DCIT, CIRCLE - 19(1), DELHI V. PUNJAB NATIONAL BANK (EARLIER KNOWN AS ORIENTAL BANK OF COMMERCE), DELHI

ITA 3161/DEL/2024

AI Insights

The case involves an appeal by the Revenue against the decisions of the CIT(A)/NFAC, which had deleted several disallowances made by the Assessing Officer in the assessment of Punjab National Bank for the year 2017-18. The disallowances pertained to interest payments on fixed deposits, investments, and depreciation on assets. The Tribunal examined each ground of appeal, referencing relevant legal standards and previous judicial decisions, and found that the CIT(A)'s decisions were well-supported by evidence and consistent with legal provisions. The Tribunal emphasized the need for the Assessing Officer to substantiate disallowances with adequate reasoning and evidence, which was lacking in this case.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 781104 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 3 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-10-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2017-2018
• Appeal Filed On: 02-07-2024
• Other Referred Cases: Collector, Land & Acquisition vs. Mst. Katiji & Others (1987) 167 ITR 471 (SC), Madras Industrial Corporation vs. CIT 225 ITR 802, Maxopp Investment Ltd. Vs. CIT (2018) 402 ITR 640 (SC), Bharat Earth Movers Vs. Commissioner of Income Tax, Karnataka, 245 ITR 428 (SC)
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DAYAINDER SINGH SIDHU
• Assessee Lawyers: K.V.S.R. KRISHANA
• Keywords: Revenue expenditure; Bad and doubtful debts; Depreciation; Capital expenditure; TDS; Rule 8D
• Section: 143(3); 14A

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: ‘C’ NEW DELHI BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND SHRI AVDHESH KUMAR MISHRA, ACCOUNTANT MEMBER ITA No.3161/Del/2024 Assessment Year: 2017-18 DCIT, Circle-19(1), Delhi Vs. Punjab National Bank (earlier know as Oriental Bank of Commerce), Harsha Bhawan, E Block, Connaught Place, Delhi PAN: AAACO0191M (Appellant) (Respondent) ORDER PER SATBEER SINGH GODARA, JM This Revenue’s appeal for assessment year 2017-18, arises against the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre [in short, the “CIT(A)/NFAC”], Delhi’s DIN and order no. ITBA/NFAC/S/250/2022-23/1049284753(1), dated 31.01.2023 involving proceedings under section 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’). Assessee by Sh. K.V.S.R. Krishana, CA Department by Sh. Dayainder Singh Sidhu, CIT(DR) Date of hearing 28.07.2025 Date of pronouncement 24.10.2025 Printed from counselvise.com ITA No.3161/Del/2024 2 | P a g e Heard both the parties. Case file perused. 2. Delay of 458 days in filing of the Revenue’s instant appeal is condoned in larger interest of justice and in light of Collector, Land & Acquisition vs. Mst. Katiji & Others (1987) 167 ITR 471 (SC). 3. The Revenue pleads the following substantive grounds in the instant appeal: “1. Whether on the facts and under the circumstances of the case, the Ld. CIT (A) has erred in law and the facts in deleting the disallowance of Rs.5.61 lakh made by the Assessing Officer without appreciating the facts that assessee has not submitted the basis of payment of interest in respect of the Fixed Deposit. 2. Whether on the facts and under the circumstances of the case, the Ld. CIT (A) has erred in law and the facts in deleting the disallowance of Rs. 22.45 crores made by the Assessing Officer u/s 14A r.w.r. 8D by ignoring the mandatory provisions of sub rule 8D r.w.s. 14A of the Income-tax Act 1961. 3. Whether on the facts and under the circumstances of the case, the Ld. CIT (A) has erred in law and the facts in allowing 100% depreciation of Rs.21.46 Cr claimed by the assessee on temporary erections as against @ 10% and @ 5% for less than 180 days allowed by the Assessing Officer that the erection and fixtures mentioned above have longer life than one year and of enduring benefit to the assessee company as held by the Hon'ble Apex Court in the case of Madras Industrial Corporation vs. CIT 225 ITR 802.\" 4. Whether on the facts and under the circumstances of the case, the Ld. CIT (A) has erred in law and the facts in deleting the disallowance of Rs.570.86 Cr on account of inter office adjustment made by the Assessing Officer of the Income-tax Act, 1961.\" 5. Whether on the facts and under the circumstances of the case, the Ld. CIT(A) has erred in deleting the disallowance of Rs. 14.06 Cr/ made on account of software expenses treating it as revenue expenditure instead of expenses incurred are as 'capital in nature without appreciating the facts that these expenses are in the nature of capital and result in enduring benefit. Printed from counselvise.com ITA No.3161/Del/2024 3 | P a g e 6. Whether on the facts and under the circumstances of the case, the Ld. CIT(A) has erred in law and in facts and circumstances of the case, In reducing the above disallowance by ignoring the fact that the claim of the assessee u/s 36(1) (viia) is available only if it fulfills the conditions laid down in the Act u/s 36(2)(v) of the Act and on going through the records it is observed that the assessee has nowhere in earlier years had ever made any provision for such claim. 