IN HIGH COURT OF JUDICATURE AT MADRAS DATED: 02.03.2020 CORAM HON'BLE DR.JUSTICE VINEET KOTHARI AND HON'BLE MR.JUSTICE R.SURESH KUMAR Tax Case (Appeal) No.522 of 2010 Commissioner of Income Tax-II Trichirapalli. ... Appellant Vs. M/s.City Union Bank Limited Central office, 149, T.S.R.Big Street Kumbakonam. ... Respondent Tax Case Appeal filed under Section 260A of Income Tax Act, 1961 against order of Income Tax Appellate Tribunal 'C' Bench, Chennai dated 13.11.2009 in ITA No.739/Mds/2009. For Appellant : Mr.J.Narayanasamy Senior Standing Counsel For Respondent : Mr.V.S.Jayakumar JUDGMENT (Judgment of Court was delivered by DR.VINEET KOTHARI,J.) This Tax Case Appeal has been filed by Revenue calling in question correctness of order passed by Income Tax Appellate Tribunal, 'C' Bench, Chennai dated 13.11.2009 for Assessment Year 2001-02 holding in favour of Assessee that amount of stale Demand Drafts not claimed by customers and which had become barred by limitation cannot be treated as income of Respondent Assessee Bank. 2. relevant findings of learned Tribunal are quoted below for ready reference. 4. above ratio was rendered on account of facts of that case where ITO found that for assessment years 1982-83 and 1983-84, assessee had transferred amount of Rs.17,381 to Profit & Loss Account of Company during accounting period ended on March 31, 1982 (assessment year 1982-83) and amount of Rs.38,975/- during accounting period ended on March 31, 1983 (assessment year 1983-84). But these amounts were not included in total income of assessee. sums were stated to be credit balances standing in favour of customers of company. Since these balances were not claimed by customers, amounts were transferred by assessee to Profit & Loss Account. ITO was of view that because surplus had arisen as result of trade transactions, amount had character of income and had to be added as income of assessee for purpose of income-tax assessment. additions were deleted by ld.CIT(A) and this was upheld by Tribunal. But facts of this case are different because in banking business, RBI guidelines are to be followed and that by, simplicitor, efflux of time, say beyond 3 years, ordinary limitation would not apply as assessee has been showing cumulative total liability at relevant period. In this case, after detailing period total outstanding amount has been shown in Annexure attached to assessment order. Actually, items are coming in and going out of this account every now and then throughout year, and it is treated like current account operated upon regularly doing in course of business. Given nature of transactions, encashment of drafts after revalidation thereof, is regular feature. Rather common-sense demands that such drafts cannot be treated as unclaimable because time- barred, given nature of banking transactions. Drafts issued, becoming stale is not uncommon factor rather it is usual and common feature in all banks. Unless draft amount becomes, in fact, unclaimable which can be by virtue of multifarious facts available and not by guess work, this cannot be treated as bank's income. There is no such law which can convert such liability into income/asset of assessee-bank after lapse of particular time lag. decision of Hon'ble Supreme Court (cited supra) is, otherwise helpful to claim of assessee. Assessing Officer has not given any clear cut finding as to how amount has become unclaimable. Hence we set aside impugned finding and delete entire addition. 3. present appeal filed by Revenue was admitted by Coordinate Bench of this Court on following substantial question of law. "Whether on facts and in circumstances of case, Income Tax Appellate Tribunal was right in deleting addition of Rs.49,19,660/- made by Assessing Officer being amount of stale drafts not claimed for more than three years and claim for which had become barred by limitation without applying ratio of Supreme Court's decision in case of Commissioner of Income Tax Vs.T.V.Sundaram Iyengar & Sons Ltd.(222 ITR 344)? 4. Both learned counsel fairly submit that, controversy involved in present appeal is covered by decision of Division Bench of Karnataka High Court in Commissioner of Income Tax -Vs- Raddi Sahakara Bank Niyamitha delivered on 30.01.2017 reported in [2017] 395 ITR 652 (Karnataka) (to which one of us DR.VINEET KOTHARI, J. was party), in which Division Bench of Karnataka High Court has held as under: 4. learned counsel at bar submitted before court that this controversy is no longer res integra and Division Bench of this court in CIT v. Karnataka Vikas Grameen Bank in I. T. A. No. 100014 of 2014 and connected case, decided on December 14, 2015, has held, following decision of hon'ble Supreme Court in case of CIT v. T. V. Sundaram Iyengar and Sons Ltd. reported in [1996] 222 ITR 344 (SC), that such addition cannot be made under section 41(1) of Act, since liability of assessee-bank to pay back amounts to customers in respect of such stale demand drafts and pay orders does not cease in law. relevant extract from judgment of Division Bench of court as contained in para 18 thereof including extract from decision of hon'ble Supreme Court is quoted below for ready reference : "18. careful perusal of above provision leads us to infer that section 41(1) can be pressed into service when allowance or deduction is sought to be made in respect of loss, expenditure or trad ing liability is incurred by assessee. In instant case, sum of Rs. 58,38,581 has remained with assessee owing to fact that payees or holders of draft/pay orders had not encashed them. language employed by Legislature being unambiguous, it would be incongruous to construe said sum as either loss, expenditure or trading liability incurred by assessee. While deal ing with situation of unclaimed amount, hon'ble Supreme Court. In case of T. V. Sundaram Iyengar and Sons Ltd. [1996] 222 ITR 344 (SC), has held as follows (page 351 of 222 ITR) : "We are unable to uphold decision of Tribunal. amounts were not in nature of security deposits held by asses see for performance of contract by its constituents. As it appears from facts of case, amounts were depleted by adjustments made from time to time. Commissioner of Income-tax (Appeals) found that assessee wrote back amounts to its profit and loss account because various trading parties did not claim these amounts for long time. amounts represented credit balances in name of trading parties and was taken to its profit and loss account. Commissioner of Income-tax (Appeals) held that these amounts were not revenue receipts but were of capital nature. provisions of section 41(1) were not attracted in facts of this case because assessee's liability to pay back amounts to its cus tomers had not ceased. Tribunal agreed with this view.' (under lining is by us) 19. Tribunal adverting to above ruling has rightly deleted sum of Rs. 58,38,581 added by assessing authority by holding it as unsustainable in law." 5. Having perused record, we are in respectful agreement with aforesaid decision of Division Bench of this court and we do not find any reason to take different view of matter and in view of aforesaid, we do not find any substantial question of law arising in present case. 5. We agree with said view of Karnataka High Court and accordingly question of law framed in this appeal is answered against Revenue and in favour of Assessee. Appeal filed by Revenue deserves to be dismissed and is accordingly dismissed. No costs. (V.K.,J.) (R.S.K.,J.) 02.03.2020 KST To Income Tax Appellate Tribunal 'C' Bench,Chennai. DR.VINEET KOTHARI, J. AND R.SURESH KUMAR, J. Commissioner of Income-tax-II, Trichirapalli v. City Union Bank Limited