44

PRESENT

¶45

THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN

¶46

¶47

THE HONOURABLE MR. JUSTICE ASHOK MENON

¶48

MONDAY ,THE 03RD DAY OF DECEMBER 2018 / 12TH AGRAHAYANA, 1940

¶49

ITA.No. 58 of 2010

¶50

AGAINST THE ORDER/JUDGMENT IN ITA 131/COCH/2008 of I.T.A.TRIBUNAL,COCHIN BENCH DATED 06-08-2009

¶51

APPELLANT/S:/RESPONDENT/REVENUE:

¶52

THE COMMISSIONER OF INCOME TAX, THRISSUR

¶53

BY ADV. SRI.PKR MENON, SR.COUNSEL, GOI (TAXES) SRI.JOSE JOSEPH, SC, FOR INCOME TAX DEPT.

¶54

RESPONDENT/S:/APPELLANT/ASSESSEE:

¶55

M/S.CATHOLIC SYRIAN BANK LTD., THRISSUR.

¶56

BY ADVS.

¶57

SRI.JOSEPH MARKOSE (SR.)

¶58

SRI.ABRAHAM JOSEPH MARKOS

¶59

SRI.ISAAC THOMAS

¶60

SRI.V.ABRAHAM MARKOS

¶61

THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 03.12.2018, ALONG WITH ITA.3/2010 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

¶62

ITAs3/2010 & conns.

¶63

-4

¶64

IN THE HIGH COURT OF KERALA AT ERNAKULAM

¶65

PRESENT

¶66

THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN

¶67

¶68

THE HONOURABLE MR. JUSTICE ASHOK MENON

¶69

MONDAY ,THE 03RD DAY OF DECEMBER 2018 / 12TH AGRAHAYANA, 1940

¶70

ITA.No. 65 of 2010

¶71

AGAINST THE ORDER/JUDGMENT IN ITA 406/COCH/2007 of I.T.A.TRIBUNAL,COCHIN BENCH DATED 6.8.2009

¶72

APPELLANT/S:/RESPONDENT/REVENUE:

¶73

THE COMMISSIONER OF INCOME TAX, THRISSUR.

¶74

BY ADV. SRI.PKR MENON, SR.COUNSEL, GOI (TAXES)

¶75

SRI.JOSE JOSEPH, SC, FOR INCOME TAX DEPT.

¶76

RESPONDENT/S:/APPELLANT/ASSESSEE:

¶77

M/S.CATHOLIC SYRIAN BANK LTD., THRISSUR.

¶78

BY ADVS.SRI.JOSEPH MARKOSE (SR.)

¶79

SRI.ABRAHAM JOSEPH MARKOS

¶80

SRI.ISAAC THOMAS

¶81

SRI.V.ABRAHAM MARKOS

¶82

THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 03.12.2018, ALONG WITH ITA.3/2010 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

¶83

ITAs3/2010 & conns.

¶84

-5

¶85

IN THE HIGH COURT OF KERALA AT ERNAKULAM

¶86

PRESENT

¶87

THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN

¶88

¶89

THE HONOURABLE MR. JUSTICE ASHOK MENON

¶90

MONDAY ,THE 03RD DAY OF DECEMBER 2018 / 12TH AGRAHAYANA, 1940

¶91

ITA.No. 81 of 2010

¶92

AGAINST THE ORDER/JUDGMENT IN ITA 130/COCH/2007 of I.T.A.TRIBUNAL,COCHIN BENCH DATED 06-08-2009

¶93

APPELLANT/S:/RESPONDENT/REVENUE:

¶94

THE COMMISSIONER OF INCOME TAX, THRISSUR.

¶95

BY ADV. SRI.PKR MENON, SR.COUNSEL, GOI (TAXES)

¶96

SRI.JOSE JOSEPH, SC, FOR INCOME TAX

¶97

RESPONDENT/S:/APPELLANT/ASSESSEE:

¶98

M/S. CATHOLIC SYRIAN BANK LTD., THRISSUR.

¶99

BY ADVS.JOSEPH MARKOS (SR.)

¶100

SRI.ABRAHAM JOSEPH MARKOS

¶101

SRI.ISAAC THOMAS

¶102

SRI.V.ABRAHAM MARKOS

¶103

THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 03.12.2018, ALONG WITH ITA.3/2010 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

¶104

ITAs3/2010 & conns.

