PR. COMMISSIONER OF INCOME TAX-7 vs. ORIENTAL BANK OF COMMERCE LTD (NOW MERGED WITH PUNJAB NATIONAL BANK LTD.)

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ITA/524/2023HC DelhiDLHC01035977202313 September 2023Bench: HON'BLE MR. JUSTICE RAJIV SHAKDHER,HON'BLE MR. JUSTICE GIRISH KATHPALIA6 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that no substantial question of law arises in these appeals. Regarding the first issue, concerning Section 14A, the Tribunal correctly appreciated that the respondent assessee is a nationalized bank and that shares held as stock-in-trade do not attract Section 14A, citing Supreme Court decisions in Maxopp Investment Ltd. and South Indian Bank, as well as CBDT Circular No. 18 of 2015. The Court found no interference warranted with the Tribunal's deletion of the disallowance. For the second issue (HTM Securities), the Court found it covered by a coordinate bench decision of the High Court in Principal Commissioner of Income-Tax-07 v. Oriental Bank of Commerce (ITA No.306/2016). Similarly, the third issue (depreciation on temporary erections) was held to be covered by the principle of consistency, referencing a prior High Court decision where the revenue did not raise a ground on this issue. The fourth issue (interest on overdue deposits) was also found to be covered by a coordinate bench decision of the High Court in Oriental Bank of Commerce v. Additional Commissioner of Income Tax (ITA No.57/2018). Finally, the fifth issue (disallowance under Section 36(1)(vii)) was held to be squarely covered in favour of the assessee by the Supreme Court judgment in Vijaya Bank v. CIT. Consequently, the appeals were not entertained and were closed.

What were the facts?

The appeals were filed by the Pr. Commissioner of Income Tax-7 against the Income Tax Appellate Tribunal's order dated March 4, 2022. The Tribunal had allowed the appeals of the respondent assessee, Oriental Bank of Commerce Ltd. (now merged with Punjab National Bank Ltd.), for Assessment Years (AYs) 2014-15, 2015-16, and 2013-14, and also for AY 2012-13. The revenue's cross-appeals were also disposed of by the impugned order. The appeals before the High Court concerned specific additions made by the Assessing Officer (AO) and subsequently restricted by the CIT, which were ultimately deleted by the Tribunal. These additions related to Section 14A, HTM Securities, depreciation on temporary erections, interest on overdue deposits, and disallowance under Section 36(1)(vii). The revenue sought to challenge the Tribunal's deletion of these additions.

What were the issues?

1. Whether the provisions of Section 14A of the Income Tax Act, 1961, are applicable to a nationalized bank holding shares as stock-in-trade? The assessee contended that Section 14A is not applicable as shares are held as stock-in-trade, relying on Supreme Court judgments in Maxopp Investment Ltd. and South Indian Bank, and CBDT Circular No. 18 of 2015. The revenue's argument is not recorded. 2. Whether the addition made by the AO concerning HTM Securities, which was deleted by both appellate authorities, should be sustained? The revenue's argument is not recorded. The assessee relied on a coordinate bench decision of the High Court in Principal Commissioner of Income-Tax-07 v. Oriental Bank of Commerce (ITA No.306/2016). 3. Whether depreciation on temporary erections, deleted by both appellate authorities, was correctly allowed? The assessee relied on a coordinate bench decision of the ITAT in AY 2007-08. The revenue's argument is not recorded. 4. Whether interest on overdue deposits, deleted by both appellate authorities, was correctly deleted? The assessee relied on a coordinate bench decision of the High Court in Oriental Bank of Commerce v. Additional Commissioner of Income Tax (ITA No.57/2018). The revenue's argument is not recorded. 5. Whether the disallowance under Section 36(1)(vii) of the Act, deleted by both appellate authorities, was correctly deleted? The assessee relied on the Supreme Court judgment in Vijaya Bank v. CIT. The revenue's argument is not recorded.

Which sections of the Income-tax Act were involved?

Section 14A,Section 36(1)(vii)

AI-generated summary — verify with the full judgment below

ITA Nos.521/2023, 522/2023 & 524/2023 Page 1 of 6

$~41, 42 & 44 * IN THE HIGH COURT OF DELHI AT NEW DELHI

Decision delivered on: 13.09.2023 + ITA 521/2023 & CM Nos.47075-77/2023

PR. COMMISSIONER OF INCOME TAX-7 ..... Appellant Through: Mr Puneet Rai, Sr Standing Counsel with Mr Ashvini, Standing Counsel.

versus ORIENTAL BANK OF COMMERCE LTD (NOW MERGED WITH PUNJAB NATIONAL BANK LTD.)

..... Respondent

Through: None.

