The Appeal Has Been Admitted On The Following Substantial Questions Of Law v. Excel Indusries (Reported In 358 Itr Page 295) And Decision Of Calcutta High Court In The Case Of Bank Of Tokyo Ltd.?

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 30 DAY OF JUNE, 2021 PRESENT THE HON'BLE MR. JUSTICE SATISH CHANDRA SHARMA AND THE HON'BLE MR. JUSTICE NATARAJ RANGASWAMY BETWEEN: I.T.A. NO.270 OF 2018 C/W I.T.A. NO.271 OF 2018, I.T.A. NO.272 OF 2018 1. THE COMMISSIONER OF INCOME-TAX, LTU, 7 FLOOR, BMTC BUILDING, 80 FEET ROAD, KORMANGALA, BENGALURU-560 095 2. THE JOINT COMMISSIONER OF INCOME TAX, LTU, 7 FLOOR, BMTC BUILDING, 80 FEET ROAD, KORMANGALA, BENGALURU-560095. … APPELLANTS (COMMON) (BY SRI. ARAVIND K.V., ADVOCATE) AND: M/S. CANARA BANK BSCA SECTION, HEAD OFFICE, 112, JC ROAD, BENGALURU-560 002, PAN:AAACC 6106G …RESPONDENT (COMMON) (BY SRI. T.SURYANARAYANA, ADVOCATE) IN I.T.A. NO.270/2018: THIS APPEAL IS FILED UNDER SECTION 260-A OF THE INCOME TAX ACT 1961, ARISING OUT OF THE ORDER DATED 15/09/2017 PASSED IN ITA NO.1035/BANG/2013 FOR THE ASSESSMENT YEAR 2009-2010 VIDE ANNEXURE 'C' PRAYING THIS HON'BLE COURT TO (i) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE. (ii) ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, BENGALURU IN ITA NO. 1035/BANG/2013 DATED 15/09/2017 VIDE ANNEXURE 'C' CONFIRMING THE ORDER OF THE APPELLATE COMMISSIONER AND CONFIRM THE ORDER PASSED BY THE JOINT COMMISSIONER OF INCOME TAX, LTU, BENGALURU. (iii) TO PASS SUCH OTHER SUITABLE ORDERS AS THIS HON'BLE COURT DEEMS FIT TO GRANT IN THE FACTS AND CIRCUMSTANCES OF THE CASE IN THE INTEREST OF JUSTICE AND EQUITY. IN I.T.A. NO.271/2018: THIS APPEAL IS FILED UNDER SECTION 260-A OF THE INCOME TAX ACT 1961, ARISING OUT OF THE ORDER DATED 15.09.2017 PASSED IN ITA NO.1440/BANG/2014, FOR THE ASSESSMENT YEAR 2010-2011 PRAYING THIS HON'BLE COURT TO (i) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE. (ii) ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, BENGALURU IN ITA NO.1440/BANG/2014 DATED 15.09.2017 CONFIRMING THE ORDER OF THE APPELLATE COMMISSIONER AND CONFIRM THE ORDER PASSED BY THE JOINT COMMISSIONER OF INCOME TAX, LTU, BENGALURU. (iii) TO PASS SUCH OTHER SUITABLE ORDERS AS THIS HON'BLE COURT DEEMS FIT TO GRANT IN THE FACTS AND CIRCUMSTANCES OF THE CASE IN THE INTEREST OF JUSTICE AND EQUITY. IN I.T.A. NO.272/2018: THIS APPEAL IS FILED UNDER 260-A OF THE INCOME TAX ACT 1961, ARISING OUT OF THE ORDER DATED 15.09.2017 PASSED IN ITA NO.903/BANG/2016, FOR THE ASSESSMENT YEAR 2011-2012 PRAYING THIS HON'BLE COURT TO (I) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE (II) ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, BENGALURU IN ITA NO. 903/BANG/2016 DATED 15.09.2017 CONFIRMING THE ORDER OF THE APPELLATE COMMISSIONER AND CONFIRM THE ORDER PASSED BY THE JOINT COMMISSIONER OF INCOME TAX, LTU, BENGALURU. (iii) TO PASS SUCH OTHER SUITABLE ORDERS AS THIS HON'BLE COURT DEEMS FIT TO GRANT IN THE FACTS AND CIRCUMSTANCES OF THE CASE IN THE INTEREST OF JUSTICE AND EQUITY. THESE APPEALS COMING ON FOR HEARING THIS DAY, SATISH CHANDRA SHARMA J., DELIVERED THE FOLLOWING: JUDGMENT Regard being had to the similitude in the controversy involved in all these cases, they were heard analogously together and a common order is being passed. 2. The facts of ITA No.270/2018 are reproduced as under: The present appeal is arising out of the order dated 15.09.2017 passed by the Income Tax Appellate Tribunal in ITA No.1035/Bang/2013 for the assessment year 2009-10. 3. The appeal has been admitted on the following substantial questions of law: "1. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in setting aside the disallowance of expenditure of earning exempt income under Sec.14A of the Act by erroneously holding that no disallowance is called for under Section 14A of the Act by following earlier order which has not reached finality even when all the ingredients of Section 14A are satisfied in the case of Assessee? 2. The facts of ITA No.270/2018 are reproduced as under: The present appeal is arising out of the order dated 15.09.2017 passed by the Income Tax Appellate Tribunal in ITA No.1035/Bang/2013 for the assessment year 2009-10. 3. The appeal has been admitted on the following substantial questions of law: "1. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in setting aside the disallowance of expenditure of earning exempt income under Sec.14A of the Act by erroneously holding that no disallowance is called for under Section 14A of the Act by following earlier order which has not reached finality even when all the ingredients of Section 14A are satisfied in the case of Assessee? 2. