Case Law Details
Brief of the Case
Karnataka High Court held In the case of CIT & ACIT vs. Karnataka Vikas Grameen Bank that Section 41(1) attracted when an allowance or deduction is sought to be made in respect of loss, expenditure or trading liability is incurred by the assessee. In the instant case, the sum of Rs.58,38,581/- has remained with the assessee owing to the fact that the payees or holders of the draft/pay orders had not encashed them. The language employed by the legislature being unambiguous, it would be incongruous to construe the said sum as either a loss, expenditure or trading liability incurred by the assessee. While dealing with a situation of unclaimed amount, the Hon’ble Supreme Court in the case of T.V. Sundaram Iyengar (1996) 222 ITR 344, has held that CIT (A) correctly observed that the amount were not in nature of revenue receipts but were of capital nature. The provisions of section 41(1) were not attracted in the facts of this case because the assessee’s liability to pay back the amounts to its customers had not ceased.
Facts of the Case
The assessee is a Regional Rural Bank registered under the Schedule of Reserve Bank of India. It caters to the needs of Agricultural and Cottage Industry sectors. It makes investment in Government and other securities. For the assessment year 2007-08, assessee declared a taxable income of Rs.94,26,91,495/-. Assessment was completed and an income of Rs.112,45,33,700/- was assessed against the returned income of Rs.94,26,91,495/- by disallowing Rs.17,59,00,087/- claimed towards depreciation on Investment , Rs. 87,224 claimed u/s 14A , Rs. 23,040 towards commission on locker rent and Rs. 58,31,851 towards Stale Drafts / Pay Orders.
For the assessment year 2008-09, the assessee filed its income declaring an income of Rs.93,25,06,010/- as per revised return. Assessment for the said period was also completed and the income was determined at Rs.102,66,57,128/- by disallowing Rs.2,47,52,075/- deduction claimed under Section 36(1)(viia); Rs.6,74,91,000/- towards deductions claimed under Section 36(1)(viii); Rs.68,478/- claimed under Section 14A; Rs.2,61,911/- claimed under loss of sale of assets; Rs.13,94,212/- claimed as exemption towards tax on Stale Drafts; Rs. 1,82,112 claimed towards Commission paid to Pigmy Agents and Rs. 1330 towards Locker rent.
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