¶105

-6

¶106

IN THE HIGH COURT OF KERALA AT ERNAKULAM

¶107

PRESENT

¶108

THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN

¶109

¶110

THE HONOURABLE MR. JUSTICE ASHOK MENON

¶111

MONDAY ,THE 03RD DAY OF DECEMBER 2018 / 12TH AGRAHAYANA, 1940

¶112

ITA.No. 82 of 2010

¶113

AGAINST THE ORDER/JUDGMENT IN ITA 854/COCH/2007 of I.T.A.TRIBUNAL,COCHIN BENCH DATED 06-08-2009

¶114

APPELLANT/S:/APPELLANT/REVENUE:

¶115

COMMISSIONER OF INCOME TAX, THRISSUR.

¶116

BY ADV. SRI.PKR MENON, SR.COUNSEL, GOI (TAXES) SRI.JOSE JOSEPH, SC, FOR INCOME TAX

¶117

RESPONDENT/S:/RESPONDENT/ASSESSEE:

¶118

M/S.CATHOLIC SYRIAN BANK LTD., THRISSUR.

¶119

BY ADVS.

¶120

SRI.JOSEPH MARKOSE (SR.)

¶121

SRI.ABRAHAM JOSEPH MARKOS

¶122

SRI.ISAAC THOMAS

¶123

SRI.V.ABRAHAM MARKOS

¶124

THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 03.12.2018, ALONG WITH ITA.3/2010 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

¶125

ITAs3/2010 & conns.

¶126

-7

¶127

IN THE HIGH COURT OF KERALA AT ERNAKULAM

¶128

PRESENT

¶129

THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN

¶130

¶131

THE HONOURABLE MR. JUSTICE ASHOK MENON

¶132

MONDAY ,THE 03RD DAY OF DECEMBER 2018 / 12TH AGRAHAYANA, 1940

¶133

ITA.No. 85 of 2010

¶134

AGAINST THE ORDER/JUDGMENT IN ITA 700/COCH/2007 of I.T.A.TRIBUNAL,COCHIN BENCH DATED 06-08-2009

¶135

APPELLANT/S:/APPELLANT/REVENUE:

¶136

THE COMMISSIONER OF INCOME TAX, THRISSUR.

¶137

BY ADV. SRI.PKR MENON, SR.COUNSEL, GOI (TAXES) SRI.JOSE JOSEPH, SC, FOR INCOME TAX

¶138

RESPONDENT/S:/RESPONDENT/ASSESSEE:

¶139

M/S.CATHOLIC SYRIAN BANK LTD., THRISSUR.

¶140

BY ADVS.

¶141

SRI.JOSEPH MARKOSE (SR.)

¶142

SRI.ABRAHAM JOSEPH MARKOS

¶143

SRI.ISAAC THOMAS

¶144

SRI.V.ABRAHAM MARKOS

¶145

THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 03.12.2018, ALONG WITH ITA.3/2010 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

¶146

ITAs3/2010 & conns.

¶147

-8

¶148

IN THE HIGH COURT OF KERALA AT ERNAKULAM

¶149

PRESENT

¶150

THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN

¶151

¶152

THE HONOURABLE MR. JUSTICE ASHOK MENON

¶153

MONDAY ,THE 03RD DAY OF DECEMBER 2018 / 12TH AGRAHAYANA, 1940

¶154

ITA.No. 88 of 2010

¶155

AGAINST THE ORDER/JUDGMENT IN ITA 346/COCH/2008 of I.T.A.TRIBUNAL,COCHIN BENCH DATED 06-08-2009

¶156

APPELLANT/S:/APPELLANT/REVENUE:

¶157

THE COMMISSIONER OF INCOME TAX, THRISSUR.

¶158

BY ADV. SRI.PKR MENON, SR.COUNSEL, GOI (TAXES) SRI.JOSE JOSEPH, SC, FOR INCOME TAX

¶159

RESPONDENT/S:/RESPONDENT/ASSESSEE:

¶160

M/S.CATHOLIC SYRIAN BANK LTD., TRICHUR.

¶161

BY ADVS.

¶162

SRI.JOSEPH MARKOSE (SR.)

