TaxTMI 
TaxTMI 
2021 (11) TMI 702
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....nds including stock in trade converted as liquid money and kept as fixed deposits are stock in trade however interest thereon has its characterization as income from other sources due to liquidation process but in view judgment of Supreme Court in case of Western States Trading Co (P.) Ltd. v/s. C.I.T. 80 ITR 21 (SC) such interest income on fixed deposits being stock in trade and assessed under head income from other sources ought to have been set-off against brought forward business losses. (3) In view of deposit credit Guarantee Corporation of India Act, 1961 (DICGCI Act, 1961) read with DICGCI Regulation 1961; any bank under liquidation availed insurance claim for payment of outstanding deposit liability from DICGCI (subsidiary of RBI) statutorily required to set a part funds realized from advances for payment of liability of DICGCI hence bank is statutorily obliged to divert by overriding title for payment of liabilities of DICGCI and not otherwise as held by Supreme Court in case of DICGIC vs. Raghupathi Raghavan Civil appeal no. 1035/2008 dated 01/07/2015 and by Gujarat High Court in case of assessee in LPA No. 2456/2009 in SCA No. 7617/2009 dated 06.07.2015 hence an....
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....n the computation of income. Accordingly, the ground of appeal of the assessee based on the real income was rejected by the learned CIT(A). 8. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us. 9. The learned Authorized Representative before us filed a 3 different paper books running from pages 1 to 58, 1 to 64 and 1 to 41 and contended that the assessee has borrowed money from DICGCI for making the payment to the depositors. As per the understanding with DICGCI the assessee was liable to make the payment to DICGCI against the amount recovered by it. As such, the learned Authorized Representative contended that DICGCI has overriding title on the amount recovered by the assessee whether such recovery represents the principal amount or the interest. In support of his contention, the learned Authorized Representative drew our attention on the direction given by the Hon'ble Gujarat High Court in the own case of the assessee which is placed on pages 14 to 36 of the paper book-III filed as on 03.01.2019. Accordingly, the learned Authorized Representative contended that the income received by the assessee in the form of interest has been div....
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....06 of 2010, Letters Patent Appeal No. 1307 of 2010, Letters of Patent Appeal No. 2458 of 2009, Letters Patent Appeal No. 238 of 2013 and Letters Patent Appeal No. 239 of 2013 stand disposed of with the aforesaid observations and directions. However, in the facts and circumstances of the case, there shall be no order as to costs, in each of the appeals." 13. From the above judgment of the Hon'ble Gujarat High Court, it is revealed that whatever amount will be received by the assessee has to be paid firstly to DICGCI after making necessary provision for expenses in relation to liquidation and declaration of dividend. Thus, there remains no ambiguity to the fact that the assessee has no right in the impugned amount of interest income as the same has been diverted to DICGCI as discussed above. Accordingly, the amount of interest though received by the assessee but does not belong to it. 14. We also find that Hon'ble Supreme Court in the case of Associated Power Co. Ltd. vs. CIT reported in [1996] 218 ITR 195 (SC) with respect to diversion of income due overriding title observed as under: "The application of the doctrine of diversion of income by reason of an over....
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....ve been kept in mind while deciding the issue. It is undisputed fact that Bank is under liquidation with effect from 28/03/2003 and administration of bank is in hands of official of cooperative department of Govt. of Gujarat for the purpose of realising advances under various legal methods provided in Gujarat Cooperative Societies Act, 1962. Bank retains part of the staff when bank was in operation as identity and history of advances can be known from such staff only. Bank has also availed insurance from DICGCI and an amount of Rs. 3,65,71,875/- is payable to DICGCI as of deposit insurance claim as at 31/03/2014. After the above judgement of Ragupathi Ragavan(Supra) bank has repaid Rs. 3,65,71,875/- to DICGCI and present liability to DICGCI is Rs. Nill. During the year appellant bank has earned interest of Rs. 40,75,681/- and share dividend of Rs. 69,245/- after meeting all expenses including depreciation of Rs. 2,39,180/- there is surplus of Rs. 29,31,478/- however appellant has disallowed aforesaid depreciation of Rs. 2,39,18G/- and has claimed depreciation Rs. 32,882/- and its computation is provided in statement of total income which has been allowed by DOT. Now the di....
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....ew of lack of factual submissions as regards capital nature of receipts in the event of liquidation, I am unable to deal with such ground, therefore, ground No. 3 is hereby dismissed." The order of CIT(A) is self explanatory. 8. We are in complete agreement with the findings of the CIT(A) noted above in the light of various decisions noted above. We thus decline to interfere." 16. In view of the above, we conclude that the amount of interest in dispute is not an income of the assessee and therefore the same cannot be made subject matter of tax in the hands of the assessee. 17. It is also pertinent to note that the specific issue raised by the assessee in ground No. 3 is not arising from the order of the authorities below. On perusal of the learned CIT(A) order, we find that this ground was raised by the assessee in a general/casual manner which was also adjudicated by the learned CIT(A) but not in a specific manner. 18. But the ground raised before us is very specific after making a reference to the order of Hon'ble Gujarat High Court in the own case of the assessee i.e. The Visnagar Nagrik Shahakari Bank Ltd. & ors vs. DICGCI (supra). Thus the questi....