THE COMMISSIONER OF INCOME TAX, V. M/S.SOUTH INDIAN BANK

ITA/844/2009

AI Insights

The case involves an appeal by the Commissioner of Income Tax, Thrissur against the South Indian Bank, Thrissur, concerning the Income Tax Appellate Tribunal's decision which favored the bank. The dispute centered on the tax return filed by the bank for the assessment year 2000-01, specifically regarding the disallowance of claims under Section 36(1)(viia) for bad debts and the payment of broken period interest on securities. The Tribunal's decision, which was upheld by the High Court, allowed these claims, referencing precedents set by the Supreme Court in similar cases.

• Counselvise Citation: [2021] 140 COUNSELVISE.COM (IT) 728340 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 13-07-2021
• Assessment Year: misc
• Other Referred Cases: Catholic Syrian Bank v. Commissioner of Income Tax, Commissioner of Income Tax v. Nedungadi Bank Ltd, Commissioner of Income Tax v. South Indian Bank
• Laws Referred To: Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: JOSEPH MARKOS; V ABRAHAM MARKOS; ABRAHAM MARKOS; ISAAC THOMAS; ALEXANDER MARKOS; SHARAD KODANTHARA
• Assessee Lawyers: JOSE JOSEPH
• Keywords: Assessment Year 2000-01; Bad debts; Broken Period Interest; Income tax appeal
• Section: 143(3); 36(1)(vii); 36(1)(viia)

Judgement Text

"IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS TUESDAY, THE 13TH DAY OF JULY 2021 / 22ND ASHADHA, 1943 ITA NO. 844 OF 2009 AGAINST THE ORDER IN ITA 1207/COCH/2004 DATED 28.09.2006 OF I.T.A.TRIBUNAL, COCHIN BENCH, ERNAKULAM APPELLANT/APPELLANT: THE COMMISSIONER OF INCOME TAX, THRISSUR BY ADV SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT/RESPONDENT: M/S.SOUTH INDIAN BANK THRISSUR. BY ADVS. SRI.JOSEPH MARKOSE (SR.) SRI.V.ABRAHAM MARKOS SRI.ABRAHAM JOSEPH MARKOS SRI.ISAAC THOMAS SHRI.ALEXANDER JOSEPH MARKOS SHRI.SHARAD JOSEPH KODANTHARA THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 13.07.2021, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ITA No. 844 of 2009 -2- J U D G M E N T S.V.BHATTI,J. Heard learned Standing Counsel Mr.Jose Joseph and learned Senior Advocate Mr.Joseph Markos for parties. 2. Revenue is the appellant. The South Indian Bank Ltd Trichur/Assesee is the respondent. The appeal is directed against the order of the Income Tax Appellate Tribunal, Cochin Bench in I.T.A 1207/Coch/2004 dated 28.09.2006. The appeal deals with the issues arising from the tax return filed by the assessee for the assessment year 2000-01. 2.1. The Assessing Officer through the assessment order in Annexure-A disallowed the claim of the assessee under Section 36(1)(viia). Similarly, the Assessing Officer disallowed the claim of payment of broken period interest on securities purchased by the assessee for being compliant with statutory norms. The ITA No. 844 of 2009 -3- assessee filed appeal before the Commissioner of Income Tax (Appeals) and the appeal was allowed in part. In the appeal filed by the revenue before Income Tax Appellate Tribunal, through Annexure-C order, the Tribunal upheld the order of the Commissioner of Income Tax (Appeals) and the claims of the assessee under Section 36(1)(viia) and broken period interest were allowed. Hence the instant Income Tax Appeal, at the instance of the revenue under Section 260 A of the Income Tax Act (for short, the Act). The following substantial questions of law are raised by the revenue: 1. Whether, on the facts and in the circumstances of the case and on an interpretation of the relevant provisions, the Tribunal is right in law,- i) in interfering with the disallowance of bad debts written off under section 36(1)(vii) amounting to Rs.8,47,40,283/-? ii) in allowing the bad written off under section 36(1) (vii) amounting to Rs.8,47,40,283/-? 2. Whether, on the facts and in the circumstances of the case and also in the light of the decision of the Supreme Court in United Commercial Bank (32 ITR 688) followed in subsequent decisions of Supreme Court,- ITA No. 844 of 2009 -4- i) the assessee is entitled to claim deduction of broken period interest (Rs.3,85,29,440/-)? ii) The Tribunal is right in law interfering with the disallowance of broken period interest? (Emphasis added) 3. The first question is regarding the eligible deduction under Section 36(1)(viia) of the Act. It is stated by the counsel appearing for the parties that question no.1 is covered by the judgment of the Supreme Court in Catholic Syrian Bank v. Commissioner of Income Tax1 and had answered the issue in favour of assessee and against the revenue. We are referring to the decision of the Apex Court with a limited view to comprehensively advert to the outcome on all the questions raised by the revenue in the instant appeal. The operative portion in Catholic Syrian Bank Ltd case reads thus: “Firstly, the Full Bench ignored the significant expression appearing in both the proviso to Section 36(1) (vii) clause (v) of Section 36(2) i.e ., 1[2012] 343 ITR 270 (SC) ITA No. 844 of 2009 -5- 'assessee to which clause (viia) sub-section(1) applies'. In other words, if the case of the assessee does not fall under Section 36(1)(viia) proviso/limitation would not come into play. xxxx xxxx xxxx “Consequently, while answering the question in favour of the assessee, we allow the appeals of the assessee and dismiss the appeals preferred by the revenue. Further, we direct that all matters be remanded to the Assessment Officer for computation in accordance with law, in light of the law enunciated in this judgment.” 4. The substantial question no.2 is a claim made towards payment of broken period interest by the assessee. The question is covered also in favour of the assessee and against the revenue in the reported judgment in Commissioner of Income Tax v. Nedungadi Bank Ltd2 read with Commissioner of Income Tax v. South Indian Bank3 The operative portion of the judgment is excerpted hereunder: 2 (2003) 264 ITR 545 (Ker.) 3(2000) 241 ITR 374 (Ker.) ITA No. 844 of 2009 -6- “For all these reasons, we are of the view that the Income-tax Appellate Tribunal has rightly held that the securities held by the assessee-bank in all these cases are the stock-in-trade of the business of the assessee-banks and the notional loss suffered on account of the revaluation of the said securities at the close of the year is an allowable deduction in the computation of the profits of the appellant. This disposes of the first two questions mentioned in para. 10 above.” The questions of law framed, by following the judgments referred to above, are answered in favour of the assessee and against the revenue. Income Tax Appeal stands dismissed accordingly. Sd/- S.V.BHATTI JUDGE Sd/- BECHU KURIAN THOMAS JUDGE JS ITA No. 844 of 2009 -7- APPENDIX APPELLANT'S ANNEXURES ANNEXURE A TRUE COPY OF THE ORDER OF THE ASSESSING OFFICER U/S. 143(3) OF THE IT ACT DATED 30/09/2002. ANNEXURE B TRUE COPY OF THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN ITA NO.71/RI/TCR/CIT- V/02-03 DATED 06/07/2004. ANNEXURE C TRUE COPY OF THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL IN ITA NO.1207/COCH/2004 DATED 28/09/2006 RESPONDENT'S ANNEXURES: NIL "