PCIT Vs Punjab And Sind Bank (Delhi High Court)
Delhi High Court has dismissed an appeal filed by the Principal Commissioner of Income Tax (PCIT) against an order of the Income Tax Appellate Tribunal (ITAT) concerning the assessment of Punjab & Sind Bank for the Assessment Year 2016-17. The court found that the questions of law raised by the Revenue in the appeal were already covered by its own previous judgment in the bank’s case for an earlier assessment year, as well as by decisions of the Supreme Court and other High Courts.
The appeal before the High Court pertained to the Assessment Year 2016-17 and challenged an ITAT order dated February 7, 2024. The ITAT had ruled against the Revenue, upholding the decision of the Commissioner of Income Tax (Appeals) [CIT(A)], which had deleted certain additions made by the Assessing Officer (AO) in the original assessment order dated December 16, 2018.
The core of the controversy related to three specific areas where the AO had made additions to the bank’s income. These issues, as framed by the Revenue in their proposed questions of law before the High Court, were:
1. Depreciation/Valuation of Securities: An addition of Rs. 6,03,46,364 made by the AO in respect of depreciation claimed on the value of securities held by the bank. The Revenue argued that the bank’s claim, based on RBI guidelines, was not justified, particularly as the investments were not shown as “stock in trade” and their subsequent sale profits were not adjusted for this depreciation.
2. Pension Fund Contribution: A disallowance of Rs. 155,86,40,020 made by the AO out of the bank’s contribution to the Punjab & Sind Bank Employee’s Pension Fund Trust. The Revenue contended that this contribution did not qualify as either ordinary annual contribution or initial contribution to the pension fund.
3. Disallowance under Section 14A read with Rule 8D: A disallowance of Rs. 13,04,85,000 made by the AO under Section 14A of the Income-Tax Act, 1961, read with Rule 8D of the Income Tax Rules. This disallowance pertained to expenditure allegedly incurred by the bank to earn exempt income, based on the argument that the bank had made investments and Section 14A provisions were applicable.
The ITAT, in its order for AY 2016-17, had rejected the Revenue’s appeal by following its own earlier decision in the bank’s case. The Revenue, in turn, approached the Delhi High Court seeking to challenge the ITAT’s order.
