New Delhi: The Supreme Court on Thursday said that there is no scope for any assumption or guess in the taxation system. The top court said that it is the responsibility of the government to create a convenient and easy tax system so that individuals or companies can make their budgets and plan. The Supreme Court observed that if proper balance is achieved, unnecessary litigation can be avoided without compromising on revenue generation.
The court, while allowing a batch of appeals filed by banks against the order of the Kerala High Court, held that in case their own interest-free funds available with the banks exceed their investments, tax-free bonds/securities Proportionate interest on investment cannot be denied under section 14A of the Income Tax Act.
The assessing banks get tax-free dividends and interest on investments in such bonds or securities. Section 14A in respect of income deals with an expenditure not included in total income.
In their 22-page judgment, Justices Sanjay Kishan Kaul and Hrishikesh Roy said, “With this finding, we agree without hesitation with the view taken by ITAT in favor of the assessees. Referring to 18th-century economist Adam Smith’s work The Wealth of Nations, the bench said it needs to be understood that the taxation system does not allow for any imagination and nothing can be assumed to be inherent.
The bench said, “There is a need to pay personal or corporate tax. It is a matter of planning for the taxpayer. As such, it is the responsibility of the government to make it convenient and accessible so as to maximize compliance.”
