2008 (8) TMI 1048 - SCH - Income Tax

Summary

In the Supreme Court of India case citation 2008 (8) TMI 1048 - SC, the revenue appealed against the High Court's decision dated April 10, 2003, in Income Tax Reference No.191 of 1997, which favored the assessee. The Supreme Court addressed three key legal questions:

1. Deductible Expenditure Apportionment: The Court affirmed the High Court's ruling that expenses under Sections 30, 31, 36, and 37, related to "interest on securities" for banking companies, are not restricted by Sections 40A(3), 40A(5), and 44-C of the Income Tax Act, 1961. This was consistent with the Supreme Court's order in Civil Appeal No. 1533 of 2006.

2. Interest on Securities: The Court upheld the High Court's decision that interest paid for the broken period on the purchase of securities should be treated as revenue expenditure in the purchase year, aligning with the Court's order in Civil Appeal No. 1549 of 2006.

3. Interest on Sticky Advances: The Court agreed with the High Court that interest on sticky advances credited to a memorandum account is not taxable, referencing the precedent set in UCO Bank vs. CIT, 237 ITR 889.

The Supreme Court dismissed the revenue's appeal, confirming the High Court's rulings in favor of the assessee on all three questions. Each party is to bear its own costs.