The Commissioner Of Income-Tax vs M/S. Karnataka Bank Ltd.,
2021 Latest Caselaw 3003 Kant

Citation : 2021 Latest Caselaw 3003 Kant
Judgement Date : 27 July, 2021

Karnataka High Court

The Commissioner Of Income-Tax vs M/S. Karnataka Bank Ltd., on 27 July, 2021

Author: Alok Aradhe Chandangoudar

                           1



 IN THE HIGH COURT OF KARNATAKA AT BENGALURU

       DATED THIS THE 27TH DAY OF JULY, 2021

                      PRESENT

       THE HON'BLE MR. JUSTICE ALOK ARADHE

                        AND

THE HON'BLE MR. JUSTICE HEMANT CHANDANGOUDAR

                ITA NO. 404 OF 2018
BETWEEN:

  1. THE COMMISSIONER OF INCOME TAX,
     C.R.BUILDING,
     ATTAVARA,
     MANGALURU-575001.

  2. THE ASST. COMMISSIONER OF INCOME-TAX
     CIRCLE - 2 (1),
     C.R.BUILDING,
     ATTAVARA,
     MANGALURU-575001.               ... APPELLANTS

(BY SRI K.V.ARAVIND, ADVOCATE)

AND:

M/S KARNATAKA BANK LTD.,
NEAR MAHAVEER CIRCLE,
PUMPWELL,
MANGALURU-575002.                     ... RESPONDENT

(BY SRI BALRAM R RAO, ADVOCATE)
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     THIS ITA IS FILED UNDER SECTION 260-A OF INCOME
TAX ACT 1961, ARISING OUT OF ORDER DATED 19.01.2018
PASSED IN ITA NO.1335/BANG/2012, FOR THE ASSESSMENT
YEAR 2010-2011, VIDE ANNEXURE-C, PRAYING TO:

     I. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW
STATED ABOVE.

     II. ALLOW THE APPEAL AND SET ASIDE THE ORDERS
PASSED BY THE INCOME-TAX APPELLATE TRIBUNAL,
BENGALURU IN ITA NO. 1335/BANG/2012, DATED
19.01.2018, VIDE ANNEXURE-C, CONFIRMING THE ORDER
OF THE APPELLATE COMMISSIONER AND CONFIRM THE
ORDER PASSED BY THE ASST. COMMISSIONER OF INCOME
TAX, CIRCLE-2(1), BENGALURU.

     III. TO PASS SUCH OTHER SUITABLE ORDERS AS THIS
HON'BLE COURT DEEMS FIT TO GRANT IN THE FACTS AND
CIRCUMSTANCES OF THE CASE IN THE INTEREST OF
JUSTICE AND EQUITY.

    THIS ITA COMING ON FOR ADMISSION, THIS DAY,
ALOK ARADHE J., DELIVERED THE FOLLOWING:

                         JUDGMENT

Mr. K.V. Aravind, learned counsel for the revenue.

Mr. Balram R. Rao, learned counsel for the assessee.

This appeal under Section 260A of the Income Tax Act,

1961 (hereinafter referred to as the Act for short) has been

preferred by the assessee against the order dated

19.01.2018 passed by the Income Tax Appellate Tribunal.

The subject matter of the appeal pertains to the Assessment

year 2008-2009. The appeal was admitted by a bench of this

Court on the following substantial questions of law:

"1. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in setting aside disallowance made under the head investment portfolio by following earlier decisions which has not reached finality even when the assessing authority rightly made disallowance by holding that irrespective of RBI guidelines were applicable to the assessee for the purposes of the I.T.Act or not, as per the principles of accountancy and the various decisions of Apex Court, income should be recognized in a way which reflects a true and fair picture of the affairs of the assessee and accordingly, when bank itself is treating the securities as "held to maturity", for any reason whatsoever, the same should be the case for purposes of Income Tax as this representation alone reflects the true picture of the accounts of the assessee?

2. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in setting aside disallowance made under Section 14A read with Rule 8D(2) (ii) and (iii) of the Act on expenditure incurred on earning

exempt income even when the assessing authority rightly made disallowances as conditions for making such disallowances were satisfied and assessee failed to show flow of its own funds to those investments from which income is exempt?

3. Whether on the facts and in the circumstances of the case, the Tribunal is right in law holding that the assessee-Bank cannot be considered as a Company by following decisions which has not reached finality and even when as per Section 2(17) of the Act, the Company is defined as an Institution, association or body which is or otherwise assessable or assessed as a Company and as such Section 115JB is applicable to assessee Bank for MAT purposes?

4. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in setting aside disallowance in setting aside disallowance made under Section 40(a) (ia) of the Act on ATM charges of other Banks even though Section 194H and Explanation to said section is applicable to assessee-Bank and as such assessee ought to have deducted TDS on such payments?

2. When the matter was taken up today, the

learned counsel for the assessee submitted that the 1st and

3rd substantial questions of law involved in this appeal have

already been answered in favour of the assessee by this

Court vide judgment dated 16.01.2020 in the case of

COMMISSIONER OF INCOME-TAX, BANGALORE Vs. ING

VYSYA BANK LTD reported in [2020] 114

TAXMANN.COM 506 (KARNATAKA)

3. It is further also submitted that the 2nd

substantial question of law involved in this appeal also has

already been answered in favour of the assessee by this

Court vide judgment dated 15.02.2021 in ITA No.133/2015

the case of THE COMMISSIONER OF INCOME-TAX AND

ANOTHER. Vs. M/S QUEST GLOBAL ENGINEERING

SERVICES PVT. LTD. It is further submitted that the 4th

substantial question of law is also answered by a bench of

this Court vide Judgment dated 23.11.2020, passed in ITA

No.427/2015 in favour of the assessee and against the

revenue.