Ita/351/2014 Of Commissioner Of Income Tax v. M/S Syndicate Bank

IN THE HIGH COURT OF KARNATAKA AT BENGALURUDATED THIS THE / DAY OF SEPTEMBER 2020 PRESENT THE HON’BLE MR. JUSTICE ALOK ARADHE AND| THE HON’BLE MR. JUSTICE H.T.NARENDRA PRASAD LT.A. NO.351 OF 2014 BEI|WEEN 1.COMMISSIONER OF INCOME TAX) C.R. BUILDING, ATTAVARA MANGALORE. 2).DEPUTY COMMISSIONER OF INCOME TAX) CIRCLE-1, UDUPI-576101. ... APPELLANTS (BY SRI. E.I1. SANMATHI, ADV.) AND" M/S. SYNDICATE BANKCENTRAL ACCOUNTS DEPARTMENT|TAX CELL, HEAD OFFICEMANIPAL-5 /6104. ... RESPONDENT (BY SRI. T. SURYANARAYANA, ADV.,) THIS kI§I.T.A. IS FILED UNDER SECTION 2600-AI.T.ACT, 1961, ARISING OUT OF ORDER DATED 14-03-2014|PASSED|IN|ITANO.680/BANG/2012|AND17 .A.NO.708/B/2012, FOR THE ASSESSMENT YEAR 2008-09,PRAYING TO: I. DECIDE THE FOREGOING QUESTION OF LAW AND/OR|SUCH OTHER QUESTIONS OF LAW AS MAY BE FORMULATED|BY THE HON’BLE COURT AS DEEMED FIT. II. SET ASIDE THE APPELLATE ORDER DATED 14-03-2014|PASSED IN ITA NO.680/BANG/2012 AND ITA NO.708/B/2012|BY THE ITAT, C BENCH, BANGALORE. THIS I.T.A. COMING ON FOR HEARING, THIS DAY,ALOK ARADHE J.,DELIVERED THE FOLLOWING: JUDGMENT Mr.E.I.Sanmathi, learned counsel for the revenue. Mr.T.Suryanarayana,learnedcounsel for.the|aSSeSsSee. 2. This appeal under Section 260-A of the Income|Tax Act, 1961 (hereinafter referred to as ‘the Act’, forshort) has been preferred by the revenue which wasadmitted by a Bench of this Court on 16.12.2014 toconsider the following substantial questions of law: 7 a“Whether on the facts and in thecircumstances of the case, the Tribunal were.justified in law in allowing assessee’s claim|for reversal of interest of Rs.12,80,483/-.credited to its Income?”| 1(a)“Whether on the facts and in thecircumstances of the case, the Tribunal wereright in law tin not appreciating that theassessee has only reversed the earlier years’|income by treating the account as NPA and|such reversal of interest does not fall withinthe purview of sec.36(1)(vil) r.w.s. 36(2) of|the I.T. Act, 1961?” 1(b)|“Whether on the facts and in thecircumstances of the case, the Tribunal werejustified in law in not considering that as per|guidelines of Reserve Bank of India which Is binding on the assessee U/s.43D, once the|debt becomes NPA, only the interest credited|in the current year can be reversed and)interest already credited in the previous year|cannot be reversed?” 2D.“Whether on the facts and in thecircumstances of the case, the Tribunal wereright in law in not considering the fact that|the amount [incurred for issue of bonds Is [ifact incurred for expansion of capital and has|to be considered as a capital expenditure|and not an admissible revenue expenditure?” 3“Whether on the facts and in thecircumstances of the case, the Tribunal werejustified in law in allowing assessee’s claim|on the point of accrued interest on securities|amounting to Rs.16,/6,60,611/- offered on|cash basis 2? 3(a)“Whether on the facts and in thecircumstances of the case, the Tribunal werejustified in law in not appreciating the fact|that the assessee is following mercantile|system of accounting in respect of interest|from securities for the purpose of finalaccounts as per annual report under the)Companies Act but had deviated and sought|to reduce a sum of Rs.16,/6,60,611/- asinterest accrued but not fallen due for thepurpose of final accounts as per annual)report under the Companies Act but had|deviated and sought to reduce a sum of.Rs.16,/76,60,611/- as interest accrued butnot fallen due for the purpose of taxation|under the Income Tax Act?” 3(D)“Whether on the facts and in thecircumstances of the case, the Tribunal werejustified in law in not appreciating the fact| 3(a)“Whether on the facts and in thecircumstances of the case, the Tribunal werejustified in law in not appreciating the fact|that the assessee is following mercantile|system of accounting in respect of interest|from securities for the purpose of finalaccounts as per annual report under the)Companies Act but had deviated and sought|to reduce a sum of Rs.16,/6,60,611/- asinterest accrued but not fallen due for thepurpose of final accounts as per annual)report under the Companies Act but had|deviated and sought to reduce a sum of.Rs.16,/76,60,611/- as interest accrued butnot fallen due for the purpose of taxation|under the Income Tax Act?” 3(D)“Whether on