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2024 (10) TMI 1574
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....owed 269 of 2015 770/Mds/2010 2007-2008 Dismissed 272 of 2015 937/Mds/2010 2004-2005 Dismissed 273 of 2015 939/Mds/2010 2005-2006 Dismissed 274 of 2015 940/Mds/2010 2006-2007 Dismissed Table II Respondent/Assessee I.T.A.No. Assessment Year Result 910/mds/2010 2002-2003 Dismissed 914/Mds/2010 2006-2007 Partly Allowed 915/Mds/2010 2007-2008 Allowed 4. At the time of admission in all these appeals following substantial question of laws were framed:- Table III Sl. No. Substantial Question of Law Assessment Years Decisions Covering the Issue 1. Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee need not offer interest on accrual basis and assessee can exclude the interest earned from securities on accrual basis for the purpose of income tax even though the assessee is a banking company bound to follow mercantile system of accounting as per Income Tax Act, Indian Companies Act, RBI guidelines? 2002-2003 2004-2005 2006-2007 2007-2008 1. CIT vs. City Union Bank (2007) 291 ITR 144 (Mad) following CIT v....
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....44 (Mad) 2. United Commercial Bank vs. CIT (1999) 106 Taxman 601 (SC) 3. CIT vs. HDFC Bank Ltd. (2014) 52 taxmann.com 333 (Bombay) 6. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee is entitled for the deduction with resect to the provision for depreciation on investments under the trading account even though the assessee had valued the closing stock of the investments for the purpose of income tax by ignoring the appreciation in its value and had valued the investments differently in the books of accounts? 2004-2005 2005-2006 1. CIT vs. City Union Bank (2007) 291 ITR 144 (Mad) 2. CIT vs. Lakshmi Vilas Bank Ltd (2022) 139 taxmann.com 48 (Mad) 3. United Commercial Bank vs. CIT (1999) 106 Taxman 601 (SC) 4. Chainrup Sampatram vs. CIT (1953) 24 ITR 481 (SC) 7. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee is entitled for deduction of amortization loss/expenses on Government securities classified as Held to Maturity Category, without capitalising the loss/expenses over the remaining period of maturity of securities? 2002-2....
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....laim of bad debts in relation to non-rural branches of the assessee-bank is allowable without first setting off against the provision already allowed under section 36(1)(viia) when no distinction is made between advances relating to non-rural and rural advances has been made in section 36(1)(vii)? 3. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the reduction of Rs. 47,38,984 claimed by the assessee-bank as diminution in the value of investments is allowable when the loss has been claimed only on notional basis in the adjusted statement filed along with the return of income and not on the basis of any definite method of accounting followed in the books of account? 8. Operative portion of the Order reads as under:- "7. With regard to the first substantial question of law raised in T.C.(A) No. 22 of 2004 and the first substantial question of law raised in T.C.(A) No. 466 of 2004, the Division Bench of this Court by judgment dated 23-1- 2007 made in T.C.(A) Nos. 15 and 24 of 2003-CIT v. Tamilnadu Mercantile Bank Ltd. [2007] 291 ITR 137 (Mad.), after referring to the decisions in CIT v. Canara Bank [1992] 195 ITR....
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....ntitled to the deduction of the entire bad debt relating to advances made by the urban branches written off in the books and also the difference between the amount written off in the books relating to advances made by the rural branches during the previous year relevant to the assessment year and the credit balance in the provisions for bad and doubtful debts account relating to advances made by the rural branches made under clause (viia). If the bad debt written off relates to debts other than for which provision is made under clause (viia) such debt will fall squarely under the main part of clause (vii) which is entitled to deduction and in respect of that part of the debt with reference to which a provision is made under clause (viia), the proviso will operate to limit the deduction to the extent of the difference between that part of debt written off in the previous year and the credit balance in the provision for bad and doubtful debts account made under clause (viia)." (p. 579) 11. In the instant case, while allowing the claim for bad debts written off in respect of advances made by rural branches, the Commissioner of Income-tax (Appeals) as well as the Trib....
