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Facts
The appeals by the assessee and Revenue were against the order of NFAC for AY 2020-21. The assessee's primary grievance was the disallowance of set-off of carry forward business losses. The assessee also raised additional grounds concerning bad debts and applicability of Section 115JB.
Held
The Tribunal restored the issue of carry forward of business losses to the AO for verification, allowing it for statistical purposes. The issues of bad debts and Section 115JB were also set aside to the AO for adjudication. The Revenue's grounds regarding Section 14A, Rule 37BA(2), and carried forward long-term capital loss were decided against the Revenue.
Key Issues
Whether carry forward business losses, bad debts, and the applicability of Section 115JB were correctly handled. Also, the validity of disallowance under Section 14A and the treatment of TDS credit were examined.
Sections Cited
36(1)(vii), 36(1)(viia), 115JB, 14A, 37BA(2), 143(3), 194A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI ‘A’ BENCH,
Before: SHRI SATBEER SINGH GODARA, & SHRI NAVEEN CHANDRA
Revenue are directed against the order of the NFAC, New Delhi dated 28.03.2024 pertaining to A.Y 2020-21 respectively.
2. Since common grievance is involved in the captioned appeals and pertain to same assessee, they were heard together and are disposed of by this common order for the sake of convenience and brevity.
[A.Y 2020-21](Assessee)
The solitary grievance raised by the assessee reads as under:
“That on the facts and circumstances of the case and in law, the NFAC erred in not allowing the set off of the carry forward business losses of Rs.47,15,03,726/-. Such action being arbitrary, fallacious and illegal must be quashed with directions for appropriate relief.” 4. In addition to the above, the assessee has raised additional grounds of appeal which read as under:
The learned Assessing Officer be directed to allow the deduction u/s 36(1)(vii) in respect of bad debts written off by non-rural branches of the appellant bank without adjusting the same against the credit balance in the provision account made under Section 36(1)(viia).
The learned Assessing Officer be directed to not to apply the provisions of section 115JB of the Income Tax Act, 1961 as the provisions of Section 115JB of the Income Tax Act, 1961 are not applicable to the appellant bank.”
Page 2 of 12 & 3039 /DEL/2024 Punjab National Bank [A.Y 2020-21]
With respect to the ground of disallowance of the set off of the carry forward business losses of Rs.47,15,03,726/- for AY 2018-19, it is submitted that the same be allowed.
On the issue of deduction u/s 36(1) (vii) in respect of bad debts written off by the non rural branches of the ld counsel of the assessee stated that the consultants appointed by the Bank have advised to raise a specific ground with respect to the issue of deduction u/s 36(1)(vii).
The ld AR submitted that the bad debts written off by non-rural branches may not be adjusted against the credit balance in the provision account made under Section 36(1)(viia).
With respect to the ground relating to the applicability of provisions of section 115JB, the ld AR stated that the provisions of the section 115JB was not applicable to them.
Per contra, the ld. DR relied on the orders of the authorities below.
We have heard the rival submissions and have perused the relevant material on record. We are of the considered view that, with regard to the carry forward of the business loss, there is a confusion as to the fact of its disallowance or allowance in the subsequent assessment years which are not clear either from the AO’s or the CIT(A)’s order. In view of the same, we deem it fit to restore the said issue to the file of the Page 3 of 12 & 3039 /DEL/2024 Punjab National Bank [A.Y 2020-21] AO to examine whether the same has been allowed in AY 2018-19 or the subsequent years. In the event that the business loss is allowed in subsequent years, no action is required. In the event, the said business loss is not allowed, the assessee shall get the benefit of said business loss in the impugned year. This ground is allowed for statistical purposes.
With respect to the additional grounds raised, in respect to bad debts and applicability of section 115JB, we find that the issues do emanate from the order of the AO nor the same was before the CIT(A).
Though the issue of bad debts u/s 36(1)(via) and the issue of applicability of section 115JB do not arise from the facts on record, in the interest of natural justice, we are of the opinion that the same be set aside to the file of the AO for verification and adjudication. The AO is directed to examine and verify the facts of the issues of bad debt and applicability of section 115JB in the impugned year and adjudicate the issues afresh.
The additional ground is allowed for statistical purposes.
