Case Law Details

Case Name : ACIT Vs PNB Housing Finance Ltd. (ITAT Delhi)
Appeal Number : ITA No. 7518/Del/2019
Date of Judgement/Order : 30/06/2022
Related Assessment Year : 2016-17

ACIT Vs PNB Housing Finance Ltd. (ITAT Delhi)

Income Tax Appellate Tribunal (ITAT), New Delhi bench consisting of Anil Chaturvedi, Accountant Member and Narender Kumar Choudhary, Judicial Member granted relief to Punjab National Bank Housing Finance Limited and Confirmed the order of Commissioner of Income Tax of computing rebate under Section 36(1)(viii).

The assessee, Punjab National Bank Housing Finance Limited is an approved housing finance company and a subsidiary company of Punjab National Bank. Assessee filed its original return of income for A.Y. 2016-17 on 29.11.2016 declaring total income of Rs. 479,67,01,950/-. The return of income was later revised on 28.03.2018 declaring total income at Rs.479,67,01,950/-. The case was selected for scrutiny and thereafter assessment was framed u/s 143(3) of the Act vide order dated 13.12.2018 and the total income was determined at Rs.484,79,15,150/-. Aggrieved by the order of AO, assessee carried the matter before CIT(A) who allowed the appeal of the assessee. Aggrieved by the order of CIT(A), Revenue is now in appeal before the Tribunal.

The assessee worked out the income from eligible business (i.e., profit from Long Term housing loan at Rs.291,71,23,780/-). The assessee thereafter applying 20% to the income from eligible business worked out the amount of Rs.58,34,24,760/- being eligible for deduction u/s 36(1)(viii) of the Act. It was further submitted that amount transferred to Special Reserve was Rs.58,40,00,000/- as against the amount eligible for deduction u/s 36(1)(viii) of the Act of Rs.58,34,24,760/-, the assessee has claimed the deduction as per the provisions of the Act. It was further submitted that on identical issue in earlier years, the issue has been decided by the CIT(A) in assessee’s favour.

The CIT while deciding the issue in favour of the assessee has noted that the issue of computation of rebate u/s 36(1)(viii) of the Act has been subject matter of appeal from A.Y. 1998-99 to A.Y. 2012-13 and every year the CIT has decided the issue in favour of the assessee. He also noted that in A.Y. 2014-15, CIT(A) by following the order of CIT(A) for A.Y. 1998-99 to A.Y. 2012-13 had decided the issue in favour of the assessee. He therefore following the decision of his predecessor, directed the deletion of the addition of Rs.5,12,13,197/-.

The Tribunal observed “Revenue has not placed any material on record to demonstrate that the decision rendered by Co-ordinate Bench in A.Y. 2015-16 has been set aside/stayed/overruled by Higher Judicial Forum nor has pointed to any distinguishing feature in the facts of the present case as compared to that of earlier year. Considering the totality of the aforesaid facts, we find no reason to interfere with the order of CIT.”

FULL TEXT OF THE ORDER OF ITAT DELHI

This appeal filed by the Revenue is directed against the order dated 12.06.2019 of the Commissioner of Income Tax (Appeals)-38, New Delhi relating to Assessment Year 2016-17.

2. Brief facts of the case as culled out from the material on record are as under:-

3. Assessee is an approved housing finance company and a subsidiary company of Punjab National Bank. Assessee filed its original return of income for A.Y. 2016-17 on 29.11.2016 declaring total income of Rs. 479,67,01,950/-. The return of income was later revised on 28.03.2018 declaring total income at Rs.479,67,01,950/-. The case was selected for scrutiny and thereafter assessment was framed u/s 143(3) of the Act vide order dated 13.12.2018 and the total income was determined at Rs.484,79,15,150/-. Aggrieved by the order of AO, assessee carried the matter before CIT(A) who vide order dated 12.06.2019 in Appeal No.CIT(A), Delhi-38/10015/2019-20, allowed the appeal of the assessee. Aggrieved by the order of CIT(A), Revenue is now in appeal and has raised the following grounds:

1. On the facts and in the circumstances of the case, the Ld CIT(A) has erred in deleting disallowance of Rs.5,12,13,197/- u/s 36(1)(viii) of the IT Act.

