TaxTMI 
TaxTMI 
2026 (5) TMI 1695
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....r dated 04.09.2025 passed for A.Y. 2012-13. 2. The Department has raised the following grounds of appeal: "1. Whether the Ld. CIT(A) has erred in deleting the addition of Rs. 2,89,66,968/- on account of disallowance of set off of brought forwarded loss without appreciating the fact that the income earned in the form of interest from deposits and recoveries is taxable as Income from Other Sources and not business income being non-banking entity and consequently, provisions of section 72 relating to set-off of brought forward business loss are not applicable? 2. The appellant craves leave to amend or alter nay ground or add a new ground, which may be necessary." 3. The brief facts of the case are that the assessee, a c....
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....contended that the interest income earned during liquidation retained the character of business income as it arose from business assets, namely advances and surplus funds temporarily parked in fixed deposits. The assessee argued that realization of advances was a continuation of the banking business and that such advances constituted stock-in-trade; therefore, interest earned thereon was business income. However, the Assessing Officer, relying upon judicial precedents including Morvi Mercantile Bank Ltd. vs. CIT (104 ITR 568) (Guj) and Vijaya Laxmi Sugar Mills Ltd. vs. CIT (59 Taxman 22) (SC), held that once the banking licence was suspended and the assessee ceased to carry on banking operations, the income derived thereafter could not be r....
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....n alternative contention based on the doctrine of diversion of income by overriding title. The assessee submitted that under the provisions of the Deposit Insurance and Credit Guarantee Corporation Act, 1961 (DICGCI Act) read with relevant regulations and section 115A of the Gujarat Co-operative Societies Act, the assessee bank, being under liquidation, was under a statutory obligation to first repay the liabilities towards DICGCI out of all recoveries made from advances. The assessee submitted that that the DICGCI, having paid insurance claims to depositors, acquired a statutory right over the recoveries made by the bank, and the bank had no discretion to utilize such funds except for limited liquidation expenses. Therefore, the entire inc....
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.... assessee's own case, the CIT(Appeals) accepted the contention of the assessee that the entire income, including interest income, stood diverted at source by overriding title in favour of DICGCI. Consequently, it was held that such income did not constitute taxable income in the hands of the assessee. The CIT(Appeals), therefore, did not adjudicate on the issue of characterization of income as business income or income from other sources or the allowability of set-off, as the fundamental issue of taxability itself was decided in favour of the assessee. 8. Accordingly, the CIT(Appeals) held that the interest income of Rs. 2,89,66,970/- was not taxable in the hands of the assessee for the year under consideration and allowed the appeal in ....
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....1 provides that insurance claim being amount paid to depositors shall have to be paid out of realization of all advances and other assets without making payment of any liability." 13. Further, after considering the findings of the Ld. CIT(A) and various judicial precedents, the Tribunal has held in clear and unequivocal terms: "We have heard the rival submissions and perused the materials available on record. We are in complete agreement with the findings of the Ld. CIT(A) in the light of various decisions discussed in the above order. As per this mandatory conditions of Section 21(2) DICGCI Act, till liability of DICGCI is fully paid all funds realized by Bank under liquidation are diverted at source. Entire income of the asses....