¶163

SRI.ABRAHAM JOSEPH MARKOS

¶164

SRI.ISAAC THOMAS

¶165

SRI.V.ABRAHAM MARKOS

¶166

THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 03.12.2018, ALONG WITH ITA.3/2010 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

¶167

ITAs3/2010 & conns.

¶168

-9

¶169

IN THE HIGH COURT OF KERALA AT ERNAKULAM

¶170

PRESENT

¶171

THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN

¶172

¶173

THE HONOURABLE MR. JUSTICE ASHOK MENON

¶174

MONDAY ,THE 03RD DAY OF DECEMBER 2018 / 12TH AGRAHAYANA, 1940

¶175

ITA.No. 97 of 2010

¶176

AGAINST THE ORDER/JUDGMENT IN ITA 345/COCH/2008 of I.T.A.TRIBUNAL,COCHIN BENCH DATED 6.8.2009

¶177

APPELLANT/S:/APPELLANT/REVENUE:

¶178

THE COMMISSIONER OF INCOME TAX, THRISSUR.

¶179

BY ADV. SRI.PKR MENON, SR.COUNSEL, GOI (TAXES)

¶180

SRI.JOSE JOSEPH, SC, FOR INCOME TAX DEPT.

¶181

RESPONDENT/S:/RESPONDENT/ASSESSEE:

¶182

M/S.CATHOLIC SYRIAN BANK LTD., THRISSUR.

¶183

BY ADVS.JOSEPH MARKOS (SR.)

¶184

SRI.ABRAHAM JOSEPH MARKOS

¶185

SRI.ISAAC THOMAS

¶186

SRI.V.ABRAHAM MARKOS

¶187

THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 03.12.2018, ALONG WITH ITA.3/2010 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

¶188

ITAs3/2010 & conns.

¶189

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

¶191

PRESENT

¶192

THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN

¶193

¶194

THE HONOURABLE MR. JUSTICE ASHOK MENON

¶195

MONDAY ,THE 03RD DAY OF DECEMBER 2018 / 12TH AGRAHAYANA, 1940

¶196

ITA.No. 100 of 2010

¶197

AGAINST THE ORDER/JUDGMENT IN ITA 132/COCH/2008 of I.T.A.TRIBUNAL,COCHIN BENCH DATED 06-08-2009

¶198

APPELLANT/S:/RESPONDENT/REVENUE:

¶199

THE COMMISSIONER OF INCOME TAX, THRISSUR.

¶200

BY ADV. SRI.PKR MENON, SR.COUNSEL, GOI (TAXES)

¶201

SRI.JOSE JOSEPH, SC, FOR INCOME TAX DEPT.

¶202

RESPONDENT/S:/APPELLANT/ASSESSEE:

¶203

M/S. CATHOLIC SYRIAN BANK LTD., THRISSUR.

¶204

BY ADVS.SRI.JOSEPH MARKOSE (SR.)

¶205

SRI.ABRAHAM JOSEPH MARKOS

¶206

SRI.V.ABRAHAM MARKOS

¶207

THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 03.12.2018, ALONG WITH ITA.3/2010 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

¶208

ITAs3/2010 & conns.

¶209

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

¶211

PRESENT

¶212

THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN

¶213

¶214

THE HONOURABLE MR. JUSTICE ASHOK MENON

¶215

MONDAY ,THE 03RD DAY OF DECEMBER 2018 / 12TH AGRAHAYANA, 1940

¶216

ITA.No. 104 of 2010

¶217

AGAINST THE ORDER/JUDGMENT IN ITA 812/COCH/2007 of I.T.A.TRIBUNAL,COCHIN BENCH DATED 06-08-2009

¶218

APPELLANT/S:/RESPONDENT/REVENUE”

¶219

THE COMMISSIONER OF INCOME TAX, THRISSUR.

¶220

BY ADV.SRI.PKR MENON, SR.COUNSEL, GOI (TAXES)

¶221

SRI.JOSE JOSEPH, SC, FOR INCOME TAX DEPT.

¶222

RESPONDENT/S:/APPELLANT/ASSESSEE:

¶223

M/S. CATHOLIC SYRIAN BANK LTD., THRISSUR.

¶224

BY ADVS.SRI.JOSEPH MARKOSE (SR.)

¶225

SRI.ABRAHAM JOSEPH MARKOS

¶226

SRI.ISAAC THOMAS

¶227

SRI.V.ABRAHAM MARKOS

¶228

THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 03.12.2018, ALONG WITH ITA.3/2010 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

¶229

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ITAs3/2010 & conns.