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in setting aside the disallowance of claim of deduction on account of commission on locker rent received in advance of Rs.112.84 Crore by following the decision of Apex Court in the case of CIT vs. EXCEL INDUSRIES (reported in 358 ITR page 295) and decision of Calcutta High court in the case of Bank of Tokyo Ltd.? 3. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in setting aside in allowing depreciation on assets leased to M/s. Kedia Group of Companies by following earlier orders which has not reached finality even when the assessee is not entitled for Depreciation on assets leased to others under the provisions of the Act? 4. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in setting aside that the provisions of Section 115JB are not applicable to banking companies as no accounts are drawn up as per the requirement of Schedule VI of the Companies Act 1956 by following its earlier orders which has not reached finality? 5. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in setting aside relying upon Circular No.18 of 2015 dated 2.11.2015, the fact that investments are shown as Stock in Trade in books of account, loss/depreciation on account of fall in value of securities held by assessee bank should be allowed as deduction and therefore the income arising therefrom should also be treated as business income ignoring Section 45(2) which requires investments are to be treated as Stock in Trade? 6. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in setting aside the rejection of claim of assessee as deduction on account of unrealised gains on revaluation of forward contracts by relying on the decision of Apex Court in the case of CIT vs. SHOORJI VALLABHADAS (REPORTED in 46 ITR PAGE 144) AND GODHRA ELECTRICITY CO.LTD CASE (REPORTED IN 225 ITR PAGE 746)? 7. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in holding that addition to book profits under Section 115 JB towards expenditure on exempt income is purely academic in nature as the Tribunal has held that no disallowance can be made under the provisions of Section 14A in respect of Exempt Income, the question of adding back the amount of disallowances to the book profits does not arise even though bank earned exempt income from tax and as such assessing authority rightly estimated 5% of exempt income as expenditure and disallowed the same under provisions of Section 14A of the Act?" 4. Learned counsel for the revenue has fairly stated before this Court that he is confining the present appeal only in respect of the substantial question of law Nos.1, 3 and 7. He has fairly stated before this Court that the substantial question of law No.1 stands concluded on account of the judgment delivered by this Court in ITA No.27/2017 connected with ITA No.28/2017 (The Commissioner of Income-Tax and another vs. M/s.Canara Bank) decided on 30.11.2020. As the issue has already been decided by this Court, the substantial question of law No.1 is answered in favour of the assessee. 4. Learned counsel for the revenue has fairly stated before this Court that he is confining the present appeal only in respect of the substantial question of law Nos.1, 3 and 7. He has fairly stated before this Court that the substantial question of law No.1 stands concluded on account of the judgment delivered by this Court in ITA No.27/2017 connected with ITA No.28/2017 (The Commissioner of Income-Tax and another vs. M/s.Canara Bank) decided on 30.11.2020. As the issue has already been decided by this Court, the substantial question of law No.1 is answered in favour of the assessee. 5. In respect of the substantial question of law No.3, learned counsel for the parties have fairly stated before this Court that the same question has again been answered in favour of the assessee in ITA No.332/2016 (The Commissioner of Income-Tax and another vs. M/s.Canara Bank) decided on 02.11.2020. 6. In light of the aforesaid, the substantial question of law No.3 is again answered in favour of the assessee. 7. In respect of the substantial question of law No.7, the issue has been dealt with by this Court in ITA No.18/2014 and connected appeals (The Commissioner of Income Tax and another vs. M/s. Ing Vysya Bank Limited) decided on 16.01.2020. Therefore, the substantial question of law No.7 is now of academic value only. 8. Sri Aravind K.V. has at this stage fairly stated before this Court that the other questions of law may be left open as they are subject matter of other income tax appeals. 9. Resultantly, the other questions of law are left open as they are matters of other income tax appeals and the Appeal stands disposed of. IN ITA No.271/2018 10. The present appeal is arising out of the order dated 15.09.2017 passed by the Income Tax Appellate Tribunal, 'A' Bench, Bengaluru, in ITA No.1440/Bang/2014 for the assessment year 2010-11. 