Ita/128/2008 Of The Commissioner Of Income Tax,Tvm v. Kerala State Industrial Dev.corpn.ltd

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE THE CHIEF JUSTICE MR.H.L.DATTU & THE HONOURABLE MR. JUSTICE A.K.BASHEER TUESDAY, THE 11TH NOVEMBER 2008 / 20TH KARTHIKA 1930 I.T.A.No. 128 of 2008 ----------------------------------- ORDER DATED 12.5.2003 IN ITA.2/COCH/2000 OF THE INCOME TAX APPELLATE TRIBUNAL,COCHIN BENCH, COCHIN .................... APPELLANT/APPELLANT: ----------------------------------- THE COMMISSIONER OF INCOME -TAX, THIRUVANANTHAPURAM. BY ADV. SRI.P.K.R.MENON,SR.COUNSEL, GOVERNMENT OF INDIA (TAXES) & SRI.JOSE JOSEPH, STANDING COUNSEL FOR INCOME TAX RESPONDENT/RESPONDENT: ------------------------------------------- KERALA STATE INDUSTRIAL DEVELOPMENT CORPORATION LTD., THIRUVANANTHAPURAM. THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 11/11/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: H.L.DATTU, C.J. & A.K.BASHEER, J. ------------------------------------------- I.T.A.No.128 of 2008 ------------------------------------------ Dated, this the 11[th]day of November, 2008 JUDGMENT H.L.Dattu, C.J. The Revenue is before this Court being aggrieved by theorders passed by the Income Tax Appellate Tribunal, Cochin Bench inI.T.A.No.2 of 2000 dated 12[th] May, 2003. (2) The Revenue has framed the following questions of law for our consideration and decision. They are as under: “1. Whether, on the facts and in the circumstancesof the case interest on deposits with banks (other thanReserve Bank) is exempt under section 2(7) of the InterestTax Act? 2. Whether, on the facts and in the circumstances ofthe case, the Tribunal is right in law in confirming thedirection of the Commissioner of Income Tax (Appeals) toexclude the interest on deposits received from banks fromthe chargeable interest holding that the interest ondeposits with the banks are outside the provisions ofSection 2(7) and Section 5 of the Interest Tax Act? 3. Whether, on the facts and in the circumstances ofthe case the Tribunal is justified in law in interfering withthe order of the Assessing Officer?” (3) The assessee is a public sector enterprise engaged infinancing industrial projects. In the returns filed for the assessment year1997-98, the assessee had claimed exemption on interest received on bankdeposits. (4) The assessing officer while completing the assessmenthas included the interest received on bank deposits amounting toRs.1,15,77,863/- as chargeable interest. Aggrieved by this finding of theassessing authority, the assessee had carried the matter before the firstappellate authority [Commissioner of Income Tax (Appeals). The firstappellate authority has taken the view that the deposits cannot be termed asloans and advances and, therefore, interest on deposits is to be treated asoutside the purview of Section 5 of the Interest Tax Act and accordinglyhad deleted the additions made by the assessing authority. (5) The Revenue, being aggrieved by the orders passed bythe first appellate authority had carried the matter before the Tribunal. TheTribunal, following its earlier decisions in the case of the very sameassessee for the earlier assessment years in I.T.A.Nos.11 of 1997, 2 of1998 and 9 of 1998 dated 21.3.2002 and also I.T.A.Nos. 8 and 11 of 1996dated 8.10.1994, has confirmed the orders passed by the first appellateauthority. (6) It is the correctness or otherwise of the said order passedby the Tribunal that is the subject matter of this appeal filed by theRevenue under Section 260A of the Income Tax Act. (7) The questions of law framed by the Revenue are no moreres integra in view of the orders passed by this Court in I.T.A.No.259 of2002 and I.T.A.No.4 of 2003 decided on 16[th] June, 2008. In the aforesaiddecision this Court has observed as under: (6) It is the correctness or otherwise of the said order passedby the Tribunal that is the subject matter of this appeal filed by theRevenue under Section 260A of the Income Tax Act. (7) The questions of law framed by the Revenue are no moreres integra in view of the orders passed by this Court in I.T.A.No.259 of2002 and I.T.A.No.4 of 2003 decided on 16[th] June, 2008. In the aforesaiddecision this Court has observed as under: “Interest tax is payable on 'loans and advances'made by a credit institution. Admittedly, the assessee is notengaged in advancing loan to the banks. In other words,the assessee which is engaged in industrial financing madedeposits of surplus amount for short term periods in theBank to earn interest which does not amount to advance forloan. Consequently, the Tribunal rightly held that theassessee is not liable to pay interest tax under the InterestTax Act. Even though citation is not available, this Courthad already decided the matter in favour of the assessee forearlier assessment year 1993-94. Consequently, wedismiss the appeals filed by the Revenue.” (8) In view of the declaration of law made by this Court in I.T.A.No.128 of 2008 the assessee's own case, in our opinion, the appeal filed by the Revenuerequires to be rejected and accordingly it is rejected. The questions of lawframed by the Revenue are answered against the Revenue and in favour ofthe assessee. Ordered accordingly. vns (H.L.DATTU) (A.K.BASHEER) JUDGE CHIEF JUSTICE