Banking company deductions and sticky-advance interest: binding precedent barred Revenue's objections on all three tax issues.

Binding precedent controlled all three issues concerning banking-company taxation. Expenditure apportioned under section 20(1)(i) for interest on securities was not restricted by sections 40A(3), 40A(5) and 44C when computing admissible deductions under sections 30, 31, 36 and 37, so the assessee succeeded. Broken-period interest on purchase of securities was treated as not forming part of purchase price and was allowable in the year of purchase, again in the assessee's favour. Interest on sticky advances credited only to a memorandum account was held not taxable on the facts considered, leaving the Revenue's appeal to fail entirely.

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Issues: (i) Whether, while apportioning deductible expenditure under section 20(1)(i) under the head interest on securities in the case of banking companies, the expenditure admissible under sections 30, 31, 36 and 37 of the Income-tax Act, 1961 is subject to the restrictions in sections 40A(3), 40A(5) and 44C; (ii) whether interest paid to sellers for the broken period on purchase of securities forms part of the purchase price or is allowable as revenue expenditure in the year of purchase; (iii) whether interest on sticky advances credited to a memorandum account is taxable.

Issue (i): Whether, while apportioning deductible expenditure under section 20(1)(i) under the head interest on securities in the case of banking companies, the expenditure admissible under sections 30, 31, 36 and 37 of the Income-tax Act, 1961 is subject to the restrictions in sections 40A(3), 40A(5) and 44C.

Analysis: The issue stood covered by the Court's earlier decision relied upon in the judgment, under which the admissible expenditure under the specified heads was not taken to be restricted by sections 40A(3), 40A(5) and 44C in the manner contended for by the Revenue.

Conclusion: The issue was answered in the affirmative in favour of the assessee and against the Revenue.

Issue (ii): Whether interest paid to sellers for the broken period on purchase of securities forms part of the purchase price or is allowable as revenue expenditure in the year of purchase.

Analysis: The issue was concluded by the Court's contemporaneous decision referred to in the order, treating broken period interest as not forming part of the purchase price and as allowable in the relevant year.

Conclusion: The issue was answered in the affirmative in favour of the assessee and against the Revenue.

Issue (iii): Whether interest on sticky advances credited to a memorandum account is taxable.

Analysis: The issue was governed by the Court's earlier ruling in UCO Bank, which held that interest on sticky advances credited to a memorandum account was not taxable on the facts considered.

Conclusion: The issue was answered in the affirmative in favour of the assessee and against the Revenue.

Final Conclusion: All three questions were decided in favour of the assessee, and the Revenue's appeal failed in its entirety.

Ratio Decidendi: Where the relevant issue is already covered by binding precedent, the same conclusion governs the appeal, and interest on sticky advances credited only to a memorandum account is not taxable.

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