11. The appeal was admitted on the following substantial questions of law: "1. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in setting aside the disallowance of expenditure of earning exempt income under Sec.14A of the Act by erroneously holding that no disallowance is called for under Section 14A of the Act by following earlier order which has not reached finality even when all the ingredients of Section 14A are satisfied in the case of Assessee? 2. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in setting aside the disallowance of claim of deduction on account of commission on locker rent received in advance of Rs.112.84 Crore by following the decision of Apex Court in the case of CIT vs. EXCEL INDUSRIES (reported in 358 ITR page 295) and decision of Calcutta High court in the case of Bank of Tokyo Ltd.? 3. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in setting aside in allowing depreciation on assets leased to M/s. Kedia Group of Companies by following earlier orders which has not reached finality even when the assessee is not entitled for Depreciation on assets leased to others under the provisions of the Act? 4. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in setting aside that the provisions of Section 115JB are not applicable to banking companies as no accounts are drawn up as per the requirement of Schedule VI of the Companies Act 1956 by following its earlier orders which has not reached finality? 5. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in setting aside relying upon Circular No.18 of 2015 dated 2.11.2015, the fact that investments are shown as Stock in Trade in books of account, loss/depreciation on account of fall in value of securities held by assessee bank should be allowed as deduction and therefore the income arising therefrom should also be treated as business income ignoring Section 45(2) which requires investments are to be treated as Stock in Trade? 5. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in setting aside relying upon Circular No.18 of 2015 dated 2.11.2015, the fact that investments are shown as Stock in Trade in books of account, loss/depreciation on account of fall in value of securities held by assessee bank should be allowed as deduction and therefore the income arising therefrom should also be treated as business income ignoring Section 45(2) which requires investments are to be treated as Stock in Trade? 6. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in setting aside the rejection of claim of assessee as deduction on account of unrealised gains on revaluation of forward contracts by relying on the decision of Apex Court in the case of CIT vs. SHOORJI VALLABHADAS (REPORTED in 46 ITR PAGE 144) AND GODHRA ELECTRICITY CO.LTD CASE (REPORTED IN 225 ITR PAGE 746)? 7. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in holding that addition to book profits under Section 115 JB towards expenditure on exempt income is purely academic in nature as the Tribunal has held that no disallowance can be made under the provisions of Section 14A in respect of Exempt Income, the question of adding back the amount of disallowances to the book profits does not arise even though bank earned exempt income from tax and as such assessing authority rightly estimated 5% of exempt income as expenditure and disallowed the same under provisions of Section 14A of the Act?" 12. So far as the substantial question of law No.1 is concerned, it stands concluded as the same has already been answered in favour of the assessee by this Court in ITA No.27/2017 connected with ITA No.28/2017 (The Commissioner of Income-Tax and another vs. M/s. Canara Bank) decided on 30.11.2020. 13. The substantial question of law No.3 has already been decided by this Court in ITA No.332/2016 (The Commissioner of Income-Tax and another vs. M/s. Canara Bank) decided on 02.11.2020. Similarly, the substantial question of law No.4 has been decided by this Court in ITA No.18/2014 c/w ITA Nos.229/2009, 21/2012 and 35/2014 (The Commissioner of Income Tax and another vs. M/s.ING Vysya Bank Limited) decided on 16.01.2020. 14. Sri Aravind K.V., learned counsel, has fairly stated before this Court that the other questions of law are the subject matter of other income tax appeals and the issue may be left open. 15. Therefore, in respect of the other questions of law, the issue is left open. 16. Resultantly, the appeal stands disposed of as stated above. IN ITA No.272/2018 17. The present appeal is arising out of the order dated 15.09.2017 passed by the Income Tax Appellate Tribunal, 'A' Bench, Bengaluru, in ITA No.903/Bang/2016 for the assessment year 2011-12. 