JOSNA BANK LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) The assessee is before us. It was carrying on banking business. By virtue of the notification issued under S.45 of the Banking Regulation Act, 1949 (for short the Act) the assessee Bank got amalgamated with the Lord Krishna Bank Ltd., Cranganore. The notification is dated 7-10-1965. It contains the scheme of amalgamation. It came into force on 13-10-1965. As per the said scheme the assets and liabilities of the assessee bank shall be and shall become the assets and liabilities of Lord Krishna Bank. The assessee bank under the scheme of amalgamation is the transferor and the Lord Krishna Bank Ltd. is the transferee

(2.) The assets immediately taken over was of the value of Rs. 36,47,559.57 and the liabilities as it stood then came to Rs. 34,01,542.39. The assets taken over were all good and readily realisable assets. So far as ''advances considered as not readily realisable and / or bad or doubtful of recovery", the transferee bank was authorised to take steps to recover the same in terms of the scheme of amalgamation as notified. The value of such assets was found to be Rs. 7,72,439.70 As per the scheme if any amounts are to be realised by the transferee the same were to be distributed to the shareholders of the assessee bank.

(3.) During the previous year ending 31-12-1970 the year of assessment being 1971-72, the assessee bank had realised a sum of Rs. 44,714.68 as interest on moneys deposited for short periods. The moneys in such short term deposits represented the amounts realised by the transferee bank from those assets which were not readily realisable. In the return for the relevant year the assessee had shown a loss of Rs. 23,098/- and in doing so it had claimed a sum of Rs 58,560/-, representing the bad debts, as deduction. The assessing authority accepted the return and completed the assessment on 7-1-1972 determining the loss at Rs. 23,098/-.