¶231

ITA Nos.3, 23, 58, 65, 81, 82, 85, 88, 97, 100 and 104 of 2010

¶232

J U D G M E N T

¶233

K.Vinod Chandran, J.

¶234

The above appeals are all by the Department challenging various orders of the Income Tax Appellate Tribunal. For the assessment year 19992000, there are two appeals filed - ITA Nos.3/2010 and 23/2010 - arising from orders under Sections 143(3) and 147 of the Income Tax Act, 1961 ('Act', for short). There are also more than one appeal filed in many of the assessment years. There are also years in which appeals were filed by the Department and the assessee-Bank before the Tribunal, and the Tribunal having held in favour of the assessee-Bank, the Department has filed appeals for the said years arising from those orders of the Tribunal. There are common issues in many of the appeals, which shall be dealt with together.

¶235

ITAs3/2010 & conns.

¶236

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¶237

questions arise for consideration:-

¶238

“(1) Whether, on the facts and in the circumstances of the case and amendment to 2^nd proviso to section 43B being effective from 01.04.2004 is not payment to the Pension contribution Fund after the due dates an impermissible deduction?

¶239

(2) Whether, on the facts and in the circumstances of the case-,

¶240

i) the assessee is entitled to claim the expenses under the head Lease Equalization charges;

¶241

ii) is not the Lease Equalization charges a provision made towards a future liability and hence an impermissible deduction in the light of the decision of the Madras High Court in the case of Tamil Nadu Power Finance?”

¶242

On the first question regarding the pension fund as available under the respondentassessee-Bank, it is submitted by the learned Senior Counsel that there is no question of any employees’ contribution and the contribution is made exclusively by the employer. The specific question raised is also as to whether the second proviso to Section 43B being brought into the statute book on 01.04.2004, the deduction is impermissible insofar as the payment to pension fund having been made after the due dates. The Honourable Supreme Court in (2009) 319 ITR 306

¶243

ITAs3/2010 & conns.

¶244

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¶245

(SC) [Commissioner of Income Tax v. Alom Extrusions Ltd.] has found that the amendment by introduction of a proviso to Section 43B has to be read retrospectively to give full effect thereto. Hence, the question stands answered in favour of the assessee and against the Revenue upholding the order of the Tribunal, which affirmed the deduction as granted by the first appellate authority.

¶246

The second question in ITA No.3/2010 is also covered in favour of the assessee as found by the Honourable Supreme Court in (2018) 404 ITR 409 (SC) [Commissioner of Income Tax v. Virtual Soft Systems Ltd.] . The issue of lease equalization charges arose in the context of the assessee claiming the lease rentals to be adjusted towards the cost of acquisition of the property or machinery, which is leased out. The Guidance Note of the Institute of Chartered Accountants of India providing for separation of capital recovery element and finance income has been approved by the Honourable Supreme Court in the aforesaid decision. Hence, the said question also has to be answered in favour of the assessee and against the Revenue. ITA No.3/2010,

¶247

ITAs3/2010 & conns.

¶248

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¶249

hence, stands rejected.

¶250

The aforesaid issue of lease

¶251

equalization charges has also been raised in ITA Nos.58, 100, 81, 65 and 104/2010 for the assessment years 2000-01 to 2004-05, respectively. The question raised of lease equalization charges in the aforesaid ITAs is also answered in favour of the assessee and against the Revenue. Hence, ITA Nos.58, 65 and 104/2010 are rejected, as there arose the aforesaid question alone.

¶252

ITA No.23/2010 raises the following

¶253

question for the assessment year 1999-2000:-

¶254

“(1) Whether, on the facts and in the circumstances of the case and also in the light of the amendment by the Finance Act (2) of 2009 which had introduced Explanation 'g' below Section 115JA(1) which reads:

¶255

“(g) the amount or amounts set aside as provision for diminution in the value of any asset”

¶256

is not disallowance of Rs.8,61,53,052/- towards provision for bad debts made under section 36(ii) (viia) while calculating the book profit under section 115JA in accordance with law?”

¶257

In fact, the specific stand of the Assessing Officer (AO) and the Revenue in the statutory appeal was that

¶258

ITAs3/2010 & conns.

