Padmanabha Chettiar And Sons v. Kerala State Industrial Development Cor

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HON'BLE THE CHIEF JUSTICE MR.H.L.DATTU & THE HONOURABLE MR. JUSTICE K.T.SANKARAN THURSDAY, THE 19TH JULY 2007 / 28TH ASHADHA 1929 ITA.No. 56 of 2007 -------------------- ( ITA.62/C0CH/1998 of I.T.A.TRIBUNAL,COCHIN BENCH) APPELLANT/APPELLANT ------------------------------------ THE COMMISSIONER OF INCOME TAX, THIRUVANANTHAPURAM. BY ADV. SRI.GEORGE K. GEORGE, SC FOR IT RESPONDENT/ RESPONDENT ---------------------------------------------- KERALA STATE INDUSTRIAL DEVELOPMENT CORPORATION LIMITED, THIRUVANANTHAPURAM. BY THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 19/07/2007, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: H.L. DATTU, C.J. & K.T. SANKARAN, J.INCOME TAX APPEAL No. 56 OF 2007...................................................................................Dated this the 19[th] July , 2007 ................................................................................... J U D G M E N T H.L. Dattu, C.J.: The revenue being aggrieved by the orders passed by the Income TaxAppellate Tribunal, Cochin Bench, Cochin in I.T.A.No. 62/Coch/98 dated31.12.2002, has filed the present appeal before us , under section 260A of theIncome Tax Act. The revenue has raised the following substantial questionsof law for our consideration and decision. They are as under: “1)Whether, on the facts and in the circumstances of thecase and also in the absence of a finding that the methodadopted by the assessing officer invoking section 145 of the Actis not reasonable, the Tribunal is justified in interfering with themethod of treatment given to interest receipts as well as interestpayments by the Assessing Officer? 2)Whether on the facts and in the circumstances of thecase, the method of treatment given to interest receipts andpayments by the assessee, the direction given by the CIT(A)and the confirmation of the same by the Tribunal are inaccordance with law and accountancy practice?” 2. The assessing officer had found that the assessee had followedthe cash system of accounting for interest receipts and mercantile systemof accounting for interest payments. According to the assessing officer, thesame is impermissible in view of the decision of the Madras High Court in G. 2 Padmanabha Chettiar and sons vs. CIT (182 ITR P.1). Aggrieved by theorders passed by the assessing officer, the assessee had carried the matterbefore the first appellate authority. The first appellate authority, based on thenotification issued by the Government of India had concluded that theassessee was following the cash system for interest income and mercantilesystem for interest payments including interest expenditure. Accordingly,the first appellate authority had partly allowed the assessee's appeal.Aggrieved by the aforesaid order of the first appellate authority, the revenuehad carried the matter in an appeal before the Income Tax AppellateTribunal, Cochin Bench. 3. The Income Tax Appellate Tribunal, following its earlier decision inITA No.754/Coch/92 and also following the decision of this court inCommissioner of Income Tax, Trivandrum vs. The Kerala StateIndustrial Development Corporation Limited, Trivandrum (ITR Nos. 146 to148 of 1998) dated13[th] September, 2002, had rejected the appeal filed by therevenue. Aggrieved by the aforesaid order passed by the Income TaxAppellate Tribunal, the revenue is before us in this appeal. 4. The questions of law raised by the revenue, in our opinion, are nowfully concluded by the decision of this court in Commissioner of IncomeTax vs. The Kerala State Industrial Development Corporation ,Trivandrum. Respectfully following the observations made in the aforesaiddecision, the questions of law framed by the revenue require to be answeredagainst them. Accordingly, the appeal filed by the revenue requires to be INCOME TAX APPEAL No. 56 OF 2007 3 4. The questions of law raised by the revenue, in our opinion, are nowfully concluded by the decision of this court in Commissioner of IncomeTax vs. The Kerala State Industrial Development Corporation ,Trivandrum. Respectfully following the observations made in the aforesaiddecision, the questions of law framed by the revenue require to be answeredagainst them. Accordingly, the appeal filed by the revenue requires to be INCOME TAX APPEAL No. 56 OF 2007 3 rejected and it is rejected. Ordered accordingly. H.L. DATTU, CHIEF JUSTICE. K.T. SANKARAN, JUDGE. lk