Commissioner of Income Tax - III V. State Bank of Hyderabad

ITTA/418/2013

AI Insights

The case revolves around the appeal by the Commissioner of Income Tax-III, Hyderabad against the decision of the Income Tax Appellate Tribunal (ITAT), which upheld the allowance of broken period interest as a deductible expenditure by the State Bank of Hyderabad. The main legal question was whether the ITAT was correct in law in allowing this deduction despite the appellant's reliance on a Supreme Court decision in Vijaya Bank Ltd. The Tribunal and various high courts had previously ruled in favor of allowing such deductions, citing precedents that supported the assessee's position. The High Court of Andhra Pradesh, after reviewing the submissions and relevant case laws, dismissed the appeal, agreeing with the established legal position that broken period interest is an admissible deduction under the head of profits and gains of business or profession.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 744876 (HC-ANDHRA_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 17-09-2013
• Assessment Year: misc
• Other Referred Cases: JCIT vs. Dena Bank, JCIT Bank of Beharain, American Express International Banking Corporation vs. CIT, CIT vs. Nedungadi Bank, Vijaya Bank Limited vs. Additional Commissioner of Income Tax
• Laws Referred To: Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Assessee Lawyers: B SARMA
• Keywords: Broken Period Interest; Commissioner of Income Tax; Deduction; Income Tax; ITAT; State Bank of Hyderabad
• Section: 187 ITR 541; 139 TTJ 81; 132 TTJ 505; 258 ITR 601; 264 ITR 545

Judgement Text

"IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND THE HON’BLE SRI JUSTICE K.C. BHANU I.T.T.A. No. 418 of 2013 DATE: 17.09.2013 Between: Commissioner of Income Tax-III, Hyderabad. … Appellant And State Bank of Hyderabad, Hyderabad. … Respondent This Court made the following: THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND THE HON’BLE SRI JUSTICE K.C. BHANU I.T.T.A. No. 418 of 2013 JUDGMENT: (Per the Hon’ble the Chief Justice Sri Kalyan Jyoti Sengupta) This appeal is sought to be admitted on the following suggested question of law: In the facts and circumstances of the case, whether the Hon’ble Tribunal (ITAT) is correct in law in upholding the orders of the learned Commissioner of Income Tax (Appeal) in allowing the broken period interest claimed as expenditure, when the respondent-assessee is not entitled to allow the said expenditure in the facts of the case and also in view of the decision of the Hon’ble Supreme Court in the case of Vijaya Bank Ltd., (187 ITR Page 541 (SC)) relied on by the assessing officer? We have heard Sri B. Narasimha Sarma, learned counsel for the appellant, and gone through the impugned judgment and order of the learned Tribunal. The issue in this case is whether the assessee is entitled to deduction of payment of interest for the broken period. The learned Tribunal while rendering the judgment has not only relied on the judgment of the learned Tribunal, Mumbai Bench in JCIT vs. Dena Bank[1], but also relied on the decisions of the Special Bench, Mumbai in JCIT Bank of Beharain[2] and Mumbai High Court in American Express International Banking Corporation vs. CIT[3]. It also relied on the judgment of the Kerala High Court in CIT vs. Nedungadi Bank[4]. Mr. Sarma submits that the learned Tribunal has ignored the judgment of the Supreme Court in Vijaya Bank Limited vs. Additional Commissioner of Income Tax[5]. We have seen the judgment of the Supreme Court referred to by Mr. Sarma. The Supreme Court has laid down the law that a claim for deduction against securities can be sustained only when the assessee is in a position to show that any reasonable expenditure has been incurred for realizing the interest on securities. Therefore, the aforesaid judgment has not decided that payment of broken period interest is not allowable deduction. The Kerala High Court in paragraph 24 has specifically held as follows: “The last question arising for consideration in some of these appeals is as to whether the Tribunal was justified in allowing the claim for deduction of the interest paid for the broken period for the acquisition of the securities till the date of such acquisition. In fact, the said question is squarely covered by the decision of this Court in South Indian Bank Ltd’s case (241 ITR 374). This Court in the above decision held that the interest paid for the broken period would constitute allowable outgo in the hands of the assessee and is an admissible deduction in the computation of total income of the Bank under the head profits and gains of business or profession. In view of the said decision, we are in full agreement with the order of the Tribunal allowing the said claim.” Under these circumstances, we are of the view that no question of law is involved in this matter, as settled position of law has been accepted by the learned Tribunal. Accordingly, the appeal is dismissed. _____________________ K.J. SENGUPTA, CJ ________________ K. C. BHANU, J Date: 17.09.2013 ES [1] 139 TTJ 81 (Mum) [2] 132 TTJ 505 [3] 258 ITR 601 [4] 264 ITR 545 [5] (1991) 187 ITR 541 "