2. The appellant craves to be allowed to add any fresh ground of appeal and /or delete or amend any grounds of appeal.”

4. During the course of assessment proceedings, AO noticed that assessee had made a claim of Rs.58,34,24,760/- u/s 36(1)(viii) of the Act in respect of the amount transferred to Special Reserve. The AO was of the view that the claim made by the assessee was not in accordance with the provision of the Act. He accordingly show-caused the assessee as to why the deduction u/s 36(1)(viii) of the Act be not allowed as per the provision of the Act. In respect to the aforesaid query of the AO, assessee inter alia submitted that during the year under consideration assessee had earned business income of Rs.507,06,13,211/- before deduction u/s 36(1)(viii) of the Act. Assessee had earned total interest income of Rs.2460,02,58,902/- which included Rs.1415,18,49,334/- that was earned on account of interest on Long Term Housing Loan and thus the ratio of interest on Long Term housing loan to total interest income worked out at 57.53%. Applying the aforesaid percentage to the total business income, assessee worked out the income from eligible business (i.e. profit from Long Term housing loan at Rs.291,71,23,780/-). The assessee thereafter applying 20% to the income from eligible business worked out the amount of Rs.58,34,24,760/- being eligible for deduction u/s 36(1)(viii) of the Act. It was further submitted that amount transferred to Special Reserve was Rs.58,40,00,000/- as against the amount eligible for deduction u/s 36(1)(viii) of the Act of Rs.58,34,24,760/-, the assessee has claimed the deduction as per the provisions of the Act. It was further submitted that on identical issue in earlier years, the issue has been decided by the CIT(A) in assessee’s favour. The submissions of the assessee was not found acceptable to AO. AO noted that in A.Y. 2010-11, the method adopted by the assessee was not accepted by the AO. He was of the view that for working out the ratio of income eligible for computing deduction, the entire income from operations should be taken instead of confining to the extent of total income from Housing loans as taken by the assessee. AO thereafter worked out the computation of rebate allowable u/s 36(1)(viii) of the Act as per the working given on page 10 & 11 of the order and according to him, the deduction u/s 36(1)(viii) of the Act worked out to Rs. 53,22,11,563/-. He accordingly disallowed the excess claim amounting to Rs.5,12,13,197/-.

5. Aggrieved by the order of AO, assessee carried the matter before CIT(A). CIT(A) while deciding the issue in favour of the assessee has noted that the issue of computation of rebate u/s 36(1)(viii) of the Act has been subject matter of appeal from A.Y. 1998-99 to A.Y. 2012-13 and every year the Ld CIT(A) has decided the issue in favour of the assessee. He also noted that in A.Y. 2014-15, CIT(A) by following the order of CIT(A) for A.Y. 1998-99 to A.Y. 2012-13 had decided the issue in favour of the assessee. He therefore following the decision of his predecessor, directed the deletion of the addition of Rs.5,12,13,197/-. Aggrieved by the order of CIT(A), Revenue is now in appeal.

6. Before us, Learned DR supported the order of lower authorities.

7. Learned AR on the other hand reiterated the submissions made before the lower authorities and further submitted that Revenue being aggrieved by the order of CIT(A) had filed appeal before the Tribunal for A.Y. 2015-16. He submitted that the Co­ordinate Bench of Tribunal in ITA No.6352/Del/2018 order dated 14.10.2021, by following the order of Tribunal for A.Y. 2014-15 has decided the issue in favour of the assessee. He pointed to the relevant findings of the Tribunal order. He therefore submitted that since there are no change in the facts of the case in the year under consideration and that of earlier years, no interference to the order of CIT(A) is called for.

8. We have heard the rival submissions and perused the material available on record. The issue in the present appeal is with respect to the computation of deduction u/s 36(1)(viii) of the Act. We find that for working out the income from eligible business on which deduction u/s 36(1)(viii) of the Act is allowable, assessee had considered the ratio of interest income from Long Term housing loan to total interest income as against the working of AO being the ratio of interest income from Long Term housing loan to total receipts. We find that identical issue arose before the Tribunal in assessee’s case for A.Y. 2015-16. The Co-ordinate Bench of Tribunal while deciding the issue in A.Y. 2015-16 had followed the order of the Tribunal for A.Y. 2014-15 and had decided the issue in favour of the assessee by observing as under:

“3. The solitary ground raised by the Revenue in this appeal relates to deletion of disallowance of Rs. 3,08,75,079/- u/s 36(1)(vii) of the Act by the learned CIT(A).

4. On bare perusal, we find that identical issue raised by the Revenue has already been adjudicated in favour of the assessee by the order of the Tribunal, dated 04.12.2019 passed in ITA No. 2810/Del/2015 for the assessment year 2010-11. The Learned DR did not contradict this factual matrix. The relevant findings of the order of the Tribunal (supra) are reproduced as under:

