Relief for Punjab and Sind Bank: Delhi HC Rules Income from Bank-Held Securities as Business Profits, Not Investment Returns [Read Order]

In a recent decision, the Delhi High Court ruled that income from securities held by banks such securities are to be treated as stock-in-trade. So, the income derived from them should be assessed under the head “Profits and Gains of Business,” not as investment returns.

The dispute arose in connection with the bank’s assessment for the Assessment Year 2016-17. The revenue had challenged an order passed by the Income Tax Appellate Tribunal (ITAT), which had affirmed the findings of the Commissioner of Income Tax (Appeals) in favour of the bank.

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The assessing officer had originally disallowed depreciation on securities, contributions to the bank’s pension fund, and expenses under Section 14A. The revenue projected these as substantial questions of law before the High Court.

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The division bench comprising Justice Vibhu Bakhru and Justice Tejas Karia observed that all the questions raised had already been decided in previous rulings involving the same assessee. In particular, the court referred to its earlier decision in Pr. Commissioner of Income Tax-7 v. Punjab and Sind Bank, which held that securities held by banks are part of their regular banking operations and qualify as stock-in-trade.

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The revenue’s counsel acknowledged that the legal questions raised had been addressed in previous decisions by coordinate benches and higher courts. Given this legal consistency, the court ruled that no substantial question of law arose in the present case.

Relying further on the Supreme Court’s ruling in South Indian Bank v. CIT, the court emphasized that Section 14A cannot be invoked when the income arises from assets held as stock-in-trade, even if such income is partially exempt.

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The court dismissed the appeal. The court directed that the parties would be bound by the outcome of any pending Special Leave Petition (SLP) filed against the earlier decisions, but reaffirmed its current position in favour of the assessee.

To Read the full text of the Order CLICK HERE

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