7. Whether on the facts and circumstances of the case, the Ld. CITIA) has erred in deleting the disallowance made by the Assessing Officer on account of disallowance of deduction claimed on depreciation on investment of Rs. 191.98 Cr by ignoring the facts that assessee does not fulfill/eligible the condition mention in RBI Circular. 8. Whether on the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the disallowance made by the Assessing Officer on account of disallowance of provision for depreciation on Government Securities Rs.4.25 Cr by ignoring the facts that assessee does not fulfill/eligible the condition mention in RBI Circular.” 9. Whether on the facts and circumstances of the case, the Ld. CIT(A) has erred in law and in facts and circumstances of the case, in deleting the addition made by the Assessing Officer on account of disallowance of amortization on HTM securities amounting to Rs.91.63 Cr by ignoring the fact that when securities were purchased from market at market value, there could not no question of carrying investment at a lower price by writing off premium paid.\" 10. Whether on the facts and under the circumstances of the case, the Ld. CIT(A) has erred in deleting the disallowance of Rs. 14.06 Cr/ made on account of software expenses treating it as revenue expenditure instead of expenses incurred are as 'capital in nature without appreciating the facts that these expenses are in the nature of capital and result in enduring benefit. 11. \"Whether on the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the disallowance made by the Assessing Officer on account of disallowance of deduction claimed in respect of provision for NPI of Rs.153.23 Cr by ignoring the facts that assessee does not fulfill/eligible the condition mention in RBI Circular.” 4. We advert to the first and foremost issue between the parties wherein the learned CIT(A) has reversed the Assessing Officer’s Printed from counselvise.com ITA No.3161/Del/2024 4 | P a g e action disallowing assessee’s claim of interest payment amounting to Rs.5,61,297/-; vide following detailed discussion: “FINDING 4.2 The submissions of the appellant are considered carefully along with the facts of the case. The AO has made the addition essentially based on the information he had that the entity during its assessment proceedings under section 143(3) for A.Y. 2013-14 had denied having any such fixed deposit account with the assessee Bank. However, considering that the appellant had furnished a copy of cheque issued by the Fixed Deposit holder debiting its current account for opening the Fixed Deposit and that TDS has also been deducted and deposited on the interest paid, the onus was on the AO to take the enquiry further before reaching any conclusion on the issue. 4.3 Also, it has been stated by the appellant that a bank guarantee had been issued against the said Fixed Deposit. Given the nature of evidence furnished by the appellant, and the fact that the AO has not controverted the assertion that due tax was deducted on source and duly paid, it is not possible to deny the claim of expenses on account of interest paid merely based on the limited information available with the AO. As such, the AO is directed to delete the addition. Ground of appeal no. 1 is allowed. 5. Ground of Appeal No. 2” 5. It is in this factual backdrop that the Revenue vehemently contends that once the assessee had failed to get the impugned interest payment acknowledged from its payee’s side, the same had been rightly disallowed in the assessment order dated 30th December, 2019. We see no reason to accept both the Revenue’s instant vehement contentions. This is for the precise reason that the assessee had duly placed on record all the relevant supportive evidence of its customer’s fixed deposits including of TDS Printed from counselvise.com ITA No.3161/Del/2024 5 | P a g e deduction (pages 43 to 50 in the paper-book); all along right from scrutiny till date. That being the case, we are of the considered view that the assessee has duly proved all the requisite details of its impugned interest payment of fixed deposits so as to uphold the learned CIT(A)/NFAC’s action deleting the disallowance thereof herein. The Revenue fails in its first and foremost substantive ground therefore. 6. The second substantive issue between the parties is that of section 14A read with Rule 8D disallowance of Rs.22,45,66,323/- made in assessment order, and deleted in the lower appellate discussion. This is for the precise reason that the impugned investments in fact represent the assessee’s money kept with in Govt. banks, securities, shares, debentures, etc. to maintain its service lending rate(s) “SLR” and credit repo rate “CRR”; as the case may be. We note that the same is a recurring issue between the parties wherein hon’ble jurisdictional high court’s recent decision dated 13th September, 2023 (AYs 2013-14 to 2015-16) in assessee’s case(s) has made it clear that the impugned disallowance provision in section 14A read with Rule 8D itself does not apply in an instance involving investments held as stock in trade in light of Printed from counselvise.com ITA No.3161/Del/2024 6 | P a g e Maxopp Investment Ltd. Vs. CIT (2018) 402 ITR 640 (SC). We thus adopt judicial consistency to reject the Revenue’s instant second substantive ground in very terms. Ordered accordingly. 