“16. We have carefully considered the rival contentions. The appellant is a subsidiary of Punjab National Bank and is engaged in the business of retail lending and also offers long term finance for construction of homes. The assessee the business income of Rs. 876230348/- before deduction u/s 36(1)(viii) of the Act. Subsequently, assessee claimed deduction stating that Rs. 2817156893/- was on account of total interest on housing loans and out of it Rs. 1767869838/- was on account of interest on long term housing loan. Thus assessee stated that 62.75% in on account of interest on long term housing loan and worked out applying that percentage on the total business income calculated a sum of Rs. 549834543/- pertaining to long term housing loan and computed deduction @20% of Rs. 10.99 crores as deduction. The Id Assessing Officer changed the above ratio from 62.75 % to 55.89% as he considered the total receipt of business for the purpose of working out proportion. In the present case the methodology adopted by the assessee is consistently followed for last eight years. Same was accepted by the revenue without any objection. The only issue is with respect to how the profit of the business for the purpose of long term housing finance shall be worked out. The only issue is that assessee is computed with respect to the total income with respect to the interest income whereas the Id AO has applied the above ratio to the total receipt. When the method has been consistently accepted for the above year we do not find any reason to defer from that. In view of this we do not find any infirmity in allowing the assessee claim of deduction u/s 36(l)(viii) of the Act applying the ratio of 62.75%. In the result we do not find any merit in ground No. 1 of the appeal. Hence, it is dismissed.”

4.1 Further, in assessment year 2014-15 (ITA No. 5969/Del/2017, order dated: 24.08.2021), this issue again decided in favour of the assessee. The relevant findings are reproduced as under:

“In so far as the addition of Rs.1,88,65,937/- is concerned, Id. Assessing Officer recorded that for the assessment year 2010-11 also, while not accepting the method adopted by the assessee, similar addition was made and, therefore, while following the same for this year also, the disallowance u/s. 36(l)(viii) of the Act to the tune of Rs.1,88,65,937/- was made. On this aspect, learned CIT(A) recorded that, as a matter of fact, this issue is falling for consideration from the assessment year 1998-99 to 2012-13 and every year in appeal, CIT(A) has been granting relief. Learned CIT(A) places reliance on the orders of her predecessors for the assessment years 2007-08 and 2010-11 and granted relief.

Learned AR brought to our notice that for the assessment year 2009-10 and 2010-11 also, this issue was considered by the coordinate Bench of this Tribunal in ITA No. 2123/Del/2015 and batch of cases and granted relief. The coordinate Bench, on this aspect, observed thus:

“16. We have carefully considered the rival contentions. The appellant is a subsidiary of Punjab National Bank and is engaged in the business of retail lending and also offers long term finance for construction of homes. The assessee the business income of Rs. 876230348/- before deduction u/s 36(l)(viii) of the Act. Subsequently, assessee claimed deduction stating that Rs. 2817156893/- was on account of total interest on housing loans and out of it Rs. 1767869838/- was on account of interest on long term housing loan. Thus assessee stated that 62.75% in on account of interest on long term housing loan and worked out applying that percentage on the total business income calculated a sum of Rs. 549834543/- pertaining to long term housing loan and computed deduction @20% of Rs. 10.99 crores as deduction. The Id Assessing Officer changed the above ratio from 62.75 % to 55.89% as he considered the total receipt of business for the purpose of working out proportion.

In the present case the methodology adopted by the assessee is consistently followed for last eight years. Same was accepted by the revenue without any objection. The only issue is with respect to how the profit of the business for the purpose of long term housing finance shall be worked out. The only issue is that assessee is computed with respect to the total income with respect to the interest income whereas the Id AO has applied the above ratio to the total receipt. When the method has been consistently accepted for the above year we do not find any reason to defer from that. In view of this we do not find any infirmity in allowing the assessee claim of deduction u/s 36(1 )(viii) of the Act applying the ratio of 62.75%. In the result we do not find any merit in ground No. 1 of the appeal. Hence, it is dismissed.”

In view of the consistent view taken by the first appellate authority right from 1998-99 to 2012-13 and also the Tribunal for assessment years 2009-10 and 2010-11, in the absence of any change of either facts or law, we find it difficult to take a different view and consequently uphold the findings of the Id. CIT(A). Hence, ground No. 1 of the Revenue’s appeal is dismissed.”

5. In view of above, respectfully following the decisions of the Tribunal mentioned herein above, we do not find any infirmity in the order of the learned CIT(A), therefore, we uphold the same.

6. In the result, the appeal of the Revenue is dismissed.”

9. Before us, Revenue has not placed any material on record to demonstrate that the decision rendered by Co-ordinate Bench in A.Y. 2015-16 has been set aside/stayed/overruled by Higher Judicial Forum nor has pointed to any distinguishing feature in the facts of the present case as compared to that of earlier year. Considering the totality of the aforesaid facts, we find no reason to interfere with the order of CIT(A) and thus the ground of Revenue is dismissed.

10. In the result, appeal of the Revenue is dismissed Order pronounced in the open court on 30.06.2022

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