STATE BANK OF HYD, GUNFOUNDRY, HYD. V. JOINT COMMISSIONER OF INCOME TAX [ASSESSMENTS], HYD.

ITTA/286/2006

AI Insights

The case involves the State Bank of India appealing against the order of the Income Tax Appellate Tribunal, Hyderabad, which upheld the Income Tax Department's view that interest on securities should be computed on an accrual basis for the assessment year 1996-97. The bank argued that the interest should be considered on a due basis, aligning with the specific dates agreed upon in the securities. The High Court examined several substantial questions of law, particularly focusing on whether the income from interest on securities should be computed on an accrual basis or a due basis. The court referenced decisions from the Bombay High Court and the Supreme Court, which supported the bank's position of taxing the interest income on a due basis.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 753102 (HC-TELANGANA)
• Appeal Type: Others
• Pronouncement Date: 04-01-2023
• Assessment Year: misc
• Other Referred Cases: State Bank of Travancore v. CIT, UCO Bank v. CIT, United Commercial Bank v. CIT, Director of Income Tax (International Taxation) M/s. Credit Suisse First Boston (Cyprus) Limited v. Bombay, Commissioner of Income Tax v. State Bank of India, Deputy Commissioner of Income Tax v. Jayachandran
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: J V PRASAD
• Assessee Lawyers: KARTHIK PUTTAMREDDY
• Keywords: Accrual basis; Assessment Year 1996-97; Due Basis; Income Tax; Interest on securities
• Section: 145; 260-A