the facts and in thecircumstances of the case, the Tribunal werejustified in law in not appreciating the fact| that the assessee while acknowledging the|interest Income as accrued in the annualreport for the year ending 31.3.2008 and the|basis|Of)WHICA|accountsfinalizedand|dividends paid, has sought to defer the}taxation under the [.T. Act of the above.amount of the ground that it is yet to be)received which represents dual treatment of|the same [Income under different Acts andthe assessee has followed receipt or cash|system of accounting in respect of interest|accrued during A.Y. 2008-09 by offering it}for taxation in the subsequent year which is notpermissibleundertheamendedprovisions of sec.145?” 4“Whether on the facts and in thecircumstances of the case, the Tribunal was_correct in holding that depreciation on)valuation of investment portfolio is allowableby treating the investments held by the}assessee bank as stock-in-trade once theRBI Master Circular read with CBDT CircularNO.665 came into force?”.. 4(a)“Whether on the facts and in thecircumstances of the case, the Tribunal was_ correct in accepting assessee’s claim that theassessee has traded in securities, shown as—investments in the Balance Sheet and thettheaSSCSSCEChas incurredlossofRs.30,721,30,325/- on account of revaluingthe Investments as on 31.3.72008 at cost ormarket value whichever is /ess?. 4(D).“Whether on the facts and in thecircumstances of the case, the Tribunal wasjustified in not considering the fact that|during the year the assessee has made profit|ofRs.196,09,30,654/- OP)SaleOF|investments, which ts credited to P & L A/caSagainst lossofRs.30,21,30,325/-claimed ?” 5.“Whether on the facts and in thecircumstances of the case, the Tribunal wascorrect in law in holding that provisions of|section 115JB of the Act are not applicable|to the assessee which is a banking company|in contrary to its own decision in previous|years wherein it has directed the AO to.decide the issue afresh on the basis of the P.& L account and Balance Sheet redrawn by| theadSSCSSCEIn|accordancewith theprovisions of Companies Act 1956?”| 5(a)“Whether on the facts and in thecircumstances of the case, the Tribunal was_correct in law in holding that provisions of|section 115JB of the Act are not applicable|to the assessee which is a banking company|withouttaking Into.considerationtheprovisions of section 115JB r/w Explanation|(3) to section 115JB of the Act and recordeda perverse finding?” 6. “Whether on the facts and in thecircumstances of the case, the Tribunal was_correct in law in allowing disallowance of Ioss|of Rs.30,21,30,325/- as per investment|trading account in computing Book Profit|Uu/s.115JB, when the same Is provision madeagainst assets and cannot be considered as|an ascertained liability falling within the)purview of explanation (c) below second|proviso to sec.115JB and in view of amended|section 115JB by Finance (No.2) Act, 2009?” 6(a)“Whether on the facts and in thecircumstances of the case, the Tribunal was_correct in law in allowing the depreciation on valuation ofInvestment.portfolio.In|computing Book Profit u/s. 115JB by treating|the investments held by the assessee bank|as stock-in-trade once the RBI! MasteCircular read with CBDT Circular NO.665.came Into force?”| 6. “Whether on the facts and in thecircumstances of the case, the Tribunal was_correct in law in allowing disallowance of Ioss|of Rs.30,21,30,325/- as per investment|trading account in computing Book Profit|Uu/s.115JB, when the same Is provision madeagainst assets and cannot be considered as|an ascertained liability falling within the)purview of explanation (c) below second|proviso to sec.115JB and in view of amended|section 115JB by Finance (No.2) Act, 2009?” 6(a)“Whether on the facts and in thecircumstances of the case, the Tribunal was_correct in law in allowing the depreciation on valuation ofInvestment.portfolio.In|computing Book Profit u/s. 115JB by treating|the investments held by the assessee bank|as stock-in-trade once the RBI! MasteCircular read with CBDT Circular NO.665.came Into force?”| 6(D)“Whether on the facts and in thecircumstances of the case, the Tribunal wasjustified in law in allowing assessee’s claim|on account of floss of Rs.30,21,30,325/-claimed in computing Book Profit u/s. 115JB|by not appreciating the fact that during the|year the assessee has made profit ofRs.196,09,30,654/- on sale of investments, which is credited to P & L A/c as against lossof Rs.30,21,30,325/- claimed?”