ICCI Bank Ltd vs Commissioner General of Inland Revenue – sllr 2015 volume 1 page 140

In the case between ICCI Bank Ltd (appellant) and the Commissioner General of Inland Revenue (respondent), the court considered the proper tax treatment of borrowing costs incurred by the appellant in relation to Sri Lanka Development Bonds whose accrued interest was exempt from tax. The issues included whether the bank conducted a single or multiple businesses for tax purposes, the deductibility of borrowing costs under Sections 25 and 32(5) of the Inland Revenue Act, and the accounting treatment of separate sources of income. It was determined that, while the bank’s varied operations fell under “banking business,” for tax assessment, sources of income needed to be separately identified. The deduction of expenses for generating tax-exempt interest was found to contravene statutory provisi