¶259

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¶260

in computing minimum alternate tax payable under Section 115JA, the provision for bad and doubtful debts has to be added back under clause (c) of the Explanation to Section 115JA(2), which speaks of the provisions made for meeting liabilities, other than ascertained liabilities. The Honourable Supreme Court in (2008) 305 ITR 409 [Commissioner of Income Tax-IV v. HCL Comnet Systems and Services Ltd.] categorically held that the addition made under clause(c); of the provision for bad and doubtful debts cannot be permitted. However, clause (g) as noticed in the question has now been introduced, which has retrospective effect from 01.04.1998 onwards. We notice that when the Tribunal considered the issue, clause (g) was not introduced, which was introduced by the Finance Act, 2009. In such circumstances, it is only appropriate that the Tribunal considers the issue afresh on the basis of the facts and the specific provision of bad and doubtful debts as provided for by the assessee- Bank. ITA No.23/2010, hence, shall stand remanded. The parties shall appear before the Tribunal on 11.01.2019 and the Tribunal shall consider the issue

¶261

ITAs3/2010 & conns.

¶262

-17

¶263

expeditiously, especially noticing the fact that the assessment is of the year 1999-2000.

¶264

The question on treatment of loss on amortisation of securities purchased for a price and then sold or redeemed at a lower price, arises in ITA Nos.97, 85 and 82/2010, which appeals are for the assessment years 2000-01, 2003-04 and 2004-05, respectively. The assessee purchases securities at face value or otherwise at a premium. When purchase is made at a premium and the same is redeemed on maturity, the assessee gets only the face value of the security so purchased. Similarly, when the security is sold before the period of maturity, then the assessee at times suffers a loss for reason of the market value having fallen. The assessee claimed write off of such loss in the years at which the assessee held the security, which was allowed by the Tribunal. The issue is covered by a Division Bench judgment of this Court in ITA No.946/2009 [Commissioner of Income Tax v. South Indian Bank Ltd.] , the reasoning of which is extracted hereunder:-

¶265

-18

¶266

ITAs3/2010 & conns.

¶267

“The respondent-assessee is a Bank which purchased securities at market value above the face value. Admittedly, when the securities were redeemed, respondent will be entitled to get only face value. Consequently, the loss arising on account of purchase at market value is written off in instalments by spreading over the same equally for every year until date of maturity. We are of the view that the Tribunal rightly upheld the assessee's entitlement to write-off of the loss in instalments. Consequently the departmental appeal is dismissed.”

¶268

The Revenue had filed a Special Leave Petition against the fore quoted judgment, which has been dismissed by order dated 18.10.2010 in CC No.15556/2010. Hence, the question is answered in favour of the assessee and against the Revenue.

¶269

One other issue arising in ITA Nos.85 and 82/2010 for the assessment years 2003-04 and 2004-05, respectively, is the disallowance of depreciation in respect of the current category of investments. The aforesaid issue is connected with the additions made for appreciation in the value of securities which also arise in ITA No.81/2010 for the assessment year 2002-03. The question on depreciation is as to whether at the time of

¶270

ITAs3/2010 & conns.

¶271

-19

¶272

valuation of securities to prepare the balance sheet on closure of the financial year if the market value of the securities is lower, whether the assessee is entitled to depreciation for the reduction in the market value from the face value. The decision in (2003) 264 ITR 545 (Ker) [Commissioner of Income-tax v. Nedungadi Bank Ltd.] held that for the purpose of assessment, cost price or market value which ever is lower should be adopted as per the RBI guidelines. The assessee had valued its securities at the cost price or market value which ever is lower. Hence, when there is a loss on account of reduction of market value from that of the cost price, the assessee is entitled to claim depreciation. The question on depreciation is, hence, answered in favour of the assessee and against the Revenue affirming the view of the Tribunal.

¶273

On the question of additions made for appreciation in the value of securities, the learned Senior Counsel points out the specific instance in which the question arose. The assessee-Bank in a particular year values a security, the cost price of which is Rs.100/- at the market value of Rs.90/-.

¶274

ITAs3/2010 & conns.

¶275

-20

¶276

Then, the assessee is entitled to depreciation on the reduction that has been occasioned in the market value, which is the loss suffered by the assessee. However, in the subsequent year, if the market value exceeds the cost price and the same reaches Rs.105/-, the question is as to what is the addition to be made. Then, what is to be adopted is the cost price, since what is required as per the RBI guidelines is to show the profits in accordance with the cost price or the market value whichever is lower. The question of additions made for appreciation in the value of securities also has to be answered in favour of the assessee and against the Revenue.