7. The third substantive issue between the parties herein is that of disallowance of Rs.21,46,25,828/- involving depreciation on temporary wooden structures wherein the learned Assessing Officer had held the same to be fall ceiling(s), wooden partition(s), and glass windows etc. only. The Revenue could hardly dispute that the assessee has already succeeded on the very issue in ITA No.740/Del/2020 for AY: 2016-17, dated 31st March, 2023 before the tribunal. We thus adopt judicial consistency herein as well in the assessee’s favour since the impugned assets form part of the very block of assets all along. Rejected accordingly. 8. The Revenue’s fourth substantive ground raised in the instant appeal is that the CIT(A)/NFAC has erred in law and on facts in deleting the disallowance of assessee’s inter office adjustment claim amounting to Rs.570,86,00,000/- made by the Assessing Officer in his assessment order; vide following detailed discussion: “FINDING 8.2 The submissions of the appellant are considered carefully. It appears that the AO has not given proper consideration to the nature of liability reflected as Inter-Office Adjustment (net) of Rs. 570.8690 Printed from counselvise.com ITA No.3161/Del/2024 7 | P a g e crore in schedule 5 of the balance sheet. This item represents the difference on account of incomplete recording of transactions between one branch and another branch or between one branch and head office, as on 31st March of the financial year. As per the extant accounting norms of a bank, the inter-office adjustments balance, if in credit, is required to be shown under this head. Only net position of inter- office accounts, inland as well as foreign is shown here. 8.3 Having understood the nature of balance shown under this head, it is noted that it is a settled law that no one can earn profit from oneself. If the credit balance shown under the head 'Inter-Office Adjustments' is brought to tax, it would be amounting to taxing non- existent profits arising out of transactions undertaken by different branches inter-se, or between a branch and the head office. As the same is against the established canons of taxation, the addition made by the AO on account of 'Inter-Office Adjustments cannot be sustained, and is deleted. 6. Ground of appeal no. 5 is allowed.” 9. Suffice to say, there is hardly any dispute between the parties that the assessee had claimed the impugned sum as a provision of liability in Schedule 5 of its balance-sheet for the reason that the same represented difference on account of incomplete recording of transactions amongst its various branches. This made the learned Assessing Officer to treat the above claim as a non- existent/contingent liability only. The assessee on the other hand claims that apart from foregoing technical reason, no failure on its part was noticed all along that the impugned provision was either not based on the cogent supportive material or nor allowable as an anticipated liability in light of Bharat Earth Movers Vs. Commissioner of Income Tax, Karnataka, 245 ITR 428 (SC). We Printed from counselvise.com ITA No.3161/Del/2024 8 | P a g e thus find no merit in the Revenue’s vehement contentions seeking to revive the impugned inter-office adjustment disallowance. Rejected accordingly. 10. The Revenue’s fifth substantive ground herein seeks to revive the Assessing Officer’s action disallowing the assessee’s software expenditure of Rs. 14,06,86,873/- which stands reversed in the CIT(A)/NFAC’s lower appellate discussion. 11. The Revenue seeks to buttress the point before us that the Assessing Officer had rightly treated the same as an instance of capital expenditure than revenue in nature. It could hardly dispute that the assessee has already succeeded on the very issue in the preceding assessment year 2016-17 (supra) wherein no distinction on facts or law, as the case may be, is forthcoming from the records. We accordingly uphold the learned lower appellate authority’s action treating the assessee’s software charges as revenue expenditure items in very terms. 12. Next comes the sixth substantive issue between the parties regarding allowability of assessee’s section 36(1)(viia) deduction claim of Rs.1258,11,97,648/- made by the Assessing Officer and deleted in the lower appellate discussion, as under: Printed from counselvise.com ITA No.3161/Del/2024 9 | P a g e “FINDING 11.2 The submissions of the appellant are considered carefully. In the assessment order, the AO has given following reasons for making additions:  The census figures published on the first day of the previous year were not made available;  Even though the assessee submitted that branch wise aggregation was made separately the specific details were not submitted;  The assessee has not prepared and submitted the aggregate provisions pertaining to rural and non-rural branches;  Also, the assessee has not submitted the credit available in the provisions for bad and doubtful debts account. 11.3 Section 36(1)(viia) is quoted below for reference: Other deductions. 