IN THE HIGH COURT OF KERALA AT ERNAKULAM
ITA No. 56 of 2007()
1. THE COMMISSIONER OF INCOME TAX,
... Petitioner
Vs
1. KERALA STATE INDUSTRIAL DEVELOPMENT
... Respondent
For Petitioner :SRI.GEORGE K. GEORGE, SC FOR IT
For Respondent : No Appearance
The Hon'ble the Chief Justice MR.H.L.DATTU
The Hon'ble MR. Justice K.T.SANKARAN
Dated :19/07/2007
O R D E R
H.L. DATTU, C.J. & K.T. SANKARAN, J.
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INCOME TAX APPEAL No. 56 OF 2007
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Dated this the 19th July , 2007
J U D G M E N T
H.L. Dattu, C.J.:
The revenue being aggrieved by the orders passed by the Income Tax
Appellate Tribunal, Cochin Bench, Cochin in I.T.A.No. 62/Coch/98 dated
31.12.2002, has filed the present appeal before us , under section 260A of the
Income Tax Act. The revenue has raised the following substantial questions
of law for our consideration and decision. They are as under:
“1) Whether, on the facts and in the circumstances of the
case and also in the absence of a finding that the method
adopted by the assessing officer invoking section 145 of the Act
is not reasonable, the Tribunal is justified in interfering with the
method of treatment given to interest receipts as well as interest
payments by the Assessing Officer?
2) Whether on the facts and in the circumstances of the
case, the method of treatment given to interest receipts and
payments by the assessee, the direction given by the CIT(A)
and the confirmation of the same by the Tribunal are in
accordance with law and accountancy practice?”
2. The assessing officer had found that the assessee had followed
the cash system of accounting for interest receipts and mercantile system
of accounting for interest payments. According to the assessing officer, the
same is impermissible in view of the decision of the Madras High Court in G.
INCOME TAX APPEAL No. 56 OF 2007
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Padmanabha Chettiar and sons vs. CIT (182 ITR P.1). Aggrieved by the
orders passed by the assessing officer, the assessee had carried the matter
before the first appellate authority. The first appellate authority, based on the
notification issued by the Government of India had concluded that the
assessee was following the cash system for interest income and mercantile
system for interest payments including interest expenditure. Accordingly,
the first appellate authority had partly allowed the assessee’s appeal.
Aggrieved by the aforesaid order of the first appellate authority, the revenue
had carried the matter in an appeal before the Income Tax Appellate
Tribunal, Cochin Bench.
3. The Income Tax Appellate Tribunal, following its earlier decision in
ITA No. 754/Coch/92 and also following the decision of this court in
Commissioner of Income Tax, Trivandrum vs. The Kerala State
Industrial Development Corporation Limited, Trivandrum (ITR Nos. 146 to
148 of 1998) dated 13th September, 2002, had rejected the appeal filed by the
revenue. Aggrieved by the aforesaid order passed by the Income Tax
Appellate Tribunal, the revenue is before us in this appeal.
4. The questions of law raised by the revenue, in our opinion, are now
fully concluded by the decision of this court in Commissioner of Income
Tax vs. The Kerala State Industrial Development Corporation ,
Trivandrum. Respectfully following the observations made in the aforesaid
decision, the questions of law framed by the revenue require to be answered
against them. Accordingly, the appeal filed by the revenue requires to be
INCOME TAX APPEAL No. 56 OF 2007
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rejected and it is rejected.
Ordered accordingly.
H.L. DATTU,
CHIEF JUSTICE.
K.T. SANKARAN,
JUDGE.
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