M/S. The Andhra Bank Ltd., Hyderabad v. The Commissioner Of Income Tax, A.p. Lll, Hyderabad

স 22,1995 42স ম ক স [ 1995 ] Supp. 4S.C.R M/S. THE ANDHRA BANK LTD., HYDERABAD V, THE COMMISSIONER OF INCOME TAX, AP. lll, HYDERABAD SEPTEMBER 22, 1995 [AM. AHMADI, CJ, S.C. SEN AND KS. PARIPOORNAN, .LL[ Companies (Proji1s) Swtax Act, 1964/Banking Regulalion Act, 1949: Ss.2(5), First Sched11/e R11/e 1 cla11se (xi)/Section 17-Swtax assess-mcnt.1---<:hargeab/e profit.1-20'70 Profit to be tra11.1fC1red to the rese1ve fund C as per S. 17( J) of' Banking Rci,"J/ation and q11alifies j(H exclusion-Any s11111 more than the specified 21!'7'r-Held: Would not qua/if)' for exclusion. The dispute raised in these appeals by the appellant-Bank relates to the computation of 'chargeable profits'. It was contended by the appellant-assessee that a reserve fund was created by the assessee bank to comply with the provisions of S.17 of the Banking Regulation Act; that though the amount of contribution was higher than 20% of its balance of profits, the entire amount would have to be deducted from its total income in order to arrive at chargeable profit E under clause (xi) of Rule 1 of the First Schedule to the Companies (Profits) Surtax Act because the amount in excess of t_he statutory mini-mum was contributed pursuant to the direction given by the Reserve Bank of India, which is binding on the appellant. Dismissing the appeals, this Court HELD : L Assuming that the assessee bank was under a legal obliga-tion to transfer a sum in excess of 20o/c hy virtue of a direction given by the Reserve Bank of India, then the excess contribution to the reserve fund was not because of any requirement of Section 17 but because of the provisions G of some other Section. The exclusion permissible under clause (xi) of Rule 1 of the First schedule to the Companies (Profits) Surtax Act, 1964 is limited only to the sum "not exceeding the amount required under the aforesaid provisions to be so transferred ..... ". The 'aforesaid provisions' in this clause means the provisions of Section 17(1) of the Banking Regula-tions Act. If any further sum is transferred to the reserve fund by virtue of H A provisions of some other sections of the Act, such sum will not qualify for exclusion in computation of chargeable profits. [45-G-H, 46-A] 2. Fro1n the various circulars relied upon by the assessee Bank, it does not appear that the Reserve Bank of India gave any direction under Section 35A of the Banking Regulation Act to transfer more than 20% to the reserve B fund. A circular letter dated 27.12.1961 was issued h_y the (:Jovernor, Resen'e Bank ofJndia, to all the scheduled Banks. However, this cannot be construed as a direction by the Reserve Bank of India under Section 35A. Similarly, the circular letter WTitten on 25th January, 1962 deals with 'a point which has been raised by the Bank'. This letter is in the nature of advice and contains c [direction as ][to ][Jun\' ][profit should ][be ][calculated before transfer of ][the ][requisi-]te 20o/o is made to the reserve fund. Banks having resenres et1ual to or in excess of their paid-up capital should transfer 20% of profits after making the usual provisions and after deduction of provisions for taxation. But those Banks whose reserves are not equal to their paid-up capital should transfer 20% of their profits before tax to the reserve fund till the parity of D paid-up capital is reached. [46-B, D, H, 47-A] 3. None of the circular-letters sent by the Reserve Bank of India to the Banks nor the letters written specifically to the assessee Bank go to show· that the Reserve Bank of India had directed the Banks or the assessee-bank to transfer a larger amount than what was re11uired by Section 17(1) of the Banking Regulation Act. Therefore, it cannot be said that. the assessee had been directed by the Reserve Bank of India under Section 35A to contribute a large amount to the reserve fund than what was required by Section 17(1) of the Banking Regulation Act. (47-E] CIVIL APPELLATE .JURISDICTION : Civil Appeals Nos. 4895-96 of 1984 Etc. 42 43