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TMI Blog2013 (11) TMI 166X X X X Extracts X X X X X X X X Extracts X X X X ..... tax whether “income from other sources” or “profits and gains of business or profession” – Held that:- The interest on income-tax refund received by the assessee as income from other sources and not profits and gains of business or profession - The source of such interest income being the income-tax refund arising from the income-tax proceedings, the same cannot be treated as business income of the assessee - the activity resulting into income-tax refund as well as interest payable thereon as per the provisions of section 244A of the Income-tax Act, 1961 cannot form part of business activity of the assessee and the same cannot even be treated as an activity incidental to the business of the assessee so as to say that such interest constitutes its business income – Decided against the Assessee. Determination of the Head of Income - under which miscellaneous income earned by the assessee is chargeable to tax whether “income from other sources” or “profits & gains of business or profession” - Held that:- Miscellaneous income earned by the assessee as the income from other sources and not business income was upheld by the learned CIT(Appeals) observing that the said income had no li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on account of broken period interest. 3. The assessee in the present case is a banking company which filed its return of income for assessment year 2003-04 on 01-10-2003 declaring total income at Nil. During the course of assessment proceedings, it was noticed by the AO that the assessee has deducted from the computation of its total income the interest accrued but not realized amounting to Rs.3,46,11,759/- to arrive at the figure of profits and gains of business. Since the assessee was following mercantile system of accounting, the AO required it to explain why this interest accrued on securities held as stock in trade should not be added to its total income. In reply, it was submitted on behalf of the assessee that the amount of interest accrued in question cannot be considered as its income at all for the year under consideration as the same becomes its income only on realization of interest by the holder of the securities from RBI. It was also submitted that the bank has been following this method since assessment year 1991-92 and there was, therefore, no loss of any revenue on this count. It was also contended as an alternative that the assessee bank, in any case, was elig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not accepted by the Department and SLP was filed against the same before the Hon ble Supreme court. 6. The addition made by the AO on account of interest accrued but not realized was disputed by the assessee in an appeal filed before the learned CIT(Appeals) and the following submissions were made on its behalf before the learned CIT(Appeals) in support of the case on this issue : The Appellant has been carrying on the banking business since inception and has been following the mercantile system of accounting. Following the decision of CIT(A)-XIII for AY 1991-92 vide his order dt. 31.5.1995 in a similar matter, the CIT held the correct method of accounting for the interest paid/received on securities. The Appellant has been following the directions ever since and accordingly, preparing the share trading /ac as per directions given by the CIT and the same had also been accepted by the Department in subsequent assessments . Reliance was placed on the following judicial decisions: i) CIT V/s South Indian Bank Ltd. 241 ITR 0374. ii) CIT V/s American Express International Banking Corpn. 258 ITR 0601. = (2003-TII-85-HC-MUM-INTL) iii) CIT V/s CITI Bank 268 ITR 18. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of Goetze (India) Ltd. vs CIT (2006) 284 ITR 323 in which the Hon. Supreme Court has held that a relief if omitted to be sought has to be claimed only by filing a revised return and that this requirement cannot be circumvented by claiming the relief in any other form. Tested on this, I find that there is no claim through a revised return in the matter. In the line with the foregoing, the addition is confirmed and the ground of appeal is dismissed. 8. The learned counsel for the assessee submitted that the interest in question on the concerned securities was payable only on respective due dates and, therefore, the same could be said to have accrued only on such due dates and not prior to that. He submitted that the assessee bank did not have the right to claim such interest before the due dates specified in the bonds and thus the said interest became the income only on the relevant due dates. He contended that the AO as well as the learned CIT(Appeals) have failed to appreciate that the assessee bank was having the right to receive the interest only on the due dates and on the purchase/sale of bonds, interest was paid/received from the purchaser/seller of securities a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest on income-tax refund is chargeable to tax whether income from other sources or profits and gains of business or profession . 12. We have heard the arguments of both the sides and also perused the relevant material on record. Although the learned counsel for the assessee has cited certain judicial pronouncements in support of the assessee s case that interest on incometax refund constitutes business income of the assessee keeping in view the nature of its business being that of a banking company, it is observed that none of the said judicial pronouncements cited by the learned counsel for the assessee is directly on the issue under consideration. On the other hand, the decision of coordinate bench of this Tribunal in the case of M/s Laxmi Centre vs. ITO (ITA No. 3149/Mum/2009 dated 16th December, 2011) is directly on the issue wherein it was held that the source of such interest income being the income-tax refund arising from the income-tax proceedings, the same cannot be treated as business income of the assessee. It was held that this activity resulting into income-tax refund as well as interest payable thereon as per the provisions of section 244A of the Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed for statistical purposes. 15. The next issue raised by the assessee is relating to the addition made by the AO and confirmed by the learned CIT(Appeals) while computing its book profit u/s 115JB of the Act on account of the provision for doubtful debts. 16. We have heard the arguments of both the sides on this issue and also perused the relevant material on record. The learned counsel for the assessee at the outset, has relied on the decision of Mumbai G-Bench of ITAT in the case of Krung Thai Bank PCL vs. Joint Director of Income-tax (ITA No. 3390/Mum/2009 = (2010-TII-126-ITAT-MUM-INTL) dated 30th September, 2010) wherein it was held that the provisions of section 115JB could only come into play when the assessee was required to prepare its profit loss account in accordance with the provisions of Part II and III of Schedule VI to the Companies Act and the starting point of computation of minimum alternate tax (MAT) u/s 115JB is the result shown by such profit loss account. It was held that in the case of banking companies, the provisions of Schedule VI to the Companies Act, however, are not applicable in view of exemption set out under proviso to section 211(2) of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... involved in ground No. 3 of the assessee s appeal relating to determination of head of income under which miscellaneous income is chargeable to tax is also similar to ground No. 3 of assessee s appeal for assessment year 2003-04 which has been decided by us in the foregoing portion of this order. Following our conclusion drawn in assessment year 2003-04 on this issue, we set aside the impugned order of the learned CIT(Appeals) on this issue and restore the matter to the file of the AO to decide the same afresh after ascertaining the exact nature of non banking assets claimed to be held by the assessee in the normal course of its banking business. Needless to say that the AO shall afford sufficient opportunity to the assessee of being heard. Ground No. 3 of the assessee s appeal accordingly treated as allowed for statistical purposes. 20. The next issue relating to additions made by the AO and confirmed by the learned CIT(Appeals) on account of provision for doubtful debts amounting to Rs.15,12,85,840/- and provision for expenses amounting to Rs.35,34,886/- while computing the book profit of the assessee u/s 115JB of the Act is similar to the one involved in assessee s appeal for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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