| The Tax Publishers2020 TaxPub(DT) 5496 (Karn-HC) : (2021) 276 TAXMAN 0280 INCOME TAX ACT, 1961
Section 28(i)
Where assessee-banking company, added amount from lapsed demand drafts, gift cheques, etc., in its general reserve and same was routed through its profit and loss account, as assessee was under an obligation to meet future claims from said amount as per Guidelines of RBI, thus, said amount could not be taxed in hands of assessee as its business income.
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Business income - Chargeability - Assessee-banking company, kept amount from lapsed demand drafts, gift cheques, etc., in its general reserve -
Assessee was a banking company and it kept amount from lapsed demand drafts, gift cheques, etc., in its general reserve. It also credited such amount towards write back of demand drafts, gift cheques, etc., in its profit and loss account and same was claimed as deduction. Issue was as regards, validity of exclusion of such amount from taxable income when same was credited by assessee in its profit and loss account to his income. Held: It was found that amount in question was kept by assessee in general reserve account and same was routed through its profit and loss account as per direction of Reserve Bank of India vide its instruction dated 30-3-2007. Assessee was under an obligation to meet future claims out of general reserve so created. Therefore, on facts, amount in question could not be treated as income of assessee and could not be subjected to tax.
Followed::CIT v. T.V. Sundaram Iyengar & Sons Ltd. (1996) 222 ITR 344 (SC) : 1996 TaxPub(DT) 1245 (SC).
REFERRED : CIT v. Karam Chand Thapar (1996) 222 ITR 112 (SC) : 1996 TaxPub(DT) 1233 (SC), Solid Containers Ltd. v. Dy. CIT (2009) 178 Taxman 192 (Bom.) : 2009 TaxPub(DT) 811 (Bom-HC), CIT v. Aries Advertising (P.) Ltd. (2002) 255 ITR 510 (Mad-HC) : 2002 TaxPub(DT) 1197 (Mad-HC), Southern Technologies Ltd. v. Jt. CIT (2010) 320 ITR 577 (SC) : 2010 TaxPub(DT) 1302 (SC), CIT v. Raddi Sahakara Bank Niyamitha (2017) 395 ITR 652 (Karn-HC) : 2017 TaxPub(DT) 1922 (Karn-HC) and CIT v. Karnataka Vikas Grameen Bank (2017) 79 Taxmann.com 359 (Karn-HC) : 2016 TaxPub(DT) 817 (Karn-HC).
FAVOUR : In assessee's favour.
A.Y. : 2007-08
IN THE KARNATAKA HIGH COURT
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