Facts of the Case

The Revenue filed an appeal under Section 260A of the Income-tax Act challenging the order dated 07.02.2024 passed by the Income Tax Appellate Tribunal in ITA No. 8688/Del/2019 for Assessment Year 2016-17. The ITAT had dismissed the Revenue’s appeal and affirmed the order of the Commissioner of Income Tax (Appeals)-7, New Delhi, which had granted relief to Punjab and Sind Bank against additions made by the Assessing Officer.

The Assessing Officer had made additions relating to depreciation on securities held by the bank, disallowance of contributions made to the Punjab and Sind Bank Employees’ Pension Fund Trust, and disallowance under Section 14A read with Rule 8D. The Revenue carried the matter to the High Court contending that the ITAT erred in deleting these additions.

Issues Involved

Whether depreciation on securities held by a bank could be disallowed on the ground that such securities were not shown as stock-in-trade, whether contributions made to the bank’s employees’ pension fund were allowable deductions, and whether disallowance under Section 14A read with Rule 8D was justified in the case of a banking company.

Petitioner’s Arguments

The Revenue argued that the ITAT and the CIT(A) erred in law in deleting the addition on account of depreciation of securities, contending that the securities were not held as stock-in-trade. It was further argued that the contribution made to the employees’ pension fund was neither an ordinary annual contribution nor an initial contribution and therefore not allowable. The Revenue also contended that Section 14A was applicable since the assessee had made investments yielding exempt income.

Respondent’s Arguments

The assessee submitted that all the issues raised by the Revenue were already covered by earlier decisions of the Delhi High Court in its own case for prior assessment years. It was argued that securities held by a bank form part of its stock-in-trade, depreciation thereon is allowable, pension fund contributions had been consistently allowed, and Section 14A could not be invoked in respect of income from securities held as stock-in-trade.

Court Order / Findings

The Delhi High Court noted that the questions of law projected by the Revenue were identical to those raised in earlier appeals in the assessee’s own case, which had already been decided by coordinate benches of the Court. The Court referred to its earlier decision in Principal Commissioner of Income Tax-7, Delhi vs. Punjab and Sind Bank for Assessment Year 2013-14, wherein similar questions relating to depreciation on securities, pension fund contribution and Section 14A disallowance had been answered against the Revenue.

The Court further noted that the issue relating to Section 14A was also covered by the Supreme Court’s decision in South Indian Bank vs. Commissioner of Income Tax, which held that securities held by banks constitute stock-in-trade and Section 14A has no application. In view of the binding precedents, the Court held that no substantial question of law arose for consideration.

Important Clarification

The High Court reiterated that issues settled by binding precedents in the assessee’s own case for earlier assessment years cannot be reopened in subsequent years in the absence of any distinguishing facts or change in law, and that judicial consistency must be maintained.

Final Outcome

The appeal filed by the Revenue was dismissed. The Delhi High Court held that no substantial question of law arose for consideration, and the order of the ITAT granting relief to Punjab and Sind Bank for Assessment Year 2016-17 was upheld.

Link to download order https://www.mytaxexpert.co.in/uploads/1769756562_PR.COMMISSIONEROFINCOMETAX7DELHIVsPUNJABANDSINDBANK.pdf 

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.