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2020 (1) TMI 1614 - AT - Income TaxDisallowance of carry forward of losses on account of unrealized amount of advances - Applicability of provisions of section 139(3) - case of the assessee before the CIT(A) that bank under liquidation shall not have any taxable income till the liability of DICGCI is fully paid off due to diversion of income at source - HELD THAT:- Board of Director of Bank was superseded and official liquidator being an official of cooperative department of Government of Gujarat was appointed to administer realization of assets and repayment of liabilities. Bank under liquidation was also authorized to approach Deposit Insurance and Credit Guarantee Corporation Ltd. (DICGCI) being subsidiary of Reserve Bank of India for the purposes of reimbursement of insurance claim of deposit with bank under liquidation within the limit of Rs. 1 Lakh or less and accordingly DICGCI has paid bank under liquidation which was utilized for the purpose of repayment of depositors to the extent of Rs.1 Lakh. According to DICGCI Act, bank was authorized to realize its assets and advances coercively and whatever proceeds are realized, bank could utilize such proceeds for repayment of liabilities of depositors and other liabilities. In view of the aforesaid mandate available by virtue of DICGCI Act, a deficit arose in the hands of the assessee in the process of recovery and repayment. It was the case of the assessee before the CIT(A) that bank under liquidation shall not have any taxable income till the liability of DICGCI is fully paid off due to diversion of income at source. CIT(A) has examined the issue threadbare and has recorded a finding in favour of the assessee for non-applicability of Section 139(3) as relying on Power Company Ltd. [1995 (11) TMI 5 - SUPREME COURT] therefore entire interest income and share dividend income is diverted at source and bank under liquidation has no discretion or authority to apply such funds as it wishes and hence such funds are not available to appellant as income and therefore such income is not taxable in the hands of appellant. In view of facts and ratio laid down in the case laws ground No.1 & 2 are allowed. As appellant has not made any submissions on capital nature of receipts subsequent to liquidation as per contention raised in ground No.3. In view of lack of factual submissions as regards capital nature of receipts in the event of liquidation, unable to deal with such ground, therefore, ground No.3 is hereby dismissed
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