Case Law Details
PCIT Vs Karnataka Bank Ltd. (Supreme Court of India)
The Supreme Court dismissed the Special Leave Petition filed by the Revenue against the judgment of the Karnataka High Court in the case relating to Assessment Year 2004-05. The Supreme Court condoned the delay but observed that it did not find any good ground to interfere with the impugned judgment in exercise of its jurisdiction under Article 136 of the Constitution of India. Consequently, the Special Leave Petition was dismissed and all pending applications stood disposed of.
The High Court proceedings had arisen from the Revenue’s appeal against the order of the Income Tax Appellate Tribunal (ITAT), Bengaluru, dated 8 February 2024. The Revenue had challenged the Tribunal’s decision on several questions concerning the valuation of the assessee bank’s investment portfolio and the allowability of diminution in the value of investments.
Read HC Judgment in this case: Revenue Appeal Rejected as Investment Valuation Issue Already Settled: Karnataka HC
The Revenue contended that, during assessment proceedings and while giving effect to earlier orders, the Assessing Officer had noticed that the assessee had not effected diminution in the value of investments in its books of account in accordance with the applicable guidelines. According to the Revenue, the assessee had considered market value only in respect of securities where the value of investments had diminished, while appreciation in other securities had not been taken into account. It was argued that this approach violated the RBI guidelines dated 16 October 2000 relating to classification and valuation of investments by banks and was contrary to CBDT Circular No. 665 dated 5 October 1993.
The Revenue further argued that depreciation in certain investments ought to have been netted off against appreciation in other investments. It was also submitted that, for determining real income under Section 145 of the Income-tax Act, suitable adjustments based on proper accounting practices were necessary. Additionally, the Revenue pointed out that a Special Leave Petition filed before the Supreme Court on an identical issue involving the assessee for Assessment Year 2008-09 was pending consideration.
On behalf of the assessee, it was submitted that the Tribunal had followed its earlier order in the assessee’s own case for Assessment Year 2014-15 and had decided the issues in favour of the assessee. It was also contended that the substantial questions of law raised in the appeal had already been answered by the Karnataka High Court in the assessee’s own case relating to Assessment Year 2004-05.
After considering the submissions, the High Court observed that the Tribunal had extracted the grounds raised by the Revenue in its impugned order. The Court noted that the issue relating to netting off depreciation against appreciation in other securities, which was pressed before the High Court by the Revenue, had not been raised before the Tribunal. The High Court held that an issue not raised before the Tribunal could not subsequently form the subject matter of an appeal before the High Court.
As regards the remaining questions of law, the High Court found that they were squarely covered by its earlier judgment in the assessee’s own case. In view of the existing precedent, the Court found no reason to entertain the Revenue’s appeal and dismissed it. However, the Court clarified that it would be open to the Revenue to pursue any remedy available before the Tribunal for adjudication of the issue concerning netting of appreciation, in accordance with law.
The Supreme Court thereafter examined the challenge to the High Court’s judgment. Upon consideration, it declined to interfere with the decision rendered by the High Court. The dismissal of the Special Leave Petition effectively left undisturbed the High Court’s findings that the issues already covered by earlier precedent did not warrant reconsideration and that the issue concerning netting of appreciation could not be examined for the first time in an appeal before the High Court when it had not been urged before the Tribunal.
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
1. Delay condoned.
2. We do not find a good ground to interfere with the impugned order/judgment in exercise of our jurisdiction under Article 136 of the Constitution of India.
Accordingly, the special leave petition stands dismissed.
3. Pending application(s), if any, shall stand disposed of.
Author Bio
