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TMI Blog2013 (5) TMI 636X X X X Extracts X X X X X X X X Extracts X X X X ..... d no banking activities were carried out in the year under appeal. Assessee filed its return of income for A.Y. 2009-10 on 25.9.2009 declaring total loss of Rs. 413217/-. The case of selected for scrutiny and thereafter the assessment was framed u/s. 143(3) vide order dated 29.11.2011 and the total income was determined at Rs. 85,48,379/-. Aggrieved by the order of Assessing Officer, Assessee carried the matter before CIT(A). CIT(A) vide order dated 12.9.2012 dismissed the appeal of the Assessee. Aggrieved by the aforesaid order of CIT(A), Assessee is now in appeal before us and has raised the following grounds:- [1] The Assessing Officer has erred in law in making addition of Rs. 31,73,391/- on the ground that the above interest from Orie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax in subsequent years. AO accordingly treated the interest from OBC Bank as income of the year. Aggrieved by the order of Assessing Officer, Assessee carried the matter before CIT(A). CIT(A) upheld the order of Assessing Officer by holding as under:- "The reason for making the addition of Rs. 31,73,391/- as mentioned by the AO in the assessment order as well as the above submission of the AR of the appellant have been considered. The first ground of appeal of the appellant is that the AO has erred in law in making addition of Rs. 31,73,391/- on the ground that this interest from Oriental Bank of Commerce has not been credited in the P & L Account or not offered for taxation in the subsequent year. The AR in his above submission has submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the P & L Account and this amount was offered for taxation and I therefore, hold that the AO was correct in making the addition of this amount of Rs. 31,73,391/- to the total income of the appellant and therefore, the same is confirmed". 4. Aggrieved by the order of CIT(A), the Assessee is now in appeal before us. 5. Before us the Ld A.R. submitted that since the Assessee bank is under liquidation the Assessee is maintaining its accounts on cash basis. During the year the Assessee had received total interest from banks aggregating to Rs. 52,96,362/- which also includes interest of Rs 46,18,408/- the Assessee had received from OBC. The interest amount of Rs 46,18,408 already includes the accrued interest of Rs 31,73,391/-. The additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect him to verify the contention of the Assessee. If the contention of the Assessee is found correct, the addition made be deleted. The Assessee is also directed to furnish the necessary evidence to the satisfaction of Assessing Officer and reconcile its interest receipts. Thus this ground of assessee is allowed for statistical purposes. 8. Ground no. 2 is w r t considering the interest income as" income from other sources":- 9. During the course of assessment proceedings Assessing Officer notice that the interest receipts has been considered to be income from business by the Assessee. Assessing Officer considered the same to income from other sources for the reason that the Assessee's banking licence was suspended by RBI on 25.10.2005 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nk as it was not legally permitted to carry on banking business. In this regard, I agree with the view of the AO that the interest received on deposits during the period of liquidation cannot be considered as business receipts because the bank was not engaged in the business of banking. In this regard, the support has been drawn from the decisions of Allahabad High Court in the case of M/s. Vijay Sugar Mills Ltd, (1972) 86 ITR 402, wherein it is held that the liquidator of the company engaged in fairly realizing the assets of the company cannot be said to be carrying on business. Again Hon'ble Gujarat High Court in the case of Morvi Mercantile Bank Ltd. 104 ITR 568 has held that where the assessee, the banking company was wound up and its l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ator has been appointed to administer the activities of the bank. The Assessee was carrying out the recovery from borrowers, repaying the depositors. This fact could not be controverted by Revenue. 14. In the case of Morvi Mercantile Bank Ltd 104 ITR 568, the Hon. Gujarat High Court has held as under: when the liquidator realised the assets and invested the money in short-term deposits pending distribution he was not embarking upon any business. The realisation and distribution of assets cannot, in our opinion, be said to be carrying on business. It is obligatory upon the liquidator to realise the assets and the distribute the money amongst the creditors, and if pending distribution he invested the amount, it cannot be said that he was ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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