VIJAYA BANK LIMITED Vs. ADDITIONAL COMMISSIONER OF INCOME TAX BANGALORE
LAWS(SC)-1990-9-13
SUPREME COURT OF INDIA (FROM: KARNATAKA)
Decided on September 19,1990

VIJAYA BANK Appellant
VERSUS
ADDITIONAL COMMISSIONER Respondents


Cited Judgements :-

DIRECTOR OF INCOME TAX VS. CREDIT SUISSE FIRST BOSTON (CYPRUS) LTD [LAWS(BOM)-2012-7-222] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. LAKSHMI VILAS BANK LTD [LAWS(MAD)-2002-12-187] [REFERRED TO]
C I T VS. BANK OF RAJASTHAN LIMITED [LAWS(RAJ)-2008-3-118] [REFERRED TO]
COMMISSIONER OF INCOME TAX-2 VS. HDFC BANK LTD [LAWS(BOM)-2014-7-88] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. WALFORT SHARE AND STOCK BROKERS (P) LTD [LAWS(BOM)-2008-8-255] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. LAKSHMI VILAS BANK LTD. [LAWS(MAD)-2010-2-715] [REFERRED TO]
C I T MUMBAI VS. WALFORT SHARE AND STOCK BROKERS P LTD [LAWS(SC)-2010-7-114] [RELIED ON]
COMMISSIONER OF INCOME TAX VS. PNB FINANCE AND INDUSTRIES LTD [LAWS(DLH)-2010-10-86] [REFERRED TO]
EVEREADY INDUSTRIES INDIA LTD VS. COMMISSIONER OF INCOME TAX [LAWS(CAL)-2011-3-29] [REFERRED TO]
COMMISSIONER OF INCOME TAX-IV VS. DEVASAN INVESTMENT PVT LTD [LAWS(DLH)-2014-4-108] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. AREEZ P KHAMBHATTA [LAWS(GJH)-2014-11-131] [REFERRED TO]
COMMISSIONER OF INCOME-TAX VS. STATE BANK OF INDIA (SBI) [LAWS(KAR)-2020-9-408] [REFERRED TO]


JUDGEMENT

- (1.)- This appeal arises from the judgment of the Karnataka High Court in I.T. Referred Case No. 33 of 1973 (reported in 1976 Tax LR 524). The question which arose for consideration was :
"Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the following two sums were admissible as deductions under Sections 19, 20 and 37 of the Income-tax Act 1961) :-

a) Rs. 58,568/-, interest accrued on securities taken over by the assessee bank from Jayalakshmi Bank Ltd., and

b) Rs. 11,630/ -, interest accrued up to the date of purchase in the case of securities purchased by the assessee bank from the open market -

(2.)During the accounting year relevant to the assessment year 1968-69, the assessee which is a banking company received the above mentioned amounts as interest on securities purchased from another banking company as well as in the open market. These two amounts were brought to tax by the. Income-tax Officer u/ S. 18 of the Income-tax Act, 1961. The assessee's claim that these amounts were deductible under Sections 19, 20 and 37 was rejected by the officer. The order of assessment was confirmed by the Appellate Assistant Commissioner. However, on further appeal, the Income-tax Appellate Tribunal held that the interest earned from the securities was deductible under Sections 19, 20 and 37.
(3.)The High Court on a reference at the instance of the revenue held that the amounts received by the assessee as interest on securities were taxable under S. 18 of the Act. The High Court referred to Commissioners of Inland Revenue v. Pilcher (1949) 31 Tax Cases 314, and other cases, and observed that the amounts expended by the assessee for the purchase of securities were in the nature of capital outlay, and they could not be set off as expenditure against income accruing on the securities.
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