Madras High Court
Indian Bank vs The Deputy Commissioner Of Income Tax on 30 October, 2012
Author: Chitra Venkataraman
Bench: Chitra Venkataraman, K.Ravichandrabaabu
In the High Court of Judicature at Madras Dated: 30.10.2012 Coram The Honourable Mrs.JUSTICE CHITRA VENKATARAMAN and The Honourable Mr.JUSTICE K.RAVICHANDRABAABU Tax Case (Appeal) No. 456 of 2008 Indian Bank 66, Rajaji Salai Chennai 600 001 ... Appellant Vs. The Deputy Commissioner of Income Tax Spl. Range I 121 Nungambakkam High Road Chennai 600 034 ... Respondent Tax Case (Appeal) against the order of the Income Tax Appellate Tribunal, Madras 'A' Bench, dated 25.10.2007 passed in I.T.A.No. 1080/ Mds/ 2003 for the assessment year 1992-93. For Appellant : Dr.Anita Sumanth For Respondent : Mr.T.Ravikumar ------- JUDGMENT
(Judgment of the Court was delivered by CHITRA VENKATARAMAN,J. ) The above appeal is filed by the assessee/ Indian Bank as against the order of the Income Tax Appellate Tribunal relating to assessment year 1992-93. The above Tax Case (Appeal) is admitted on the following substantial questions of law:-
"1. Whether on the facts and circumstances of the case, the Income Tax Appellate Tribunal is right in law in holding that the addition in respect of appreciation in the value of securities based on the differentiation of securities between permanent and current securities?
2. Whether, on the facts and circumstances of the case, the Tribunal ought not to have deleted the entire addition on account of the appreciation in the value of securities, amounting to Rs.2,68,97,356?
3. Whether, on the facts and circumstances of the case, the Tribunal is right in law in disallowing the estimated amount of Rs.1,96,641/- out of the total expenditure claimed by the appellant as apportionable to earning income from tax free securities?"
2. Even though the above appeal is admitted on the above three questions of law, on going through the grounds of appeal, we find other substantial questions of law raised by the assessee. The other questions of law which appear in the grounds of appeal are as follows:-
(1) Whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal is right in law in not accepting the appellant's claim with regard to the broken period interest in its entirety and whether the Tribunal is right in law in classifying the securities as permanent or current and restricting the claim in regard to the broken period interest on securities?
(2) Whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal is right in law in confirming the assessment of the sum of Rs.2,51,38,800/- representing interest paid, treating the same as undisclosed income or otherwise?
3. As far as these questions are concerned, we have already considered these issues in T.C.(A) No.455 of 2008 by order dated 30.10.2012, wherein we pointed out to the applicability of the decision of the Apex Court in the case of Vijaya Bank Vs. Additional Commissioner of Income-tax reported in 187 ITR 541 in respect of allowability of interest of securities held as investments and the decision of the Bombay High Court in the case of American Express Bank Vs. Commissioner of Income Tax reported in 177 CTR 442(Bom) in respect of securities held as stock in trade. The decision that we had taken in the earlier T.C.(A).No. 455 of 2008 dated 30.10.2012, relating to assessment year 1991-92, would govern the issue herein. Consequently, the above questions are answered against the assessee.
4. Apart from this, yet another question which arose in this case, which reads as follows:-
"Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal is right in law in not considering the contention raised by the appellant as regards set off of carried forward losses of earlier years, which claim was not considered by the Commissioner of Income Tax (Appeals) while disposing of the appeal?"
5. As far as this question of law is concerned, a perusal of the grounds of appeal raised before the Tribunal shows that the assessee filed appeal before the Commissioner of Income Tax (Appeals) as against the order of assessment in not considering the assessee's claim in setting off of carried forward from the earlier year, even though on the basis of the orders of the earlier years, there will be unabsorbed loss / depreciation available for set off and that the said issue was not considered by the Commissioner of Income Tax (Appeals). This resulted in filing further appeal by the assessee before the Tribunal. As pointed out earlier, a reading of the order of the Tribunal shows that there is no consideration of the said question by the Tribunal. In the circumstances, we agree with the assessee. Learned counsel for the assessee submitted that when there was no due consideration on the issue in question by the authorities starting from the Officer, in fitness of things, the matter be remitted back to the Assessing Officer for consideration based on the records. The assessee is directed to produce materials relevant for the purpose of sustaining its view.
6. This leaves us three more questions for consideration. As far as first and second questions of law are concerned, we find that the issue is covered by reason of our decision rendered in T.C.(A). No.455 of 2008, wherein following the decision in the case of UCO Bank Vs. CIT reported in 240 ITR 355, we have directed the Assessing Officer to redo the valuation of securities in respect of stock-in-trade at cost or market value, whichever is lower. Thus, applying the decision of this Court rendered by us in T.C. 455 of 2008, we set aside the order of the Tribunal and remand the same to the Assessing Officer for his consideration on the issue in terms of the decision of the Apex Court in the case of UCO Bank Vs. CIT reported in 240 ITR 355.
7. As far as the third question of law on the disallowance of the estimated cost of Rs.1,96,641/- is concerned, as apportionable to the earning of the income tax paid, learned counsel for the assessee submitted that when the consistent case of the assessee is that they had not expended anything in making investment for the tax free securities, the Tribunal committed serious error in upholding the order of the authorities below restricting 2% of the income earned towards the estimated expenditure. Learned counsel for the assessee pointed out that when the assessee had not expended anything on the investment in securities, there is no question of proving any such expenditure in earning income from tax free securities.
8. Heard learned counsel for the assessee as well as learned standing counsel for the Revenue.
9. It is seen from the order of the assessment that the assessee earned income from investment on tax free securities as specified in Section 10(15) of the Income Tax Act. When the assessee was specifically asked as to the expenditure incurred thereon, the assessee submitted that there was no expenditure incurred or expended for earning such interest income. The Officer held that in the absence of any evidence, the claim could not be considered. We agree with the assessee's contention that there could be no evidence that could be let in, to prove the non-existent expenditure; the assessee could nevertheless have substantiated the nature of the securities in which it had invested and the source from which it had invested. Since no details are available on this, we feel that the proper course herein would be to restore the assessment back to the Assessing Officer for the purpose of enabling the assessee to let in evidence, particularly, as to the source to which it made investments. Depending on the materials available, it is open to the Officer to pass orders thereon.
10. The above Tax Case (Appeal) is dismissed. No costs.
bg To
1. Indian Bank, 66, Rajaji Salai, Chennai 600 001
2. The Deputy Commissioner of Income Tax Spl. Range I, 121 Nungambakkam High Road, Chennai 600 034