The Revenue has raised the following grounds of appeal:
“1. Whether on the facts and in the circumstances of the case, the Hon'ble ITAT was right in deleting the addition of Rs. 58,56,14,000/ made u/s 14A read with Rule 8D only on following Page 4 of 12 & 3039 /DEL/2024 Punjab National Bank [A.Y 2020-21] the decision of Hon'ble Supreme Court in the case of Maxopp Investment vs CIT (2018) ignoring the fact that the assessee earned exempt income during the year and the provisions under section 14A were mandatory provisions. To arrive at correct/real income, it was necessary to apportion the expenditure between taxable and non-taxable income.
2. Whether, on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in not appreciating the provisions of Rule 37BA(2) of the Income Tax Rules whereby the assessee was required to file a declaration with the TDS deductor (Buyer of the property) since the income from the sale of the property does not belong to the assessee i.e., Bank?" 3. "Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition/disallowance of Rs. 53,11,30,453/- made by the AO in respect to Carried forward of Long Term Capital Loss, without appreciating the facts that AO is made disallowance after discussing the facts in assessment order. (4) The appellant craves, leave or reserving the right to amend, modify, add of forego, alter or amend any ground(s) of appeal raised above at the time of hearing of this appeal.”
At the very outset, both the rival representatives concurred that the issue of disallowance u/s 14A is a recurring one and is squarely covered in favour of the assessee and against the Revenue by the order
Page 5 of 12 & 3039 /DEL/2024 Punjab National Bank [A.Y 2020-21] the Delhi High Court in assessee’s own case in various A.Ys. At Para 4.3.2. of his order, the ld. CIT(A) has held as under:
“Assessee has further submitted that this issue is a covered matter. The Hon'ble ITAT, New Delhi in assessee's own case for various assessment years and on cross appeals of the assessee as well as of the Revenue, on similar issue had allowed the appeal of the assessee and had dismissed the appeal of the Revenue. Copy of order dated 09.01.2019 for AY 2006-07 to AY 2010-11 is enclosed as an instance. Further, this matter is also covered in assessee's favour by the order of the Co-ordinate Bench of ITAT in ITANo.1519/Del/16 and in for A.Y. 2012-13 in the case of Punjab National Bank Limited. The relevant portion of the order is reproduced as under: "8. It is observed that decisions relied upon by Ld. Sr. D.R. has been passed prior to decision of Hon'ble Supreme Court in the case of Maxopp Investment vs. CIT (supra). Further Hon'ble Supreme Court in the case of Maxopp Investment vs. CIT (supra). Has rendered a clear finding in respect of banking institutions which is peculiar. Present assessee before us is also a Bank, where shares were held as stock-in-trade and therefore it becomes business activity of assessee. In our opinion specific observation of Hon'ble Supreme Court in the case of Maxopp Investment vs. CIT (supra), reproduced hereinabove are squarely applicable to facts of present case. Respectfully following the view taken by Hon'ble Supreme Court in the case of Maxopp Investment vs. CIT (supra), we allow this ground raised by assessee and hold Page 6 of 12 & 3039 /DEL/2024 Punjab National Bank [A.Y 2020-21] that these were not investments made by assessee in order to fall within the ambit of Rule 8D (iii) of Income tax Rules 1962". Hon'ble Delhi High court in the case of Punjab National Bank (Erstwhile United Dank of India) vide its order dated 20.05.2022 held that provision of section 14A is not applicable where securities are held as stock in trade. As such this issue also Stands covered by the said decision of Hon'ble Jurisdictional Delhi High Court. Copy of said order of the Hon'ble Delhi Court is enclosed.”
After considering the facts and circumstances, we find that issue stands settled in favour of the assessee and against the Revenue by the orders of the Hon'ble High Court of Delhi in ITA 194/2024 dated 09.12.2024; ITA 194/2024 dated 06.12.2024; ITA 193/2024 dated 06.12.2024. The Hon'ble High Court of Delhi has followed the apex Court's decision in South Indian Bank Ltd. vs. CIT (2021) 438 ITR 1.
Respectfully following the same, we dismiss Ground No. 1 of the Revenue.
Ground No. 2 relates to decision of the ld. CIT(A) in not appreciating the provisions of Rule 37BA(2) of the I.T. Rules. At the very outset, the ld. counsel for the assessee submitted that this issue be decided in favour of the assessee and against the revenue.
Per contra, the ld. DR fairly conceded to the same.