36. (1) The deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in section 28- ……………………. (viia) in respect of any provision for bad and doubtful debts made by- (a) a scheduled bank [not being a bank incorporated by or under the laws of a country outside India] or a non-scheduled bank or a co- operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank, an amount not exceeding eight and one-half per cent of the total income (computed before making any deduction under this clause and Chapter VIA) and an amount not exceeding ten per cent of the aggregate average advances made by the rural branches of such bank computed in the prescribed manner: Provided that a scheduled bank or a non-scheduled bank referred to in this sub-clause shall, at its option, be allowed in any of the relevant assessment years, deduction in respect of any provision made by it for any assets classified by the Reserve Bank of India as doubtful assets or loss assets in accordance with the guidelines issued by it in this behalf, for an amount not exceeding five per cent of the amount of such assets shown in the books of account of the bank on the last day of the previous year: Provided further………………. Printed from counselvise.com ITA No.3161/Del/2024 10 | P a g e Provided also....................... Provided also………………. Explanation- For the purposes of this sub-clause, \"relevant assessment years\" means the five consecutive assessment years commencing on or after the 1st day of April, 2000 and ending before the 1st day of April, 2005; (b) a bank, being a bank incorporated by or under the laws of a country outside India, an amount not exceeding five per cent of the total income (computed before making any deduction under this clause and Chapter VI-A); (c)……………………….. (d)………………………. Explanation. For the purposes of this clause,- (1) \"non-scheduled bank\" means a banking company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949), which is not a scheduled bank; (ia) \"rural branch\" means a branch of a scheduled bank or a non- scheduled bank situated in a place which has a population of not more than ten thousand according to the last preceding census of which the relevant figures have been published before the first day of the previous year; (ii) \"scheduled bank\" means the State Bank of India constituted under the State Bank of India Act, 1955 (23 of 1955), a subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959*), a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970), or under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980), or any other bank being a bank included in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934); (iii)………………………. (iv)………………………. (v)………………………… (vi)……………………….. (vii)……………………… (viii)……………………… Explanation. In this clause,- (a) \"specified entity\" means,- Printed from counselvise.com ITA No.3161/Del/2024 11 | P a g e (1) a financial corporation specified in section 4A81 of the Companies Act, 1956 (1 of 1956); (ii) a financial corporation which is a public sector company, (iii) a banking company, (iv) a co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank; (v) a housing finance company; and (vi) any other financial corporation including a public company; (b) \"eligible business\" means,- (i) in respect of the specified entity referred to in sub-clause (1) or sub- clause (ii) or sub-clause (iii) or sub-clause (iv) of clause (a), the business of providing long-term finance for- (A) industrial or agricultural development; (B) development of infrastructure facility in India; or (C) development of housing in India; (ii) in respect of the specified entity referred to in sub-clause (v) of clause (a), the business of providing long-term finance for the construction or purchase of houses in India for residential purposes; and (iii) in respect of the specified entity referred to in sub-clause (vi) of clause (a), the business of providing long-term finance for development of infrastructure facility in India; (c) \"banking company\" means a company to which the Banking Regulation Act, 1949 (10 of 1949) applies and includes any bank or banking institution referred to in section 51 of that Act; (d)………….. (e)…………. (f)………….. (g)………… (h)…………. 11.4 As can be seen from the above, a \"rural branch\" means a branch situated in a place which has a population of not more than ten Printed from counselvise.com ITA No.3161/Del/2024 12 | P a g e thousand according to the last preceding census of which the relevant figures have been published before the first day of the previous year. The requirement in this regard is with respect to the last census that has taken place and whose figures have been published before the relevant previous year starts, and not the census figures published on the first day of the relevant previous year as surmised by the AO. To illustrate, if a village had total population of not more than 10,000 in the last census whose figures were published prior to 01.04.2016, the branch therein would be classified as \"rural branch\" for the relevant A.Y. 2017-18. 11.5 It has been asserted by the appellant that it classifies its branches as per RBI master circular dated July 1, 2014 updated on September 1, 2016, the copy of which was filed before the AO. It is also seen that the claim is further supported by the certificate of auditors, filed before AO, who have clearly stated that they have verified in terms of provisions of Rule 6ABA and have certified, after verification of the books of accounts and the advances pertaining to the rural branches, 10% of the aggregate average rural advances. 