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2003 (3) TMI 88 - HC - Income Tax1. Whether the Tribunal was right in holding that the amount received from the Unit Trust of India was dividend? - 2. Whether the Tribunal was right in law in holding that the income received by the assessee from the Unit Trust of India was entitled to deduction under section 80M of the Income-tax Act? - we answer the above two questions in the affirmative, i.e., in favour of the assessee and against the Department. - Whether the Tribunal was right in holding that an amount of Rs. 2,34,05,457 credited to the suspense account was not taxable in the assessment year in question? - the question is answered in the affirmative, i.e., in favour of the assessee and against the Department. - Whether the Tribunal was right in holding that the amount of Rs. 2,34,05,457 credited to the interest suspense account was taxable in the assessment year in question? - the question is answered in the affirmative, i.e., in favour of the assessee-bank and against the Department.
Issues Involved:
1. Whether the amount received from the Unit Trust of India was dividend. 2. Whether the income received by the assessee from the Unit Trust of India was entitled to deduction under section 80M of the Income-tax Act. 3. Whether an amount credited to the suspense account was taxable in the assessment year in question. 4. Whether the amount credited to the interest suspense account was taxable in the assessment year in question. 5. Whether subsidy given by the State Bank of India to subsidiary branches was revenue expenditure and allowable as business deduction. Issue-wise Detailed Analysis: 1. Whether the amount received from the Unit Trust of India was dividend: The court analyzed the scheme of the Unit Trust of India Act, 1963, particularly sections 25A and 32(3). The State Bank of India (SBI) contended that the income received was dividend, eligible for deduction under section 80M of the Income-tax Act. The Department argued it was interest, not dividend, as SBI was an initial contributor, not a unit-holder. The court found that the income distributed to initial contributors was similar to dividends distributed to unit-holders. The court concluded that the income received by SBI was indeed dividend. 2. Whether the income received by the assessee from the Unit Trust of India was entitled to deduction under section 80M of the Income-tax Act: Based on the finding that the income was dividend, the court held that SBI was entitled to the benefit of section 80M of the Income-tax Act. The court emphasized that section 32(3) of the Unit Trust of India Act was a deeming provision applicable to unit-holders, introduced to prevent unit-holders from arguing that their income was not dividend. Since SBI was an initial contributor, it was considered similar to a shareholder, thus making the income received as dividend eligible for deduction under section 80M. 3. Whether an amount credited to the suspense account was taxable in the assessment year in question: The court referred to the Supreme Court judgments in UCO Bank v. CIT [1999] 237 ITR 889 and United Commercial Bank v. CIT [1999] 240 ITR 355. These judgments established that amounts credited to suspense accounts were not taxable in the assessment year in question. Therefore, the court answered this issue in the affirmative, in favor of the assessee and against the Department. 4. Whether the amount credited to the interest suspense account was taxable in the assessment year in question: Similarly, the court referred to the Supreme Court judgment in UCO Bank v. CIT and the Bombay High Court judgment in American Express International Banking Corporation v. CIT [2002] 258 ITR 601. These cases held that amounts credited to the interest suspense account were not taxable in the assessment year in question. The court answered this issue in the affirmative, in favor of the assessee-bank and against the Department. 5. Whether subsidy given by the State Bank of India to subsidiary branches was revenue expenditure and allowable as business deduction: The court referred to its earlier judgment in CIT v. State Bank of India [2003] 261 ITR 82, which held that subsidies given by SBI to subsidiary branches were revenue expenditures and allowable as business deductions. Therefore, the court answered this issue in the affirmative, in favor of the State Bank of India-assessee and against the Department. Conclusion: The court disposed of both references, answering all questions in favor of the assessee and against the Department, with no order as to costs.
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