M/S Indbank Merchant Banking Services Ltd Kresh Building (Iii Floor) v. The Assistant Commissioner Of Income Tax Company Circle Ii(3)/Company Range Ii Chennai Respondent

In the High Court of Judicature at Madras Dated : 16.04.2009 Coram :- THE HONOURABLE MR.JUSTICE K.RAVIRAJA PANDIANandTHE HONOURABLE MRS.JUSTICE M.M.SUNDRESH Tax Case (Appeal) Nos.188 and 189 of 2009and M.P.No.1 of 2009 in TCA No.189 of 2009 M/s Indbank Merchant Banking Services LtdKresh Building (III Floor)26/27, Jehangir Street, II Line BeachChennai 1. ..Appellant v. The Assistant Commissioner of Income TaxCompany Circle II(3)/Company Range IIChennai Respondent Tax Case Appeals filed under section 260 A of the Income Tax Act, 1961 against the order of theIncome Tax Appellate Tribunal Madras "A" Bench passed in ITA Nos.2445/2446/(Mds)/06 dated22.09.2008 For appellant : Mr.K.Venkatanarayananfor Mr.Subbaraya Aiyar JUDGMENT(Judgment of the Court was delivered byK.RAVIRAJA PANDIAN, J.) The assessee on appeal against the order of the Income Tax Appellate Tribunal Madras "A" Benchpassed in ITA Nos.2445/2446/(Mds)/06 dated 22.09.2008 by formulating the following questions oflaw:- "1.Whether the Appellate Tribunal is right in law in holding that the appellant is not entitled todeduction of the provision made in respect of Non Performing Assets which are consideredirrecoverable? 2. Whether the Appellate Tribunal was justified in not appreciating that the provision made inrespect of Non Performing Assets if not allowable as a bad debt is allowable as a business loss?3. Whether on the facts and in the circumstances of the case the Tribunal was right in holding thatthe appellant is not entitled to amortisation of preliminary expenses u/s 35D towards share issueexpenses?". 2. The issue involved in these two appeals is one and the same. The facts relating to the assessmentyear 1998-99 are stated below for the disposal of the appeals:- The assessee is engaged in the business of Banking, stock broking and allied financial services. Forthe assessment year 1998-99, the assessee filed return of income on 17.11.1999 admitting loss ofRs.3,29,99,169/-. The return was processed u/s 143(1) on 02.11.1999. Subsequently, the AssessingOfficer reopened the assessment by issuance of notice under Section 148 on 24.12.2004. Notice u/s143(2) was issued. The Assessing Officer has completed the assessment under Section 143(3) readwith Section 147 on 28.02.2006 and determined the total income at Rs.14,16,54,688/-. Whilecompleting the re-assessment, the Assessing Officer disallowed the provisions made for bad debtsand Non-Performing Assets amounting to Rs.5,03,59,458/- and preliminary expenses ofRs.31,13,223/-under Section 35(D) of the Act and added the same for the purpose of taxation.Aggrieved by the order of the Assessing Officer, the assessee filed an appeal before theCommissioner of Income Tax (Appeals), who by his order dated 16.10.2006, following the assessee'searlier year's order rejected the contention of the assessee and upheld the order of the AssessingOfficer. Aggrieved against that order, the assessee filed an appeal to the Income tax AppellateTribunal. The Tribunal, vide its order dated 22.09.2008, rejected the contention of the assessee andconfirmed the disallowance of provision for bad debts and non performing assets by relying thejudgment of the jurisdictional High Court i the case of T.N.Power Finance reported in 280 ITR 491.As regards to amortisation of preliminary expenses, the Tribunal by following the decision of theassessee's own case for the assessment years 1995-96 upheld the order of the lower authorities. Thecorrectness of the same is put in issue by the assessee in these two appeals by formulating thequestions of law referred to above. 3. We have heard the argument of the learned counsel, who fairly admitted that the issue has beensquarely covered against the assessee by the Division Bench Judgment of this Court in respect of theassessee's earlier years in the Judgment made in T.C.A.Nos.1969 to 1971 of 2008 dated 19.02.2009,wherein this Court has held as follows:- 3. We have heard the argument of the learned counsel, who fairly admitted that the issue has beensquarely covered against the assessee by the Division Bench Judgment of this Court in respect of theassessee's earlier years in the Judgment made in T.C.A.Nos.1969 to 1971 of 2008 dated 19.02.2009,wherein this Court has held as follows:- "3. We have heard the argument of the learned counsel, who fairly admitted that the two questionsof law now formulated relating to the years 1999-2000 and 2001-2002 in these appeals have beenconsidered by a Division Bench of this Court and by its order dated 09.02.1999 made in Tax CaseAppeal Nos.107 to 110 of 2002 decided against the assessee. 4. For the assessment year 2000-01, in addition to the above two questions of law, one morequestion of law to the following effect has also been formulated:- "Whether on the facts and in the circumstances of the case, the Tribunal was right in holding thatthe appellant is not entitled to amortisation of preliminary expenses u/s 35D towards share issueexpenses?". 5. The learned counsel for the assessee has also submitted that this issue has also been decidedagainst the assessee by a Division Bench of this Court in the case of Commissioner of Income Tax vs.Sakthi Finance Ltd reported in 256 ITR 488, wherein the Division Bench has held that Section 35Dwas inapplicable having regard to the increase in the share capital being subsequent to theestablishment of the business and because the assessee had not established any new industrial unitnor had it expanded the existing industrial undertaking.6. Following the aforesaid Judgments, the first two questions of law now raised are answered againstthe assessee following the Judgment dated 09.02.2009 made in T.C.A.Nos.107 to 110 of 2002. Inrespect of the 3rd question of law relating to the assessment year 2000-01, following the Judgmentof the Division Bench in the case of Commissioner of Income Tax vs. Sakthi Finance Ltd reported in256 ITR 488, that question of law is also answered against the assessee. Hence all the appeals aredismissed".. 4. Following the reasoning stated in the above said Judgment, the appeals are dismissed. No costs.Consequently, connected miscellaneous petition is also dismissed.Consequently, connected miscellaneous petition is also dismissed. rg To The Assistant Commissioner of Income TaxCompany Circle II(3)/Company Range II Chennai