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TMI Blog2008 (1) TMI 935X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the addition of ₹ 135,94,36,630 being interest accrued on Government Securities. It is the case of the revenue that the CIT(A) ought to have held that the interest was accrued on a day-to-day basis and such interest was to be treated as income of that year under mercantile system of accounting. This issue has already been considered by the ITAT, Cochin Bench in assessees own case for assessment years 1999-2000, 2000-2001, 2001-2002 and 2003-04. The Tribunal through its order dated 25-8-2006 in ITA Nos. 287/Coch./2003, 490 and 491/Coch./2004 and 654/Coch./2005 has considered the issue and in the light of the earlier decision and the decision of the Karnataka High Court in CIT v. Canara Bank [1992] 195 ITR 661 has held that the CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law. 6. The fourth issue raised by the revenue is that the CIT(A) has erred in treating the loss of ₹ 5 crores arising from capital assets as revenue expenditure under section 37(1) of the Income-tax Act, 1961. The loss has been reported on account of writing off of stock-in-trade which has become dumb. Again this issue was considered by the Tribunal for the earlier assessment years as mentioned in above paragraph above. As the ground is already covered in favour of the assessee by the order of the Tribunal for earlier assessment years, we do not find any reason to interfere in the order of the CIT(A). 7. The fifth issue raised by the revenue is in respect of bad and doubtful debts in view of the newly introduced proviso below ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent and it includes a public company and a government company and the assessee is a public company engaged in providing long term finance for industrial, agricultural and infrastructure facilities. The CIT(A) agreed with the argument of the assessee and held that the assessee being a public limited banking company, is obviously a financial corporation. He held that it is immaterial whether a non-banking company could also be treated as a financial corporation. Accordingly, he allowed the claim of the assessee towards the deduction. 9. We heard both the sides on this point in detail. Shri V. Sathyanarayanan, the learned Chartered Accountant appearing for the assessee contended that even though the assessee is a banking company, it does no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urchase of houses in India for residential purposes, an amount not exceeding 40 per cent of the profit derived from such business of providing long term finance (computed under the head profits and gains of business or profession ) before making any deduction under this clause carried to such reserves account. 11. One of the primary conditions to be satisfied to claim the above deduction is that the assessee must be a financial corporation. As per the argument of the ld. CA, the assessee is a banking company and the term banking means accepting for the purpose of lending or investment of deposits or money form the public, repayable on demand or otherwise and withdrawable by cheque, draft, order or otherwise and therefore, even if th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, the Explanation provides that even if the financial corporation is not registered under a specific Act, still it could be considered as a financial corporation if it is a public company or a Government company and engaged in providing long term finance for industrial or agricultural development, etc. Therefore, the Explanation does not help the argument of the assessee. In section 36 itself, the law has specified different types of financial corporations and institutions like Public Financial Institutions , State Financial Corporations , State Industrial Corporation , etc. This specific meaning assigned by the Act to different forms of financial institutions is a clear demonstration that financial institutions or financial corporatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, the assessee bank is a not notified as above. 16. Therefore, we find that the assessee bank cannot be treated as a financial institution for the purpose of special deduction available under section 36(1)(viii). The banking company may be indulging in different types of business of advancing loans to different categories of people including long term financed. But those activities per se do not make a banking company, a financial corporation as well, Financial Corporation is a distinct entity. 17. In the facts and circumstances of the case, we find that the order of the CIT(A) on this point is not in accordance with law and it has to be set aside. Accordingly, we set aside the order of the CIT(A) deleting the disallowance of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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