| Case ID |
d89307d5-3898-4d17-8861-8668a14f93f0 |
| Body |
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| Case Number |
Tax Cases Nos. 301 and 302 of 1997 |
| Decision Date |
Jul 13, 1998 |
| Hearing Date |
|
| Decision |
Held, dismissing the application for directing reference, that the Court in T.C. Nos.359 and 360 of 1986 and 1259 of 1987 concluded that the investment made by the bank was in the nature of and forming part of its stock-in-trade and the profit arising out of the redemption of securities was assessable under the head "Business profit" and not under the head "Capital gains". In these petitions, which concerned the assessment year 1988-89, the Tribunal followed the judgment of the Karnataka High Court which had been referred to with approval by the Court, and held that the change in the method of valuation of the investment was permissible, as the assessee had the option of valuing the investment at cost or at market price. The fact that the assessee had adopted the cost price in earlier years, but chose to change that mode of valuation to the market price was not in any way contrary to the requirements of the Act. No exception could have been taken to that finding of the Tribunal. The Revenue sought reference taking contradictory stands in respect of the same assessee, in spite of the fact that its contention to the contrary had been upheld by the Court on the earlier occasion. |
| Summary |
In the case of COMMISSIONER OF INCOME TAX vs. TAMIL NADU MERCANTILE BANK LTD., the Madras High Court deliberated on Tax Cases Nos. 301 and 302 of 1997, with a decision dated July 13, 1998. The core issue revolved around the Tribunal's allowance of deduction for loss on the revaluation of securities. The Revenue had contested this decision, arguing for a contrary stance based on earlier High Court decisions. However, the High Court upheld the Tribunal's decision, emphasizing that the investment by the bank was part of its stock-in-trade, thereby classifying the profit from the redemption of securities under 'Business profit' rather than 'Capital gains' as per Section 256(2) of the Indian Income Tax Act, 1961. The Court dismissed the Revenue's application for directing reference, reinforcing that the change in valuation method from cost to market price was lawful and within the assessee's discretion. Additionally, the Revenue's attempt to present contradictory arguments pertaining to the same assessee was rebuffed, leading to the dismissal of the tax case petitions with exemplary costs. This judgment underscores the judicial stance on valuation methods in income tax assessments and reaffirms the permissible flexibility granted to assessees in financial reporting. |
| Court |
Madras High Court
|
| Entities Involved |
COMMISSIONER OF INCOME TAX,
TAMIL NADU MERCANTILE BANK LTD.
|
| Judges |
B. C. PATEL,
P. B. MAJMUDAR
|
| Lawyers |
C.V. Rajan,
P.P.S. Janarthana Raja
|
| Petitioners |
COMMISSIONER OF INCOME TAX
|
| Respondents |
TAMIL NADU MERCANTILE BANK LTD.
|
| Citations |
2001 SLD 483,
2001 PTD 3177,
1999 240 ITR 929
|
| Other Citations |
CIT v. Madras Central Urban Bank Ltd. AIR 1929 Mad. 387,
Karnatka Bank Ltd. v. CIT (1978) 114 ITR 421 (Kar.),
Punjab Cooperative Bank Ltd, v. CIT (1940) 8 ITR 635 (PC),
Sardar Indra Singh & Sons Ltd. v. CIT (1953) 24 ITR 415 (SC),
State Bank of Hyderabad v. CIT (1985) 151 ITR 703 (AP),
Union Cold Storage Co. v. Simpson (Inspector of Taxes) (1939) 7 ITR 630 (CA)
|
| Laws Involved |
Indian Income Tax Act, 1961
|
| Sections |
256(2)
|