CIT, PATIALA vs. STATE BANK OF PATIALA

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ITA/64/2009HC Punjab & HaryanaPHHC01084769200909 April 2019Author: MR. JUSTICE MAHESH GROVER,MR. JUSTICE LALIT BATRA2 pages
AI SummaryWithdrawn

What did the High Court hold?

The High Court held that the present appeals had become infructuous. This conclusion was based on the fact that the issue concerning the disallowance of annual unquoted securities calculated using the Yield to Maturity (YTM) method had been decided in favour of the assessee bank by the Income Tax Appellate Tribunal (ITAT) for subsequent assessment years, and these decisions had attained finality as the Revenue did not pursue further appeals. Furthermore, the High Court referred to its own judgment in Principal Commissioner of Income Tax vs. State Bank of Patiala, which was affirmed by the Supreme Court in Maxopp Investment Ltd. vs. Commissioner of Income Tax, New Delhi. This higher judicial pronouncement had settled the broader issue regarding disallowance under Section 14-A of the Income Tax Act on securities held as stock-in-trade. Given these developments, the Court found that nothing remained to be adjudicated in the present appeals, leading to their disposal as having been rendered infructuous. No specific issue was left undecided; rather, the appeals were rendered moot by subsequent events and judicial precedents.

What were the facts?

The appeals by the Commissioner of Income Tax, Patiala, against the State Bank of Patiala concern assessment years 2001-02 and 2002-03. The dispute originated from the disallowance of annual unquoted securities calculated using the Yield to Maturity (YTM) method, as recommended by the RBI. For subsequent assessment years (2003-04 to 2006-07), the assessing officer altered the approach to the YTM method. The Income Tax Appellate Tribunal (ITAT) ruled in favour of the assessee bank for these years, and the Revenue did not appeal further, making the ITAT's orders final. Consequently, for assessment years 2007-08 and 2008-09, the assessing officer granted relief to the bank, aligning with the earlier favourable decisions. The High Court noted its own prior judgment in Principal Commissioner of Income Tax vs. State Bank of Patiala, which was affirmed by the Supreme Court in Maxopp Investment Ltd. vs. Commissioner of Income Tax, New Delhi, settling the issue of disallowance under Section 14-A on securities held as stock-in-trade.

What were the issues?

1. Whether the disallowance of annual unquoted securities calculated using the Yield to Maturity (YTM) method is valid for assessment years 2001-02 and 2002-03? (Question of law) The assessee (State Bank of Patiala) contended that the YTM method, as recommended by the RBI, should be accepted for valuing unquoted securities. The Revenue (Commissioner of Income Tax, Patiala) initially disallowed these amounts. However, the ITAT ruled in favour of the assessee for subsequent assessment years, and these decisions attained finality. The High Court also referred to its own judgment, affirmed by the Supreme Court, which settled the issue regarding disallowance under Section 14-A on securities held as stock-in-trade. The Revenue's arguments are not explicitly detailed in the judgment for the assessment years under appeal, but their initial action was to disallow the YTM calculation.

Which sections of the Income-tax Act were involved?

Section 14-A

AI-generated summary — verify with the full judgment below

ITA no. 64 of 2009 (O&M) and connected case 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH

1.

ITA no. 64 of 2009 (O&M) Commissioner of Income Tax, Patiala ....Appellant Versus State Bank of Patiala ...Respondent

2.

ITA no. 66 of 2009 (O&M) Commissioner of Income Tax, Patiala ....Appellant Versus State Bank of Patiala ...Respondent Date of Decision : 09.04.2019 CORAM : HON'BLE MR.JUSTICE MAHESH GROVER HON'BLE MR JUSTICE LALIT BATRA Present : Mr. Kunal Sharma, Advocate, Sr. Standing counsel for Income Tax Mr. Sanjay Bansal, Sr. Advocate with Mr. Amit Parsad, Advocate for Bank MAHESH GROVER, J.(ORAL) By this order we will dispose of two appeals bearing ITA Nos. 64 and 66 of 2009. The matter pertains to the assessment year 2001-02, 2002-03. The issue arose because of the disallowance of annual unquoted securities by REKHA SIHAG 2019.04.24 10:22 I attest to the accuracy and integrity of this document High Court, Chandigarh

ITA no. 64 of 2009 (O&M) and connected case 2 Yield to Maturity method (hereinafter referred to as 'YTM method') as recommended by RBI. The assessment order for the assessment years 2003-04 to 2006- 07 made an alteration in the issue on the question of the YTM method. The issue was decided by the Appellate Tribunal in favour of the assessee Bank and no further appeal on the issue against the order of CIT(A) was filed before the Tribunal by the Department/Revenue, thereby orders of the Tribunal dated 8.12.2008, 11.2.2009, 24.3.2009 and 31.3.2009 attained finality. Subsequently, the assessing officer for the assessing year 2007-08 and 2008-09 granted the relief to the assessee Bank by accepting the stand decided on 30.1.2017 reported as (2017)391 ITR 218 (P&H) has settled the issue with regard to the disallowance under Section 14-A of the Act on securities held as stock in trade. This order stand affirmed by the Hon'ble Whether speaking/reasoned Yes/No Whether reportable Yes/No REKHA SIHAG 2019.04.24 10:22 I attest to the accuracy and integrity of this document High Court, Chandigarh

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