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291 ITR 144 [2007] 163 Taxman 495 (Madras) HIGH COURT OF MADRAS Commissioner of Income-tax v. City Union Bank Ltd.* P.D. DINAKARAN AND MRS. CHITRA VENKATARAMAN, JJ. TAX CASE (A) NOS. 22, 196 AND 466 OF 2004 FEBRUARY 26, 2007 Section 145 of the Income-tax Act, 1961 - Method of accounting - System of accounting - Assessing Officer observing that interest on securities was to be assessed in accordance with method of accounting regularly employed by assessee-bank and as assessee was following accrual basis for recording interest in books of account, included interest on accrual basis for computing total income - Tribunal held that interest on securities had to be assessed only on basis of interest due on half-yearly due dates and interest accrued as at end of assessment year was not to be taken into account - Whether Tribunal was justified in holding so - Held, yes Section 36(1)(viia) of the Income-tax Act, 1961 - Bad debts - Whether Tribunal was justified in holding that claim of bad debts in relation to non-rural branches of assessee-bank was allowable without first setting it off against provision already allowed under section 36(1)(viia), when no distinction is made between advances relating to non-rural and rural advances has been made in section 36(1)(vii) - Held, yes CASE REVIEW CIT v. Tamilnadu Mercantile Bank Ltd. [2007] 291 ITR 137 (Mad), CIT v.Canara Bank [1992] 195 ITR 66 (Kar.), CIT v. Shoorji Vallabhdas and Co.[1962] 46 ITR 144 (SC), H.M. Kashiparekh and Co. Ltd. v. CIT [1960] 39 ITR 706 (Bom) , Poona Electric Supply Co. Ltd. v. CIT [1965] 57 ITR 521 (SC), Morvi Industries Ltd. v. CIT [1971] 82 ITR 835 (SC), State Bank of Travancore v. CIT [1986] 158 ITR 102 (SC), Godhra Electricity Co. Ltd. v.CIT [1997] 225 ITR 746 (SC), South Indian Bank Ltd. v. CIT [2003] 262 ITR 579 (Ker) and CIT v. Karur Vysya Bank Ltd. [2005] 273 ITR 510 (Mad)followed & relied upon. CASES REFERRED TO CIT v. Tamilnadu Mercantile Bank Ltd. [2007] 291 ITR 137 (Mad.) [Para 7],CIT v. Canara Bank [1992] 195 ITR 66 / 61 Taxman 79 (Kar.) [Para 7], CIT v.Shoorji Vallabhdas & Co. [1962] 46 ITR 144 (SC) [Para 7], H.M. Kashiparekh & Co. Ltd. v. CIT [1960] 39 ITR 706 (Bom.) [Para…

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