18. The appeal was admitted on the following substantial questions of law: "1. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in setting aside the disallowance of expenditure of earning exempt income under Sec.14A of the Act by erroneously holding that no disallowance is called for under Section 14A of the Act by following earlier order which has not reached finality even when all the ingredients of Section 14A are satisfied in the case of Assessee? 2. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in setting aside the disallowance of claim of deduction on account of commission on locker rent received in advance of Rs.112.84 Crore by following the decision of Apex court in the case of CIT vs. EXCEL INDUSRIES (reported in 358 ITR page 295) and decision of Calcutta High court in the case of Bank of Tokyo Ltd.? under Section 14A of the Act by following earlier order which has not reached finality even when all the ingredients of Section 14A are satisfied in the case of Assessee? 2. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in setting aside the disallowance of claim of deduction on account of commission on locker rent received in advance of Rs.112.84 Crore by following the decision of Apex court in the case of CIT vs. EXCEL INDUSRIES (reported in 358 ITR page 295) and decision of Calcutta High court in the case of Bank of Tokyo Ltd.? 3. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in setting aside in allowing depreciation on assets leased to M/s. Kedia Group of Companies by following earlier orders which has not reached finality even when the assessee is not entitled for Depreciation on assets leased to others under the provisions of the Act? 4. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in setting aside that the provisions of Section 115JB are not applicable to banking companies as no accounts are drawn up as per the requirement of Schedule VI of the Companies Act 1956 by following its earlier orders which has not reached finality? 5. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in setting aside relying upon Circular No.18 of 2015 dated 2.11.2015, the fact that investments are shown as Stock in Trade in books of account, loss/depreciation on account of fall in value of securities held by assessee bank should be allowed as deduction and therefore the income arising therefrom should also be treated as business income ignoring Section 45(2) which requires investments are to be treated as Stock in Trade? 6. Whether on the facts and in the circumstancesof the case, the Tribunal is right in law in setting aside the rejection of claim of assessee as deduction on account of unrealised gains on revaluation of forward contracts by relying on the decision of Apex Court in the case of CIT vs. SHOORJI VALLABHADAS (REPORTED in 46 ITR PAGE 144) AND GODHRA ELECTRICITY CO.LTD CASE (REPORTED IN 225 ITR PAGE 746)? 7. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in holding that addition to book profits under Section 115 JB towards expenditure on exempt income is purely academic in nature as the Tribunal has held that no disallowance can be made under the provisions of Section 14A in respect of Exempt Income, the question of adding back the amount of disallowances to the book profits does not arise even though bank earned exempt income from tax and as such assessing authority rightly estimated 5% of exempt income as expenditure and disallowed the same under provisions of Section 14A of the Act?" 19. So far as the substantial question of law No.1 is concerned, it stands concluded as the same has already been answered in favour of the assessee by this Court in ITA No.27/2017 connected with ITA No.28/2017 (The Commissioner of Income-Tax and another vs. M/s. Canara Bank) decided on 30.11.2020. 20. The substantial question of law No.3 has already been decided by this Court in ITA No.332/2016 (The Commissioner of Income-Tax and another vs. M/s. Canara Bank) decided on 02.11.2020. Similarly, the substantial question of law No.4 has been decided by this Court in ITA No.18/2014 c/w ITA Nos.229/2009, 21/2012 and 35/2014 (The Commissioner of Income Tax and another vs. M/s.ING Vysya Bank Limited) decided on 16.01.2020. 21. Sri Aravind K.V., learned counsel, has fairly stated before this Court that the other questions of law are the subject matter of other income tax appeals and the issue may be left open. 22. Therefore, in respect of the other questions of law, the issue is left open. 23. Resultantly, the appeal stands disposed of as stated above. Sd/- JUDGE Sd/- JUDGE sma