¶277

Yet another issue arising in ITA Nos.85 and 82/2010 for the assessment years 2003-04 and 2004-05 is as to whether the excess bad debts written off over and above the existing provisions in nonrural branches can be claimed as an expense without setting off against the existing provision for bad debts for rural branches. The question is covered in favour of the assessee-Bank by the decision of the Honoruabel Supreme Court in (2012) 343 ITR 270 (SC) [Catholic Syrian Bank Ltd. v. Commissioner of Income

¶278

ITAs3/2010 & conns.

¶279

-21

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Tax] . The question is answered in favour of the assessee and against the Revenue.

¶281

ITA No.100/2010 for the assessment year 2001-02 arises from an order of remand made by the Tribunal which we would not interfere with at this stage. Hence, we decline to answer the questions as raised in the above ITA.

¶282

One of the questions arising in ITA No.88/2010 is loss on revaluation of unquoted securities which the RBI directed the Banks to value at Re.1/-. The decision in (2011) 339 ITR 606 (Ker) [Commissioner of Income Tax v. Lord Krishna Bank Ltd.] applies squarely with respect to the said issue also. Hence, we affirm the order of the Tribunal answering the question in favour of the assessee and against the Revenue.

¶283

In ITA No.88/2010, a further question arises as to whether the levy of interest as set aside by the Tribunal is proper or not. The Tribunal merely noticed the fact that the assessee had paid considerable advance tax and, hence, there is no warrant for levy of interest under Section 234C. We

¶284

ITAs3/2010 & conns.

¶285

-22

¶286

cannot accede to the view that considerable advance tax payment would absolve the liability of interest if it arises under Section 234C. The question, hence, is answered in favour of the Revenue and against the assessee. The order of the Tribunal is set aside and it is directed that the AO would determine the interest payable under Section 234C, in accordance with law.

¶287

Hence, all the ITAs, except ITA Nos.23/2010 and 88/2010, are rejected. ITA No.88/2010 is partly allowed on the question of levy of interest under Section 234C. ITA No.23/2010 is remanded back for fresh consideration by the Tribunal. No costs.

Sd/-

K.VINOD CHANDRAN

JUDGE

Sd/-

ASHOK MENON

JUDGE

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ITAs3/2010 & conns.

APPENDIX OF ITA 3/2010

¶297

APPELLANT'S EXHIBITS:

¶298

ANNEXURE A TRUE COPY OF ORDER U/S.143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 DATED 28.01.2004.

¶299

ANNEXURE B TRUE COPY OF ORDER U/S.143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 DATED 18.12.2006.

¶300

ANNEXURE C TRUE COPY OF THE ORDER OF CIT(A)-I.T.A. NO. 96/R1/TCR/CIT-V/O3-04 DATED, 14.06.2004.

¶301

ANNEXURE D TRUE COPY OF THE ORDER OF CIT(A)I.T.A.NO.48/R1/TCR/CIT-V/06-07 DATED, 11.09.2007.

¶302

ANNEXURE E CERTIFIED COPY OF THE ORDER OF ITAT I.T.A.NO.879/COCH/2004, I.T.A. NO.919/COCH/2007 AND I.T.A.NO.26/COCH/2008 30.06.2009 (COMPOSITE ORDER).

[True Copy]

-24

ITAs3/2010 & conns.

APPENDIX OF ITA 23/2010

¶308

APPELLANT'S/S EXHIBITS:

¶309

ANNEXURE A TRUE COPY OF ORDER U/S. 143(3)R.W.S.147 OF THE INCOME TAX ACT, 1961 DATED 28.1.2004.

¶310

ANNEXURE B TRUE COPY OF ORDER U/S. 143(3)R.W.S.147 OF THE INCOME TAX ACT, 1961 DATED 18.12.2006.

¶311

ANNEXURE C TRUE COPY OF THE ORDER OF CIT(A)I.T.A.NO.96/R1/TCR/CIT-V/03-04 DATED, 14.6.2004.