+ ITA 522/2023 & CM Nos.47082-84/2023

PR. COMMISSIONER OF INCOME TAX-7 ..... Appellant Through: Mr Puneet Rai, Sr Standing Counsel with Mr Ashvini, Standing Counsel.

versus ORIENTAL BANK OF COMMERCE LTD (NOW MERGED WITH PUNJAB NATIONAL BANK LTD.)

..... Respondent

Through: None.

+ ITA 524/2023 & CM Nos.47088-90/2023

PR. COMMISSIONER OF INCOME TAX-7 ..... Appellant Through: Mr Puneet Rai, Sr Standing Counsel with Mr Ashvini, Standing Counsel.

versus ORIENTAL BANK OF COMMERCE LTD (NOW MERGED WITH PUNJAB NATIONAL BANK LTD.)

..... Respondent

Through: None.

CORAM: HON'BLE MR. JUSTICE RAJIV SHAKDHER HON'BLE MR. JUSTICE GIRISH KATHPALIA [Physical Hearing/Hybrid Hearing (as per request)] Digitally Signed By:ATUL JAIN Signing Date:26.10.2023 20:38:32 Signature Not Verified

ITA Nos.521/2023, 522/2023 & 524/2023 Page 2 of 6

RAJIV SHAKDHER, J. (ORAL): CM No.47075/2023 in ITA 521/2023 CM No.47082/2023 in ITA 522/2023 CM No.47088/2023 in ITA 524/2023

1.

Allowed, subject to just exceptions. ITA 521/2023 & CM Nos.47076-77/2023 ITA 522/2023 & CM Nos.47083-84/2023 ITA 524/2023 & CM Nos.47089-90/2023 [Applications filed on behalf of the appellant seeking condonation of delay of 231 days in filing and 85 days in re-filing the appeals] 2. These are the appeals concerning Assessment Year (AY) 2014-15 [ITA No.521/2023], AY 2015-16 [ITA No.522/2023] and AY 2013-14 [ITA No.524/2023]. 3. Via the impugned order dated 04.03.2022, the Income Tax Appellate Tribunal [in short, “Tribunal”] allowed the appeals of the respondent/assessee which were filed not only with respect to the AYs referred to hereinabove, but also with regard to AY 2012-13. 3.1 Simultaneously, cross-appeals filed by the appellant/revenue were also disposed of, via the impugned order. 4. Mr Puneet Rai, learned senior standing counsel, who appears on behalf of the appellant/revenue, has helpfully placed a tabular chart before us, indicating therein the issues which arose for consideration in the aforementioned AYs. The details given in the tabular chart are set forth hereafter:

Digitally Signed By:ATUL JAIN Signing Date:26.10.2023 20:38:32 Signature Not Verified

ITA Nos.521/2023, 522/2023 & 524/2023 Page 3 of 6

Sr. No. Particulars ITA 521/2023 [AY 2014-15] ITA 522/2023 [AY 2015-16 ITA 524/2023 [AY 2013-14] 1. Addition on Section 14A Rs.93.48 crores addition made by AO which was restricted by CIT to the tune of Rs.21.28 crores which was ultimately deleted by the Tribunal. Rs.78.98 crores addition made by AO which was restricted by CIT to the tune of Rs.5.56 crores which was ultimately deleted by the Tribunal. Rs.99.72 crores addition made by AO which was restricted by CIT to the tune of Rs.6.76 crores which was ultimately deleted by the Tribunal. 2. HTM Securities Addition of Rs.66.49 crores made by AO deleted by both the appellate authorities Addition of Rs.71.45 crores made by AO deleted by both the appellate authorities Addition of Rs.28.83 crores made by AO deleted by both the appellate authorities 3. Depreciatio n on temporary erections Addition of Rs.19.98 crores made by AO deleted by both appellate authorities. Addition of Rs.27.92 crores made by AO deleted by both the appellate authorities Addition of Rs.15.99 crores made by AO deleted by both the appellate authorities 4. Interest on overdue deposits Addition of Rs.17 crores made by AO deleted by both appellate authorities. Addition of Rs.14 crores made by AO deleted by both the appellate authorities Addition of Rs.18 crores made by AO deleted by both the appellate authorities 5. Disallowan ce under Section 36(1)(vii) Addition of Rs.1231.56 crores made by AO deleted by both appellate authorities. Addition of Rs.315 crores made by AO deleted by both the appellate authorities Addition of Rs.1062.73 crores made by AO deleted by both the appellate authorities

First Issue [Addition on account of Section 14A] 5. Insofar as the issue concerning disallowance under Section 14A of the Income Tax Act, 1961 [in short, “Act”] is concerned, the Tribunal, in our view, correctly appreciated the fact that the respondent/assessee was a nationalised bank and that in terms of the judgment rendered by the Supreme Court in Maxopp Investment Ltd. v. Commissioner of Income Tax, (2018) 402 ITR 640 (SC) qua shares are held as stock-in-trade, the provisions of Section 14A would have no applicability. 5.1 In this regard, the Tribunal also noticed the judgment rendered by the Digitally Signed By:ATUL JAIN Signing Date:26.10.2023 20:38:32 Signature Not Verified

