2021 (11) TMI 1131 - HC - Income Tax

Depreciation on assets leased to others - HELD THAT - Substantial question of law No.1 raised by the revenue the issue is no more res integra in view of the ruling of this Court in the assessee s own case 2020 (11) TMI 344 - KARNATAKA HIGH COURT wherein the order of disallowing depreciation of asset had been answered in favour of the assessee. MAT applicability u/s 115JB on banking companies - HELD THAT - Substantial question of law which has been admitted by this Court as aforesaid the Co-ordinate Bench of this Court in M/s.ING Vysaya Bank Limited 2020 (1) TMI 1116 - KARNATAKA HIGH COURT has categorically held that the provisions of Section 115JB(2) of the Income Tax Act 1961 do not apply to the Banking Companies. We have no reason to differ from the same. Accordingly we answer the said substantial question of law in favour of the assessee and against the revenue

Summary

Issues involved:
1. Applicability of Section 115JB to banking companies.
2. Disallowance of depreciation on assets leased to others.
3. Treatment of investments shown as Stock in Trade in books of account.

Analysis:

Issue 1: Applicability of Section 115JB to banking companies
The appeal was filed by the revenue/appellants under Section 260A of the Income Tax Act, 1961, challenging the order of the Income Tax Appellate Tribunal related to the Assessment Year 2012-13. The substantial question of law was whether Section 115JB is applicable to banking companies if accounts are not drawn up as per the requirement of Schedule VI of the Companies Act, 1956. The Court referred to a previous ruling in a similar case and held that Section 115JB(2) does not apply to banking companies. The judgment was based on a previous ruling in a case involving ING Vysaya Bank Limited, where it was categorically stated that the provisions of Section 115JB(2) do not apply to banking companies. Consequently, the Court ruled in favor of the assessee and against the revenue, dismissing the appeal.

Issue 2: Disallowance of depreciation on assets leased to others
The Court noted that the issue of disallowing depreciation on assets leased to others had been settled in favor of the assessee in a previous ruling related to the same case. The Court referred to its earlier order in ITA No.332/2016 dated 02.11.2020, where the disallowance of depreciation on assets had been answered in favor of the assessee. Therefore, this issue was considered resolved in favor of the assessee.

Issue 3: Treatment of investments shown as Stock in Trade in books of account
Regarding the treatment of investments shown as Stock in Trade in books of account, the revenue did not press the issue related to Circular No.18 of 2015. As a result, this issue was not pursued further during the proceedings. The Court did not provide any specific ruling on this issue as it was not pressed by the revenue and was not considered in the judgment.

In conclusion, the High Court of Karnataka dismissed the appeal filed by the revenue/appellants, upholding the non-applicability of Section 115JB to banking companies and settling the issue of disallowance of depreciation on assets leased to others in favor of the assessee based on previous rulings. The issue related to the treatment of investments shown as Stock in Trade was not pursued further as it was not pressed by the revenue during the proceedings.