Page 7 of 12 & 3039 /DEL/2024 Punjab National Bank [A.Y 2020-21]
We have heard the rival submissions and have perused the relevant material on record. We find that the ld. CIT(A) at Paras 4.5 to 4.5.2 has given a categorical finding which reads as under:
“4.5 Ground No. 5 is about not allowing TDS credit of Rs. 4,41,68,752/- deducted u/s 194A of the Income Tax Act, 1961. 4.5.1 In respect of above Ground, Appellant has submitted that during the course of carrying banking business, the properties of customers whose accounts have become NPA, are sold by the Bank in auctions to recover its dues from the defaulting borrowers under SARFAESI Act. Dues recoverable from borrowers includes interest and other charges recoverable from the borrowers. Such interest and other charges on recovery are being offered to the income tax by the Bank. TDS deducted against section 194A on sale of such properties of defaulting borrowers for recovery of dues has been claimed by the Bank as income there against on account of interest and other charges has been offered for tax. The Learned AO misunderstood such transaction and concluded that Bank is not entitled to claim TDS w/s 194A as the income there against has not been offered to tax which is incorrect. In respect of TDS of Rs 4.42 Crore towards sale of property of defaulting borrower, we submit that Bank has accounted for interest income and other income in its books out of such sale consideration and balance amount was credited to the account of the borrower. In the cases where the accounts of defaulting borrower were written off, even the principal amount was offered for tax as recovery against bad debt. Page 8 of 12 & 3039 /DEL/2024 Punjab National Bank [A.Y 2020-21]
This Issue has also been examined and allowed consistently in past even during scrutiny assessment proceedings except from AY 2018- 19 and AY 2019-20 for which Bank filed appeals with Ld. CIT(A) and the same are yet to be disposed off. In view of the above, your honour is requested to kindly allow the credit of Rs.4,41,68,752/- u/s 194A. 4.5.2 From the above submission, it can be said that TDS deducted against section 194A on sale of such properties of defaulting borrowers for recovery of dues, has been offered to tax though not as Income from Capital Gains, as Sale of Properties. Hence merely on the basis that Income has not been offered to Tax under any specific head of Income, TDS Credit can not be denied.
We do not find any reason to interfere with the decision of the CIT(A). Accordingly, we dismiss Ground No. 2 of the Revenue.
Ground No. 3 relates to the deletion of addition of Rs. 53,11,30,453/- in respect of carried forward of long term capital loss.
At the outset, the ld. counsel for the assessee submitted that this issue has been considered and allowed in favour of the assessee in immediately preceding A.Y 2019-20.
We find that before the CIT(A), the AO submitted that the ld. CIT(A) at paras 4.6.1 to 4.6.3 has held as under:
“4.6.1 ******In the assessment order for AY 2019-20, Long Term Capital Loss of Rs 47,67,74,331/- was considered and allowed. In Page 9 of 12 & 3039 /DEL/2024 Punjab National Bank [A.Y 2020-21] respect of brought forward Long Term Capital Loss of AY 2016-17 and AY 2018 19, there has been no finding in the assessment order for AY 2019-20 for disallowing brought forward Long Term Capital Loss of said AY 2016-17 and AY 2018-19. Therefore, it cannot be concluded that such Long-Term Capital Loss was disallowed in AY 2019-20 Further your good self may refer the Assessment Order for AY 2016-17 and AY 2018-19. where the said loss was allowed during the scrutiny assessment of AY 2016-17 and AY 2018- 19. In view of above the Bank is eligible for carry forward of Long- Term Capital Loss of AY 2016-17 and AY 2018-19 besides Long- Term Capital Loss allowed for carry forward for AY 2019-20 and AY 2020-21 by Ld. AO. 4.6.2 In respect of above Assessing Officer has observed that on the basis of Assessment Order dated 30.09.2021 passed u/s 143(3) in which Carry Forward Loss of Rs.47,67,74,331 being Long Term Capital Loss is allowed. However, the assessee in his submission has stated that no disallowance for carry forward losses has been made in such order. 4.6.3 In the absence of any specific disallowance in the assessment order for A.Y 2019-120, disallowance, carry forward losses for A.Y 2016-17 and 2018-19 cannot be denied. Hence I allow this part of the appeal.”
We find no infirmity in the order of the ld. CIT(A) with regard to allowability of Long Term Capital Loss. Ground No. 2 is dismissed.
Page 10 of 12 & 3039 /DEL/2024 Punjab National Bank [A.Y 2020-21]
In the result, appeal of assessee in is allowed for statistical purposes whereas the appeal of the Revenue in Order pronounced in open court on 28.08.2025.