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TMI Blog2012 (6) TMI 772X X X X Extracts X X X X X X X X Extracts X X X X ..... ve Bank of India. iv) For these and such other grounds that may be urged at the time of hearing, it is prayed that the order of the Commissioner be cancelled and the order of the Assessing Officer restored to the extent of additions on account of write back of stale demand drafts. 3. Brief facts of the case are as follows:- The assessee is a Government of India undertaking. For the concerned assessment year, return of income was filed on 29/10/2007 declaring a total income of Rs. 593,48,70,178/-. The Assessing Officer completed the assessment under section 143(3) of the Act on 26/11/2009 determining the total income at Rs. 1772,81,78,854/-. 3.1 Subsequently, the CIT, LTU, Bangalore invoked the jurisdiction under section 263 of the Act and issued notice dated 7/2/2011. The CIT proposed to make addition on account of write back of stale demand drafts and capital gains (not considered for computation of tax). The assessee bank objected to the proposed revision of assessment order in respect of addition of write bank of stale demand drafts. It was contended by the assessee bank that the write back of stale demand drafts and credit of the same to the reserve account by passing an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eipt of cash in the course of issue of Demand drafts etc., which have lapsed. Moreover, issue of DDs are part of the trading activity of the bank and in the light of the decision of Hon'ble Supreme Court CIT v T V Sundaram Iyengar and Sons 222 ITR 344 (SC), the amount of Rs. 52,77,81,539/- clearly represents a taxable receipt and there is no provision in the Income Tax Act to allow the same as a deduction from total income. Hence, the Assessing Officer is directed to withdraw the deduction of Rs. 52,77,81,539/- claimed by the assessee". 4. Aggrieved by the said order of the Commissioner passed under section 263 of the Act, the assessee bank is in appeal before us raising the grounds mentioned supra. The assessee bank filed a paper book containing 60 pages inter alia comprising of copy of the notice dated 7.2.2011 issued under section 263 of the Act, copy of the reply dated 14/2/2011 by the assessee bank, copies of letters from the assessee bank to the RBI and RBI's instructions dated 30/3/2007 etc. 4.1 The learned senior counsel for the assessee reiterated the submissions made before the CIT (reproduced at para 2 of the impugned order of the CIT). Apart from the submissions made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BSCA F-02 204 NSR 2007 dt. March 3, 2007 requesting for approval to transfer the amount of Rs. 101.03 cr. Pertaining to entries lying unreconciled in the inter-branch account. In this regard we have to advise that taking into account the request received from you, it has been decided that in respect of entries originated in inter-branch account upto March 31, 1999 and still pending reconciliation, you may, as a one time measure transfer the net credit balance (net value of debit and credit entries outstanding) to 'General Reserve' subject to compliance with the following conditions: i) The amount should first be credited to profit and loss account and shown under item VII (Miscellaneous income) under Schedule 14 (other income). ii) Thereafter, it should be appropriated to the General Reserve to be utilized to meet the future claims, if any. Such appropriation should be 'below the line' (Net of taxes, if any and net of transfer to Statutory Reserve) as applicable to the above amount. iii) Any claim in respect of these entries, in future, should be honoured by debit to the same head of profit and loss account viz. Miscellaneous income and an equivalent amount (net of tax bene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bank to honour the claims as and when it arises. Further, the money transferred to the general reserve account cannot be used for the declaration of the dividend; therefore, it is not the income, as the bank does not have liberty to use the money in a manner it likes as its own income. In other words, it is very difficult to say that these amounts transferred to the general reserve account, as per the direction of the RBI have traces of income, either at the time of receipt or at the time of write off to the P&L account. In fact, the RBI has permitted the assessee bank to close these differences to the P&L account with the rider that the sums in question are not permitted to be used in the form of distribution of dividends and it was specifically made clear by the RBI that the obligation to discharge the liabilities arising thereunder is upon the assessee bank. Meaning thereby, there is no question of the amounts being treated as income in the hands of the bank. 6.2 The CIT while passing the revisionary order under section 263 of the Act has relied upon the judgement of the Hon'ble Supreme Court in the case of CIT v T V Sundaram Iyengar and Sons Ltd. reported in 222 ITR 344. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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