TaxTMI 
TaxTMI 
TaxTMI 
2020 (10) TMI 1391
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....i) Whether the Tribunal was correct in holding that the amount from lapsed Demand Drafts, Gift Cheques etc., credited to P & L account is not liable to tax in the hands of the assessee, though no claims were made in respect of such Drafts and cheques and recorded a perverse finding? (ii) Whether the Tribunal was correct in holding that the Commissioner was not correct in exercising his power u/s. 263 of the Act in respect of lapsed Demand Drafts, Gift Cheques etc., credited to P & L account and directing the Assessing Officer to disallow the claim of deduction? 2. Facts giving rise to filing of this appeal briefly stated are that the assessee is a banking company. The assessee filed return of income for Assessment Year 2007-08 on 29.10.2....
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....herefore, it is a receipt from business. It was further held that money was received by the assessee in the course of its business and though it was treated as deposit and was capital in nature at the point of time when it was received, by efflux of time, the same became assessee's own money. It was also observed that the assessee himself treated the money as his own and taken the amount in the profit and loss account. By placing reliance on decision of the Supreme Court in 'CIT VS. T.V. SUNDARAM IYYENGER AND SONS', 222 ITR 344 (SC), it was held that an amount of Rs. 52,77,81,539/- clearly represents a taxable receipt and there is no provision in the Act to allow the same as deduction from total income. Accordingly, the Assessin....
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....ions issued by the Reserve Bank of India operate in different fields. It is also urged that directions have been issued by the Reserve Bank of India for maintaining books of accounts and cannot alter the issue of taxability of the amount under the Act. In support of aforesaid submissions, reliance has been placed on decisions in 'COMMISSIONER OF INCOME-TAX VS. T.V. SUNDARAM IYENGAR & SONS LTD.', (1996) 88 TAXMAN 492 (SC), 'COMMISSIONER OF INCOME-TAX VS. KARAM CHAND THAPAR',(1996) 88 TAXMAN 40 (SC), 'SOLID CONTAINERS LTD. VS. DEPUTY COMMISSIONER OF INCOME-TAX, SPL. RANGE-1, MUMBAI', (2009) 178 TAXMAN 192 (BOMBAY), 'COMMISSIONER OF INCOME-TAX VS. ARIES ADVERTISING (P.) LTD.', (2002) 125 TAXMAN 969 (MADRAS), ....
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....XMANN.COM 359 (KARNATAKA). It is also urged that when any liability ceases and the same is sought to be treated as income, it can only be under Section 41 and Section 28 has no application because income sought to be taxed is not otherwise in the nature of business income and therefore, in view of aforesaid division bench decisions of this court, the issue deserves to be answered in favour of the assessee. 7. By way of rejoinder reply, learned counsel for the revenue submitted that the judgment relied by the counsel for the assessee in the case of RADDI SAHAKARA BANK NIYAMITHA and KARNATAKA VIKAS GRAMEEN BANK supra have no application to the fact situation of the case as they have been rendered in context of Section 41(1) of the Act. 8. W....
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....balances I the name of the trading parties did not claim these amounts for a long tie. The amounts represented credit balances in the name of the trading parties and was taken to its profit and loss account. The CIT(A) held that these amounts were not revenue receipts but were of capital nature. The provisions of Section 41(1) were not attracted in the facts of this case because the assessee's liability to pay back the amounts to its customers had not ceased. The tribunal agreed with this view. 9. The Supreme Court in the aforesaid factual background, held that principle appears to be that if an amount is received in the course of trading transaction, even though is not taxable in the year of receipt as being of revenue character, if t....
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....eserve) as applicable to the above amount. (iii) Any claim in respect of these entries, in future, should be honoured by debit to the same head of profit and loss account viz., Miscellaneous income and an equivalent amount (net of tax benefit, if any, and net of subsequent reduction in the transfer to statutory reserves) shall be transferred from the 'General Reserve' to the profit and loss account. (vii) The net amount credit to the profit and loss account will not be available for declaration of dividend. 12. In the instant case, in the light of statutory instructions issued by Reserve Bank of India, the amounts in question were kept by the assessee in general reserve account though routed through profit and loss account. The....