Ju Dbgment v. M/S.itc. Hotels Ltd. 1Nn Ita

IN THE HIGH COURT OF KARNATAKA, BANGALORE DATED THIS THE 26 DAY OF SEPTEMBER, 2012 PRESENT THR HON'BLE MR. JUSTICE K.SREBDHAR RAO ANT) THR HON'BLE MR. JUSTICK B.MANOHAR 1.T.A. No.1126 OF 2006 BETWEEN: M/s. Canfin Homes Limited,No.29/1, 1["*]Floor,Sri M.N.Krishna Rao Road,Lalbagh West Gate,Basavanagudi,Bangalore-560004,Rep. by its Managing Director,sri K. Venkataramaiah,Aged about 97 years,o/o. Sri K. Venkataswamy. Appellant (By Sri 8S. Parthasarathi, Advocate) AND: The Asst. Commissioner of Income Tax,Company Circle 12(3),Bangalore. Respondent (By Sri G. Kamaladhar, Advocate) This I.T.A. is filed U/s.2600-A of the IT. Act, 1961|arising out of Order dated 20.01.2006 passed in ITA No.333/Bang/2002, for the Assessment Year 1998-99,praying that this Hon’ble Court may be pleased to: |(i) formulate the substantial questions of law stated thereinand (ii) allow the appeal and set aside the order passed bythe ITAT Bangalore in ITA No.333/Bang/2002, dated20.01.2006, in the interest of justice and equity. This appeal is coming on for hearing this day,|SREEDHAR RAO, J..,delivered the following: JU DBGMENT The assessee is a public financial institution engaged|in issuance of shares and debentures. A part of thedebentures were convertible debentures. The assesseeclaimed deduction of expenses incurred for shares anddebentures. The Assessing Officer holding that the expensestowards shares and convertible debentures cannot bededucted because the amount spent towards shares andconvertible debentures would be a capital expenditure andnot revenue expenditure, in that regard relied on thedecision of this court in Commissioner ot [Income Tax Vs.M/s.ITC.hotelsLtd.1nNITA|No.377/ /2004D.D|OT)16.11.2009. The Supreme Court inBrooke bond India VS.Commercial Tax Officer, 162 ITR 373,has held that the!amount invested by the banks in security would constitutetrading asset and income from them would be a business|income. The banks have financed under the guidelines of theRBI. The banks have to invest the SLR amounts the in|Government security bonds and shares etc. The lending|policy of the banks is regulated by the RBI. The banks|cannot keep any liquid cash both utilised and un-utilised.The share capital amounts of the bank have also to be|invested in SLR proportionate to the percentage fixed by theRBI and rest of the amount is to be utilised for public|lending. Therefore, for a financial institution the share|capital also would assume the character of working capital.In that view any amount utilised by the bank towards|issuance of share capital is a deductible expenditure. In thelight of the above observations the order of the Appellate|court is set aside. The matter is remanded to the Assessing|Officer for tresh consideration to find out whether the share|capital amounts have been utilised for public lending, if it 1s "'��*/)��"")""&$1��%%&8).�*'�#--'<�+)+38*&'$"�'*/).<&")�$'*�� �88'.+&$1-7�*/)�#66)#-�&"�+&"6'")+�'%�� 6"1E� �+! ������� �+! �������