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.... is the preferable view as compared to the view based on the decision of the Madras High Court in Kisenchand Chellaram s case" 11. Operative portion of the Order of the Hon'ble Supreme Court in the case of Brooke Bond India Ltd. vs. Commissioner of Income Tax, [1997] 91 Taxman 26 (SC) reads as under:- "6. Dr. Pal has, however, submitted that this decision does not cover a case, like the present case, where the object of enhancement of the capital was to have more working funds for the assessee to carry on its business and to earn more profit and that in such a case the expenditure that is incurred in connection with issuing of shares to increase the capital has to be treated as the revenue expenditure. In this connection, Dr. Pal has invited our attention to the submissions that were urged by the learned counsel for the assessee before the AAC as well as before the Tribunal. It is no doubt true that before the AAC as well as before the Tribunal it was submitted on behalf of the assessee that increase in the capital was to meet the need for working funds for the assessee-company. But the statement of case sent by the Tribunal does not indicate that a finding was reco....
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....d has observed as under:- Income Tax Act, 1961 Section 36 (1) (vii) Section 36(1)(vii)(a) Section 36 (1) (vii) deals with general deductions available to a bank and even non-banking business upon their showing that an account had become bad and written off as irrecoverable in the accounts of the assessee for the previous year, satisfying the requirements contemplated in that behalf under Section 36(2). The provisions of Section 36(1)(vii) operate in their own field and are not restricted by the limitations of Section 36(1)(viia) of the Act. While the proviso will operate in cases under clause (viia) to limit deduction to the extent of difference between the debt or part thereof written off in the previous year and credit balance in the provision for bad and doubtful debts account made under clause (viia). The proviso to Section 36(1)(vii) will relate to cases covered under Section 36(1)(viia) and has to be read with Section 36(2)(v) of the Act. 16. Therefore to that extent we are inclined to remit the issue back to the Assessing Officer to re-examine the issue afresh in the light of the decision of the Hon'ble Supreme Court in the case of Catholic Syrian Bank ....
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....hough in the balance sheet maintained by the assessee, market price of the shares and securities is not mentioned, yet for determining the real income of the assessee-bank, the said price is required to be taken into account. And, for that purpose since years, the assessee-bank was submitting income-tax returns after taking into account the market price of such shares and securities which has been accepted by the department without any objection. He also submitted that not making of proper entries in the balance sheet could hardly be a ground for not assessing the real income. 13. In the background of the aforesaid facts, we would state that it is an established rule of commercial practice and accountancy that closing stock can be valued at cost or market price, whichever is lower. In Chainrup Sampatram vs. CIT [1953] 24 ITR 481, this Court explained the underlying reasons for the said practice thus: "... It is wrong to assume that the valuation of the closing stock at market rate has, for its object, the bringing into charge any appreciation in the value of such stock. The true purpose of crediting the value of unsold stock is to balance the cost of those goods e....
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....ess that is continuing are not brought into the charge as a matter of practice, though as already stated, loss due to a fall in price below cost is allowed even if such loss has not been actually realised. As truly observed by one of the learned Judges in Whimster & Co. v. Commissioner of Inland Revenue [1926] 12 Tax Cas. 813,827. "Under this law (Revenue law) the profits are the profits realised in the course of the year. What seems an exception is recognised where a trader purchased and still holds goods or stocks which have fallen in value. No loss has been realised. Loss may not occur. Nevertheless, at the close of the year he is permitted to treat these goods or stocks as of their market value." [Emphasis supplied] (p. 486) 17. Even applying the aforesaid tests laid down by this Court, what is taxable under the Act is the really accrued or arisen income. On the basis of the method of accountancy regularly employed by the assessee, the real income is pointed out in the income-tax return submitted by the assessee. This cannot be ignored by holding that in a balance sheet which is required to be statutorily maintained in a particular form, market value of the sh....