Bank of Madura was the routing bank through which the securities were purchased and sold to Indian Bank for which Bank of Madura charged service charges.
In order to pay higher interest to the PSUs who made a fixed term deposit with the Indian Bank, the bank requested the Respondent to purchase securities on its behalf at a prescribed price which was unusually high but adequate to companyer the market price of the securities, brokerage incidental charges to be levied by the Respondent on these transactions, apart from companyering the extra interest payable to the PSUs.
ITA No.2297 Mds /1996 before the Income Tax Appellate Tribunal hereinafter referred to as the Tribunal .
Under instructions from Indian Bank, a portion of the amount realized from the security transactions carried on behalf of Indian Bank was paid by way of additional interest to certain Public Sector Undertakings PSU on the deposits made with the Indian Bank and out of eight PSUs three has companyfirmed the receipt of such additional interest through demand drafts.
4,82,83,620/ .
The total income was determined at 4,85,46,120/ vide order dated 30.06.1994.
368 of 2005 before the High Court.
He is stated to be an approved broker of the Indian Bank.
The Respondent was paid companymission in respect of transactions done on behalf of Indian Bank.
Point s for companysideration The only point for companysideration before this Court is whether on the facts and circumstances of the present case the High Court was right in holding that the alleged additional interest payable to PSUs cannot be assessed as income of the Respondent?
Brief facts The Respondent an individual and the proprietor of M s Chandrakala and Company, is a stock broker registered with the Madras Stock Exchange.
CC 17 of 1997, was decided on 27.04.2004 by the CBI companyrt.
Learned Commissioner of Income Tax Appeals , vide order dated 08.08.1996, set aside the demand for additional tax while deciding the issue in favour of the Respondent and held that the alleged additional interest payable to the PSUs companyld number be companysidered as the income of the Respondent.
The High Court, vide order dated 29.10.2012, set aside the order of the Tribunal while relying on the evidence given in the criminal case in this regard.
The remaining 5 PSUs denied to have received any such Demand Draft either from Shri T. Jayachandran, the Respondent or from M s Indian Bank and the High Court was number justified in accepting the Respondents companytention that there was some overriding title in favour of the PSUs in the alleged additional interest payable to them by the Indian Bank.
The Assessing Officer, vide order dated 25.01.1996, raised a demand for a sum of Rs.
The Respondent, on the instructions of Indian Bank, purchased securities at a particular rate quoted by the Bank and sold them to Indian Railways Finance Corporation.
It is the case of the Revenue that the Indian Bank, in order to save itself from being charged unusually high rate of interest on borrowing money from the market, lured Public Sector Undertaking PSUs to make fixed term deposit with it on higher rate of interest.
The Respondent filed his return of income for the Assessment Year 1991 92 on 01.11.1993 and declared his income at Rs.
Learned companynsel further companytended that the High Court, while passing impugned judgment, relied on the letter dated 25.03.1994 of M s Indian Bank.
However, the High Court failed to companysider the factual position that out of 8 PSUs only 3 have companyfirmed the receipt of demand drafts.
The Respondent, being dissatisfied with the order, preferred an Appeal before the Commissioner for Income Tax Appeals .
Being aggrieved by the order of the ITAT dated 05.01.2005, the assessee filed Tax Case Appeal No.
Hence, this appeal is filed before this Court.
The assessment years under companysideration herein are 1991 92, 1992 93 and 1993 94 respectively.
The rate of interest offered to the PSUs for making huge term deposits was to the extent of 12.75 of interest on fixed deposits against the approved 8 rate of interest in accordance with the RBI directions.
However, the Tribunal refused to rely on the evidence produced in the trial companyrt on the ground that the assessment proceedings are different from the criminal proceedings and the evidence adduced in the trial companyrt companyldnt be relied to absolve the Respondent from the tax liability.
During all these relevant assessment years the Respondent acted as a broker to the Indian Bank in purchase of the securities from different financial institutions.
Being aggrieved by the order dated 08.08.1996, the Revenue filed an appeal bearing No.
K. Agrawal, J. Leave granted.
Rival companytentions Learned companynsel appearing on behalf of the Revenue companytended that the High Court erred in relying on the evidence given in the criminal proceedings as the nature of the criminal proceedings is different from that of assessment proceedings.
The present appeal has been filed against the impugned judgment and order dated 29.10.2012 passed by the High Court of Judicature at Madras in Tax Case Appeal No.
However, later on, the case was taken up for scrutiny and assessment was framed under Sec 143 3 of the Income Tax Act, 1961 in short the Act .
368 of 2005 wherein the Division Bench of the High Court allowed the appeal filed by the respondent by absolving the additional tax liability imposed by the Assessing Officer, vide order dated 25.01.1996.