ITA Nos.521/2023, 522/2023 & 524/2023 Page 4 of 6

Supreme Court in South Indian Bank v. Commissioner of Income Tax, [2021] 112 CCH 00051 (SC). The relevant portion of the said judgment which is culled out in the impugned order is extracted hereafter for the sake of convenience: “25. Proceeding now to another aspect, it is seen that the Central Board of Direct Taxes (CBDT) had issued the Circular no. 18 of 2015 dated 02.11.2015, which had analyzed and then explained that all shares and securities held by a bank which are not bought to maintain Statutory Liquidity Ratio (SLR) are its stock-in- trade and not investments and income arising out of those is attributable, to business of banking. This Circular came to be issued in the aftermath of CIT Vs. Nawanshahar Central Cooperative Bank Ltd. [(2007) 15 SCC 611] / [(2007) 160 TAXMAN 48 (SC) ] wherein this Court had held that investments made by a banking concern is part of their banking business. Hence the income earned through such investments would fall under the head Profits & Gains of business. ….”

[Also see PCIT v. State Bank of Patiala, 2017 (393) ITR 476 (P&H)] 6. In our opinion, the Tribunal has correctly deleted the disallowance made under Section 14A as the subject shares were concededly held as stock-in-trade. Second Issue [HTM Securities] 7. The second issue is covered by the decision rendered by a coordinate bench of this court dated 11.05.2016 passed in ITA No.306/2016, titled Principal Commissioner of Income-Tax-07 v. Oriental Bank of Commerce. Thus, having regard to the decision of the coordinate bench, in our view, no substantial question of law arises for our consideration qua this issue. Third Issue [Depreciation on temporary erections] 8. As regards the third issue, i.e., depreciation on temporary erections, the Tribunal has made the following observations: Digitally Signed By:ATUL JAIN Signing Date:26.10.2023 20:38:32 Signature Not Verified

ITA Nos.521/2023, 522/2023 & 524/2023 Page 5 of 6

“28. This ground is against the allowance of depreciation on temporary wooden structure at 100% by the ld. CIT(A). The AO has dealt with on facts, page no.9, para no.4 of his order the facts has not been disputed that the nature of furniture of wooden cabins, wiring etc. which are temporary in nature. The above ground of the department has to be dismissed as it is a covered matter in favour of the assessee by the order of the Co-ordinate Bench of ITAT in A.Y. 2007-08 in ITA No.1937/Del/11 and 1961 /Del/11 The matter was set aside to the AO for verification by the ITAT.”

9.

Mr Rai has adverted to the decision in ITA No. 306/2016. This appeal arose out of the decision rendered by a coordinate bench of the Tribunal with regard to AY 2007-08 in ITA No.1937/Del/2011 and ITA No.1961/Del/2011. 9.1 A perusal of the said decision would show that the appellant/revenue did not raise any ground in the appeal with regard to the allowance of depreciation on temporary wooden structures. Therefore, applying the principle of consistency, in the AYs in issue, the respondent/assessee should have been allowed depreciation on temporary structures. 9.2 In this regard, no interference is called for with the decision of the Tribunal. Fourth Issue [Interest on overdue deposits] 10. As regards the fourth issue, it is not disputed by Mr Rai that the said issue is covered by the decision dated 17.01.2018 rendered by a coordinate bench of this court in ITA No.57/2018, titled Oriental Bank of Commerce v. Additional Commissioner of Income Tax. 11. Having regard to this decision, no substantial question of law is required to be framed concerning the said issue. Fifth Issue [Disallowance under Section 36(1)(vii) of the Act] 12. This brings us to the last issue, which is disallowance of provision Digitally Signed By:ATUL JAIN Signing Date:26.10.2023 20:38:32 Signature Not Verified

ITA Nos.521/2023, 522/2023 & 524/2023 Page 6 of 6

made for bad and doubtful debts. 13. As noted by the Tribunal, this issue is squarely covered in favour of the respondent/assessee by virtue of the judgment rendered by the Supreme Court in Vijaya Bank v. CIT, [2010] 323 ITR 166. 14. Thus, for the foregoing reasons, we are not inclined to entertain the above-captioned appeals. 15. As noted above, no substantial question of law arises qua any of the issues noted above. 16. The appeals are, accordingly, closed. 17. Consequently, the pending applications shall also stand closed. 18. Parties will act based on the digitally signed copy of the order.

RAJIV SHAKDHER, J

GIRISH KATHPALIA, J SEPTEMBER 13, 2023 aj

Digitally Signed By:ATUL JAIN Signing Date:26.10.2023 20:38:32 Signature Not Verified

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