TaxTMI 
TaxTMI 
2008 (8) TMI 766
X X X X Extracts X X X X
X X X X Extracts X X X X
..... Mistry, Adv. with Mr. B.D. Damodar, Adv. and Mr. Rustom B.Hathikhanawala, Adv. Mr. Samir Parekh, Adv. Mr. Sumil Goel, Adv. Miss Divya Sinha, Adv.for M/s. Parekh & Co. ORDER The assessment year in question is 1978-79. Aggrieved against the judgment and order of the High Court of Bombay dated 16th April, 2003 passed in ITR No.278 of 1997, revenue has filed this appeal. The following question of law has been posed before us for consideration: "Whether on the facts and in the circumstances of the case, the High Court was right in law in holding, that, the interest paid for broken period should not be considered as part of the purchase price, but should be allowed as revenue expenditure in the Year of purchase of securit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....C 147, wherein this Court in paras 4 & 5 observed as under: "4. In IRC v. Pilcher (1949) 2 All ER 1097, Lord Justice Jenkins stated: (All ER p.1103) "It is a well settled principle that outlay on the purchase of an income-bearing asset is in the nature of capital outlay, and no part of the capital so laid out can, for income tax purposes, be set off as expenditure against income accruing from the asset in question." 5. In the instant case, the assessee purchased securities. It is contended that the price paid for the securities was determined with reference to their actual value as well as the interest which had accrued on them till the date of purchase. But the fact is, whatever was the consideration which prompted the ass....
X X X X Extracts X X X X
X X X X Extracts X X X X
...."Interest on securities" under section 18. However, they chose to assess the interest under the head "Business" and, while doing so, the Department taxed broken period interest received, but disallowed broken period interest payment. It is in this light that one has to read the judgment of the Karnataka High Court and the Supreme Court in Vijaya Bank Ltd's case [1991] 187 ITR 541. In that case, the facts were as follows. During the assessment year under consideration, Vijaya Bank entered into an agreement with Jayalakshmi Bank Limited, whereby Vijaya Bank took over the liabilities of Jayalakshmi Bank. They also took over assets belonging to Jayalakshmi Bank. These assets consisted of two items, viz., Rs.58,568 and Rs.11,630.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ute was-whether the impugned adjustments in the method of accounting adopted by the assessee- bank should be discarded. Therefore, the judgment in Vijaya Bank Ltd.'s case [1991] 187 ITR 541 (SC) has no application to the facts of the present case. If the Department had brought to tax, the amounts received by the assessee-bank under section 18, then Vijaya Bank Ltd.'s case [1991] 187 ITR 541 (SC) was applicable. But, in the present case, the Department brought to tax such amounts under section 28 right from the inception. Therefore, the Tribunal was right in coming to the conclusion that the judgment in Vijaya Bank Ltd.'s case [1991] 187 ITR 541 (SC) did not apply to the facts of the present case. However, before us, it was argued on....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Bank Ltd. [1957] 32 ITR 688 (SC), also support our view in the present case. In United Commercial Bank Ltd.'s case [1957] 32 ITR 688 (SC), the assessee-bank claimed a set-off under section 24(2) of the Indian Income-tax Act, 1922 (section 71(1) of the present Act), against its income from interest on securities under section 8 of the 1922 Act (similar to section 18 of the present Act). It was held that United Commercial Bank was not entitled to such a set-off as the income from interest on securities came under section 8 of the 1922 Act. Therefore, even in United Commercial Bank Ltd.'s case [1957] 32 ITR 688 (SC), the Department had assessed income from interest on securities right from the inception under section 8 of the 1922 Act and, th....