| J“Whether on the facts and in thecircumstances of the case, the Tribunal wasjustified in law in allowing assessee’s claim|on account of addition u/s.14A of the IT Act.in computing Book Profit Uu/s.115JB by nottaking cognizance of the fact that clause (f) under Explanation to section 115JB explicitly|states that amount of expenditure relatable|to any income which do not form part of total income has to be added to net profit to arrive Book Profit?”| 8.“Whether on the facts and in thecircumstances of the case, the Tribunal wascorrect in law in allowing assessee’s claim onaccount of provision for future’ interestsacrifice in CDR accounts in computing Book|Profit u/s.115JB when the provision is\created against the assets and not createdagainst any liability and hence Is a provision|for dimunition tn the value of the asset andcannot be considered as an ascertained.liabilityfallingwithinthepurviewOF|explanation (c) below second proviso to)sec.115/B and in view of amended section.115JB by Finance (No.2) Act, 2009?”| 9.“Whether on the facts and in thecircumstances of the case, the Tribunal werejustified in law in allowing assessee’s claim|on account of provision for reward points on creditcardIn.computingBookProfitU/s.115JB when it cannot be considered asan ascertained liability falling within the)purview of explanation (c) below second|proviso to sec. 15JB and in view of amended| section115/JBby Finance(No.2)|Act,2009 ?”. 3. When the matter was taken up today, learned|counsel for the parties submitted that the substantialquestion of law Nos.1, 1(a) and 1(bD) have already beenanswered in|‘THE COMMISSIONER OF INCOME TAX- III & ORS. Vs. M/s. SYNDICATE BANK’|In ITANo.260/2011 decided on 23.01.2020. For the reasons assigned in the aforesaid order,|the substantial question of law Nos.1, 1(a) and 1(b) areanswered against the revenue and in favour of theaSSeSSAE., 4. It is also urged that the substantial question of law No.2 has been answered by this Court in‘COMMISSIONER OF INCOME-TAX Vs. ITC HOTELSLTD.” (2010) 190 TAXMAN 430 (KAR). For the reasons assigned in the aforesaid order,|the substantial question of law Nos.2 is answeredagainst the revenue and in favour of the assessee. 5. It is also pointed out that the substantial|question of law Nos.3, 3(a) and 3(bD) are answeredagainst the revenue in|‘THE COMMISSIONER OFINCOME TAX & ANR. Vs. [THE KARNATAKA BANKLTD. 7decided on 12.09.2012 in ITA No.433/2006 andconnected matters. For the reasons assigned in the aforesaid order,|the substantial question of law Nos. 3, 3(a) and 3(b) areanswered against the revenue and in favour of theaSSeSSAE., 6. It is also pointed out that the substantial|question of law Nos.4, 4(a) and 4(b) are answeredagainst the revenue in|“KARNATAKA BANK LTD. Vs.ASSISTANTCOMMISSTONEROF|INCOME-TAX, For the reasons assigned in the aforesaid order,|the substantial question of law Nos.2 is answeredagainst the revenue and in favour of the assessee. 5. It is also pointed out that the substantial|question of law Nos.3, 3(a) and 3(bD) are answeredagainst the revenue in|‘THE COMMISSIONER OFINCOME TAX & ANR. Vs. [THE KARNATAKA BANKLTD. 7decided on 12.09.2012 in ITA No.433/2006 andconnected matters. For the reasons assigned in the aforesaid order,|the substantial question of law Nos. 3, 3(a) and 3(b) areanswered against the revenue and in favour of theaSSeSSAE., 6. It is also pointed out that the substantial|question of law Nos.4, 4(a) and 4(b) are answeredagainst the revenue in|“KARNATAKA BANK LTD. Vs.ASSISTANTCOMMISSTONEROF|INCOME-TAX, CIRCLE2(1),(2013)34TAXMANN.COM150|(KAR) For the reasons assigned in the aforesaid order,|the substantial question of law Nos. 4, 4(a) and 4(b) areanswered against the revenue and in favour of theaSSeSSAE., 7. It is also pointed out that the substantial|question of law Nos.5 and 5(a) are answered against therevenue In‘THE COMMISSIONER OF INCOME TAXVs. ING VYSYA BANK LIMITED’|in ITA No.18/2014and connected matters decided on 16.01.7070. For the reasons assigned in the aforesaid order,|the substantial question of law Nos.5 and 5(a) areanswered against the revenue and in favour of theaSSeSSAE., 8. 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