¶312

ANNEXURE D TRUE COPY OF THE ORDER OF CIT(A)-I.T.A. NO.48/R1/TCR/CIT-V/06-07 DATED, 11.9.2007

¶313

ANNEXURE E TRUE COPY OF THE ORDER OF ITAT I.T.A.NO.879/COCH/2004, I.T.A. NO.919/COCH/2007 AND I.T.A.NO.26/COCH/2008 30.6.2009 (COMPOSITE ORDER).

[True Copy]

ITAs3/2010 & conns.

-25

ITAs3/2010 & conns.

-26

APPENDIX OF ITA 58/2010

¶321

APPELLANT'S EXHIBITS:

¶322

ANNEXURE A TRUE COPY OF ORDER U/S.143(3) R.W.S.147 DATED, 18.12.2006.

¶323

ANNEXURE B TRUE COPY OF THE ORDER OF CIT(A)-ITA NO.50/R.1/TCR/CIT(A)-V/06-07 DATED, 29.10.2007.

¶324

ANNEXURE C CERTIFIED COPY OF THE ORDER OF ITAT-ITA NO.131/COCH/2007 DATED, 06.08.2009.

[True Copy]

ITAs3/2010 & conns.

-27

APPENDIX OF ITA 65/2010

¶330

APPELLANT'S EXHIBITS:

¶331

ANNEXURE A TRUE COPY OF ORDER U/S.143(3)OF THE IT ACT DATED,28.03.2006 ANNEXURE B TRUE COPY OF THE ORDER OF CIT(A)-ITA 7/RI/TCR/CIT-V/06-07 DATED,19.03.2007

¶332

ANNEXURE C TRUE COPY OF THE ORDER OF ITAT-ITA NO.406/COCH/2007 DATED,06.08.2009.

[True Copy]

ITAs3/2010 & conns.

-28

APPENDIX OF ITA 81/2010

¶338

APPELLANT'S EXHIBITS:

¶339

ANNEXURE A TRUE COPY OF ORDER U/S. 143(3) DATED, 2401-2005

¶340

ANNEXURE B TRUE COPY OF THE ORDER U/S. 263 OF THE IT ACT ANNEXURE C TRUE COPY ORDER U/S. 143 R.W.S 147 DATED 10-12-2007

¶341

ANNEXURE D TRUE COPY OF THE ORDER OF ITAT ITA NO. 130/COCH/2007 DATED 06-08-2009

[True Copy]

ITAs3/2010 & conns.

-29

APPENDIX OF ITA 82/2010

¶347

APPELLANT'S EXHIBITS:

¶348

ANNEXURE A TRUE COPY OF ORDER U/S.143 OF THE IT ACT DATED 28.3.2006 AND ORDER U/S.154 DATED 18.1.2007

¶349

ANNEXURE B TRUE COPY OF THE ORDER OF CIT(A)-ITA 8/RI/TCR/CIT (A)-V/06-07 DATED 11.7.2007

¶350

ANNEXURE C TRUE COPY OF THE ORDER OF ITAT-ITA NO.854/COCH/2007 DATED 6.8.2009

[True Copy]

ITAs3/2010 & conns.

-30

APPENDIX OF ITA 85/2010

¶356

APPELLANT'S EXHIBITS:

¶357

ANNEXURE A TRUE COPY OF ORDER U/S.143 OF THE IT ACT DATED 28.3.2006

¶358

ANNEXURE B TRUE COPY OF THE ORDER OF CIT(A)-ITA 7/RI/TCR/CIT-V/06-07 DATED 19.3.2007

¶359

ANNEXURE C TRUE COPY OF THE ORDER OF ITAT-ITA NO.700/COCH/2007 DATED 6.8.2009

[True Copy]

ITAs3/2010 & conns.

-31

APPENDIX OF ITA 88/2010

¶365

APPELLANT'S EXHIBITS:

¶366

ANNEXURE A TRUE COPY OF ORDER U/S.143(3) R.W.S.147 DATED, 18/12/2006. ANNEXURE B TRUE COPY OF ORDER OF CIT (A)-ITA NO.49/R.1/TCR/CIT(A)-V/06-07 DATED, 29.10.2007

¶367

ANNEXURE C TRUE COPY OF THE ORDER OF ITAT-ITA NO.346/COCH/2007 DATED, 06/08/2009.

[True Copy]

ITAs3/2010 & conns.

-32

APPENDIX OF ITA 97/2010

¶373