Commissioner of Income Tax vs Lord Krishna Bank Ltd.

We have heard Mr. Suresh Kumar, learned counsel appearing on behalf of the Revenue, and Mr. Mistry, learned senior counsel appearing on behalf of the assessee. Our attention has been invited to the order passed by a Division Bench of this court to which one of us is a party. That was passed in the case of CIT v. HDFC Bank Ltd. which is the successor-in-title of the present, assessee. The order dated March 11, 2014, in Income Tax Appeal No. 1105 of 2012, thus, directly covers the question 4(a), projected as substantial question of law. Mr. Suresh Kumar submits that the appeal survives in so far as question 4(b) on page 3. That reads as under:

"Whether, on the facts and in the circumstances of the case and in law, the Hon''ble income tax Appellate Tribunal was correct in holding that the pre-condition of notification in the Official Gazette, introduced by the Finance Act, 1997, with effect from April 1, 1998, was not applicable to the bonds purchased by the assessee during the financial year 1997-98 relevant to the assessment year 1998-99?"

In that regard Mr. Suresh Kumar invites our attention to the assessment order and that of the Commissioner of income tax and submits that the concurrent findings should not have been reversed by the Tribunal particularly when it was not disputed that tax was deducted at source. Exemption in favour of the Maharashtra State Road Development Corporation Ltd. (MSRDC) was not produced as is evidenced from a letter addressed by the said entity and contents of which are reproduced at pages 82 and 83 of the paper book.

Mr. Mistry, learned senior counsel, on the other hand, submits that the requirement of a notification in the Official Gazette, as a condition precedent for exemption u/s 10(23G) of the income tax Act, 1961, was introduced by the Finance Act, 1997, and is with effect from April 1, 1998. That is clear from the circular of the Central Board of Direct Taxes, a copy of which has been handed over by Mr. Mistry, to us. Our attention is invited to paragraph 10.3 of the Circular dated December 23, 1998, in this behalf.

We have perused the order passed by the Tribunal and its conclusion at paragraph 16. In the light of this circular and equally the legal provisions, we find that once the bonds which had been issued, in respect of which exemption is claimed by the assessee, were so issued on February 18, 1998, then, the requirement of a notification in the Official Gazette as a condition precedent for exemption u/s 10(23G) of the income tax Act was inapplicable. In that light, the Tribunal was in no error in reversing the concurrent findings of facts. That were clearly vitiated by any error of law apparent on the face of the record and perversity. Such order of the Tribunal in the given facts and circumstances cannot raise any substantial question of law. The appeal, therefore, fails and it is dismissed.