Delhi High Court dismisses appeal filed by PNB Housing Finance

Delhi High Court dismisses appeal filed by PNB Housing Finance

Observes that the Income Tax department had not objected to the assessees' methodology adopted for the past many years

A division bench of the Delhi High Court has held that the dividends of investments held as stock-in-trade are not deductible from the business income. While dismissing the appeal filed by Punjab National Bank Housing Finance Ltd, it ruled in favor of the Income Tax department.

Appearing on behalf of the appellant-revenue, Zoheb Hossain and Parth Semwal stated that the Income Tax Appellate Tribunal (ITAT) erred in setting aside the disallowance made under the Income Tax Act,1961.

The counsels held that since the assessee earned the exempt income from investments held as stock-in-trade, the provision of the Act did not apply. The provisions did not differentiate between expenses incurred on exempt income or other forms of exempt income.

It was further stated that ITAT erroneously deleted the disallowance made under the IT Act. The tribunal did not consider the total receipts of business for the purpose of working out the proportion to be used in calculating the ratio for a deduction under the provision.

The court observed that the methodology was adopted by the assessee consistently for the last eight years. Until now, the revenue department accepted it without any objection.

The bench comprising Justice Manmohan and Justice Manmeet Pritam Singh Arora stated that the shares and securities held by a bank were stock-in-trade. Also, all income received on the shares and securities must be considered business income.

The court dismissed the appeal and ruled on observing the CIT vs State Bank of Patiala case, wherein the facts were akin to the present case. The reasoning applied was that in stock-in-trade, the dividend earned on the shares was incidental and would not attract the provisions of the IT Act.