Kerala High Court
The Commissioner Of Income Tax vs M/S.South Indian Bank on 13 July, 2021
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR.JUSTICE S.V.BHATTI
&
THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS
TUESDAY, THE 13TH DAY OF JULY 2021 / 22ND ASHADHA, 1943
ITA NO. 844 OF 2009
AGAINST THE ORDER IN ITA 1207/COCH/2004 DATED 28.09.2006 OF I.T.A.TRIBUNAL,
COCHIN BENCH, ERNAKULAM
APPELLANT/APPELLANT:
THE COMMISSIONER OF INCOME TAX,
THRISSUR
BY ADV SRI.JOSE JOSEPH, SC, FOR INCOME TAX
RESPONDENT/RESPONDENT:
M/S.SOUTH INDIAN BANK
THRISSUR.
BY ADVS.
SRI.JOSEPH MARKOSE (SR.)
SRI.V.ABRAHAM MARKOS
SRI.ABRAHAM JOSEPH MARKOS
SRI.ISAAC THOMAS
SHRI.ALEXANDER JOSEPH MARKOS
SHRI.SHARAD JOSEPH KODANTHARA
THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 13.07.2021, THE
COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
ITA No. 844 of 2009
-2-
JUDGMENT
S.V.BHATTI,J.
Heard learned Standing Counsel Mr.Jose Joseph and learned
Senior Advocate Mr.Joseph Markos for parties.
2. Revenue is the appellant. The South Indian Bank Ltd
Trichur/Assesee is the respondent. The appeal is directed
against the order of the Income Tax Appellate Tribunal, Cochin
Bench in I.T.A 1207/Coch/2004 dated 28.09.2006. The appeal deals
with the issues arising from the tax return filed by the assessee
for the assessment year 2000-01.
2.1. The Assessing Officer through the assessment order in
Annexure-A disallowed the claim of the assessee under Section
36(1)(viia). Similarly, the Assessing Officer disallowed the claim
of payment of broken period interest on securities purchased by
the assessee for being compliant with statutory norms. The
ITA No. 844 of 2009
assessee filed appeal before the Commissioner of Income Tax
(Appeals) and the appeal was allowed in part. In the appeal filed
by the revenue before Income Tax Appellate Tribunal, through
Annexure-C order, the Tribunal upheld the order of the
Commissioner of Income Tax (Appeals) and the claims of the
assessee under Section 36(1)(viia) and broken period interest
were allowed. Hence the instant Income Tax Appeal, at the
instance of the revenue under Section 260 A of the Income Tax
Act (for short, the Act). The following substantial questions of
law are raised by the revenue:
1. Whether, on the facts and in the circumstances of
the case and on an interpretation of the relevant
provisions, the Tribunal is right in law,-
i) in interfering with the disallowance of bad debts
written off under section 36(1)(vii) amounting to
Rs.8,47,40,283/-?
ii) in allowing the bad written off under section 36(1)
(vii) amounting to Rs.8,47,40,283/-?
2. Whether, on the facts and in the circumstances of
the case and also in the light of the decision of the
Supreme Court in United Commercial Bank (32 ITR 688)
followed in subsequent decisions of Supreme Court,-
ITA No. 844 of 2009
i) the assessee is entitled to claim deduction of broken
period interest (Rs.3,85,29,440/-)?
ii) The Tribunal is right in law interfering with the
disallowance of broken period interest?
(Emphasis added)
3. The first question is regarding the eligible deduction
under Section 36(1)(viia) of the Act. It is stated by the counsel
appearing for the parties that question no.1 is covered by the
judgment of the Supreme Court in Catholic Syrian Bank v.
Commissioner of Income Tax1 and had answered the issue in
favour of assessee and against the revenue. We are referring to
the decision of the Apex Court with a limited view to
comprehensively advert to the outcome on all the questions
raised by the revenue in the instant appeal. The operative
portion in Catholic Syrian Bank Ltd case reads thus:
"Firstly, the Full Bench ignored the significant expression
appearing in both the proviso to Section 36(1) (vii) clause (v) of
Section 36(2) i.e .,
1[2012] 343 ITR 270 (SC)
ITA No. 844 of 2009
'assessee to which clause (viia) sub-section(1) applies'. In other
words, if the case of the assessee does not fall under Section
36(1)(viia) proviso/limitation would not come into play.
xxxx xxxx xxxx
"Consequently, while answering the question in favour of the
assessee, we allow the appeals of the assessee and dismiss the
appeals preferred by the revenue. Further, we direct that all
matters be remanded to the Assessment Officer for
computation in accordance with law, in light of the law
enunciated in this judgment."
4. The substantial question no.2 is a claim made
towards payment of broken period interest by the assessee.
The question is covered also in favour of the assessee and
against the revenue in the reported judgment in
Commissioner of Income Tax v. Nedungadi Bank Ltd 2
read with Commissioner of Income Tax v. South Indian
Bank3 The operative portion of the judgment is excerpted
hereunder:
2 (2003) 264 ITR 545 (Ker.)
3(2000) 241 ITR 374 (Ker.)
ITA No. 844 of 2009
"For all these reasons, we are of the view that the Income-tax
Appellate Tribunal has rightly held that the securities held by
the assessee-bank in all these cases are the stock-in-trade of
the business of the assessee-banks and the notional loss
suffered on account of the revaluation of the said securities at
the close of the year is an allowable deduction in the
computation of the profits of the appellant. This disposes of the
first two questions mentioned in para. 10 above."
The questions of law framed, by following the judgments
referred to above, are answered in favour of the assessee and
against the revenue.
Income Tax Appeal stands dismissed accordingly.
Sd/-
S.V.BHATTI
JUDGE
Sd/-
BECHU KURIAN THOMAS
JUDGE
JS
ITA No. 844 of 2009
APPENDIX
APPELLANT'S ANNEXURES
ANNEXURE A TRUE COPY OF THE ORDER OF THE ASSESSING OFFICER
U/S. 143(3) OF THE IT ACT DATED 30/09/2002.
ANNEXURE B TRUE COPY OF THE ORDER OF THE COMMISSIONER OF
INCOME TAX (APPEALS) IN ITA NO.71/RI/TCR/CIT-
V/02-03 DATED 06/07/2004.
ANNEXURE C TRUE COPY OF THE ORDER OF THE INCOME TAX
APPELLATE TRIBUNAL IN ITA NO.1207/COCH/2004
DATED 28/09/2006
RESPONDENT'S ANNEXURES: NIL