Judgement Text

"IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD WEDNESDAY,THE FOURTH DAY OF JANUARY TWO THOUSAND AND TWENTY IHREE PRESENT THE HON'BLE THE CHIEF JUSTICE UJJAL BHUYAN AND THE HON'BLE SRI JUSTICE N.TUKARAMJI INCOME TAX TRIBUNAL APPEAL NO: 286 OF 2006 lncome Tax Appellate Tribunal Under Section 260-A of the lncome Tax Act, 1961, against the order made in l.T.A. No.311 and 312 lHydl 2001 dated 4-3-2005 for the Assessment Year 1996-97, on the file of the lncome Tax Appellate Tribunal, Hyderabad, Bench \"A\" Hyderabad, preferred against the Order of the Commissioner of lncome Tax (Appeals), Vijayawada , dated 12.03.2001 , in ITA No. 132 / JCSR4 / HYD/clT(A)ruJY/2000-01 Old lTA No. 20lJCSR4/ClT(AllU99- 2000 preferred against the Order of the Joint Commissioner lncome Tax ( Assts) Spl Range -4, Hyderabad in PAN/GIR No. S-31 , dated. 26.02.1999. Between: State Bank of lndia , Head Office Gunfoundry, Hyderabad - 500 078 ( Amended vide C.O. dated 04-01-2023 in l.A.No.'1 of 2018 ) ...APPELLANT/ Appellant AND Joint Commissioner of lncome Tax [Assessments] Special Range-lV, Basheerbagh, Hyderabad - 500 001 RESPONDENT/ Respondent Counsel for the Appellant: SRI KARTHIK RAMANA PUTTAMREDDY Counsel for the Respondent: SRI J. V. PRASAD (SC FOR INCOME TAX) The Court made the following: ORDER TIlUtaN tlE_lltt1rr_ ltHIIr t- J-!-; s !!Q fj,.t= JJ 4r_ B_t{ L yAN AND T H E I-{()lJlll L E S R IJ t J SjII c E N. T tr IIAB4r4JI I.T.'f.A.N(, of 2006 JUDG_I{ENT,4. r rh. t tu,t bh rt-,, -t In.,.- I I t Lttt,l.t,. I-Ieard Mr. I(arthik l{amana l)utrxrDrcdd , learned counsel For the appcllanr rurd N[r- -l.V.Prasacl, learnec] Standing Counsel. Incomc T'ax l)epartmenr r.cprcscnring the respondent I.. .No,1 ol201B) under Section 2(;0,, 1,6 thr iucome -I'ax Act, 2 'I'[rrs appcal h:rs becn filccl bv rl'ic assc,.s.:c i.r., Sretc Bank oI India (a:; amcntled zrzrlr st:par:trc orclcr' passcd todav in 1961 (brie fly 'ti'rc Act' hcrcin:ritcr) 1r:,rLir1sr rhc order dated 04.03 2005 passccl br, rhL lncomi 'lax Aplrellare 'fribunal, Ilyderabad Ilcnch'A'. Hr,cler:airLcl (fribunel) tn LT.A.Nos.311 /I1yd/2001 for rhe asscssrncnr vcllr 1996-91 was oar\"rt a <:n 1().1)7.2006 without lramrng zrn : ul)st.r-r.ri qucstior-r of law. 3. I'c ma-y mcntion tllat thc appc:rl :a 2 Howcver, thc substanrial f such a sccutity does not stand ofl a diffcrent fooung. Hc has, bv virtue of the assignment or purchase, the right vested in him to rcceive the interest but only on the terms of the secur-ity and subject to all the incidents thercof as wcre appJrcable to the original owner. 6. Thus, it has been held that intcrest can be said to have accrued only on the date on whicl'r rt was due as per the tcrms and conditions of the securirl,. )7her-r an instrumcnt or an agreement scipulates interest to be payable at spccificd date, interest docs not accrue to tl-rc holder thereof on anv date prior thereto. Intcrest would accrue or arise oniy on thc datc specihcd in the instrument. 'I'his dccision of the Bon'rbay High Court was followed by the same Fligh Court 1n Comrnissioner of Income Tax v. State Bank of India2. Onc of the substantial questrons of larv rvhich was considcted ' 2016 SCC onlinc Bombay 9749 I 7 b1, the Bombay High Court rvas rvhcthcr Tribunal rvas nght in law in accepung the plca oi thc assessce that the interest income ol Rs.38.24 crores on the securitres had to bc taxed on due basis only instcad of accrual basis as per the mcrcantile systcm of accounting flollowcd by the assessee. Tnsofar this que suon is concerned, Rombalt I Iigh Court rcletred to its previous decision in Crcdit Suisse First Boston (Cyprus) Limited (1 supra) and held that issuc stands concluded against the revenue and in favour of the assessee l. l,earned counsel for tl-re appellant submits that against the aforesaid decision of the Rombay High Court in State Bank of lndia (2 supra), revenue preferred SLP(C).No.24250 of 201.1 , which was subsequendy registered as C-ivil Appcal No.4357 of 2018. The said appeal was heatd and decided by the Supremc Court along wrth other civil appeais which have ) ) 8 since been rcported in Deputy Commissioner of Incomc Tax v. TJayachandran3 B. Learned counsel lor thc appcllant faidy submits that though in the bod1, o[ thc judgmenr rhefe is no discussic,n on the issue as to the finding of the Bombay High Courr that the lnterest lncomc on securit_ies has to be taxcd on duc basis, nonethcless, by the aforesaid dccrsion, the appeals prclerred by thc revenue were dismissed 9 Re that as it may, we concur wlth the vrew cxpressed by the Bombay High Court in M/s. Credit Suisse First Boston (Cyprus) Ltd (1 supra) followed bv the decrsion in State Bank of India (2 supra) 10. Consequendy, the substantial questions o[ law are answered tn favour of the assessee and against the revenue. 11. Appeal is accordingly allowed. No cosrs I I ! : : I t I i I t I lzorsy e scc rso I 9 As a scquel, misccllaneous petitions, pending if any, stand closed Sd/- M. VIJAYA BHASKER JOINT REGISTRAR Cb SECTION OFFICER //TRUE COPY// To 1.The lncome Tax Appellate Tribunal, Hyderabad, Bench \"A\" Hyderabad. 2. The Commissioner of lncome Tax (Appeals), Vijayawadb. 3. The Joint Commissioner lncome Tax ( Assts) Spl Range -4, Hyderabad 4. One CC to SRl. N.R. SIVA SWAMY, Advocale [OPUC] 5. One CC to SRl. J V PRASAD (SC FOR INCOME TAX) Advocate [OPUC] 6- Two CD Copies ) Pnq. HIGH COURT DATED: 0410112023 ORDER ITTA.No.286 of 2006 Allowing the ITTA s^.c^ HE SIA 1 e o ( + ) :) [2 SEP2M ts e'e' r(. ? ./ >- "