ADDL. CIT, SPECIAL RANGE- 7, NEW DELHI vs. PNB HOUSING FINANCE LTD., NEW DELHI

Date of hearing 14.10.2021 Date of pronouncement 14.10.2021 ORDER PER O.P. KANT, AM:

This appeal by the Revenue is directed against the order of Commissioner of Income-tax (Appeals) - 38, Delhi [in short ‘learned CIT(A)], dated 30.07.2018, raising the following grounds of appeal:

1. Whether on the facts and circumstances of the case, the Ld. CIT(A), erred in law in deleting disallowance of Rs.3,08,75,079/- u/s 36(1)(viii) of the Income Tax Act, 1961.

2. The appellant craves to be allowed to add and alter any fresh ground(s) of appeal and/or delete or amend any of the ground(s) of appeal.

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 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 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.”