11.6 The insistence of the AO to submit aggregate provisions pertaining to rural and non-rural branches is strange as the deduction in question is limited to rural advances only. having nothing to do with non-rural advances. Similarly, it is not understood as to why the AO had asked for credit available in the provisions for bad and doubtful debts account. While the credit available in the provision for bad and doubtful debts is relevant while allowing deduction u/s 36(1)(vii) (as already held in para 7.8, 7.9, 7.10 of this order while disposing of the ground of appeal no. 2), it is not at all relevant for computing the deduction u/s 36(1)(viia). In fact, none of the reasons given by the AO while making the addition (as summarized in para above 19.1) is relevant. 11.7 Considering the totality of facts, and keeping in view that the AO has failed to provide any cogent reason on facts to challenge to figure of deduction certified by the auditors, the addition of Rs.1258,11,97,648/- is deleted. Ground of appeal No. 8 is allowed.” 13. We are informed during the course of hearing that the assessee has already succeeded on the very issue of bad debts disallowances; branch-wise, involving a schedule bank; right from Printed from counselvise.com ITA No.3161/Del/2024 13 | P a g e assessment year 2011-12 (ITA No.6443/Del/2014, dated 25.10.2017 at page 126 of the paper-book) as well as consolidated order dated 4th March, 2022 in assessment orders 2012-13 to 2015-16 (page 89 to 91 in paper-book); respectively, as follows: “14. This issue pertains to disallowance u/s 36(1)(via) to the extent of Rs.114,50,17,210/- considering it as excess deduction claimed by the assessee. 15. The AO has dealt with this in his order at page no. 11 to page no. 21 of his order stating that reserve is distinct and different from provision. Hence, provision for bad and doubtful debts made by the assessee in its accounts is only Rs.729,44,85,300/- against deduction u/s 36(1)(via) claimed to the tune of Rs. 843,95,06,510/-. Consequently total amount of deduction admissible to the assessee u/s 36(1)(vila) in respect of provision for bad and doubtful debts for A.Y. 2012-13 cannot exceed Rs. 729,44,85,300/-. 16. The assessee filed appeal seeking relief for deduction of Rs. 843,95,06,510/- u/s 36(1)(viia) of the Act. The Id. CIT(A) allowed the claim of the assessee u/s 36(1) (viia) following the order for AY 2011- 12 but restricted it to the amount of Rs.729,44,85,300/- being provision for bad and doubtful debts and disallowed Rs.114.51 cr. on the ground that reserve for bad and doubtful debts cannot be considered as provision. Reference is invited to page 13, para 8 upto page 19, para 8.4.3. 17. This issue is covered by the order of the Co-ordinate Bench of ITAT in assessee's own case for the A.Y. 2011-12 in ITA No.644/Del/2014 and ITA No.5969/Del/2014 vide order dated 25.10.2017. The operative part of the order is reproduced as under: \"12 We find that the computation made in terms of section 36(1)(viia) gives the total amount of deduction at Rs. 637,56,78,375/-, which fact has not been disputed also. However, the Id. CIT(A) restricted the addition to the tune of Rs.488.39 crore on the ground that the total amount of provision for bad and doubtful debts in respect of rural branches is only to this extent and, hence, deduction cannot exceed it. We are not agreeable with the view canvassed by the Id. CIT(A) in view of the language of section 36(1) (vila) which opens with the expression that: \"in respect of any provision for bad and doubtful debts made by ......\" It is amply clear from the language of section 36(1)((viia) that the deduction is with respect of \"Provision for bad and Printed from counselvise.com ITA No.3161/Del/2024 14 | P a g e doubtful debts\" and the same is not restricted to the provision for bad and doubtful debts - Rural branches.\". Such a total provision includes both for rural and non-rural branches. Page 122 of the paper book is a copy of the Annual report of the assessee for the year under consideration, which shows the amount of 'Provision towards NPA' at Rs. 934.38 crore. Break-up of this amount is given at page 121 of the paper book, which comprises of 'Provision for bad and doubtful debts rural branches' at Rs. 488.39 crore and Reserve for bad and doubtful debts non-rural branches at Rs.445,98,44,100/-. In fact, total provision made by the assessee stands at Rs.934.38 crore. As section 36(1)(vila) grants deduction in respect of total provision for bad and doubtful debts and the same is not confined to provision for rural branches only, we hold that the quantum of deduction has to be seen in the light of the total amount of provision consisting of both rural and non-rural branches. Viewed in this light, the action taken by the Id. CIT(A) in reducing the amount of deduction to the extent of provision for bad and doubtful debts in respect of rural branches alone, becomes unsustainable. We, therefore, direct that deduction of Rs. 637,56,78,375/- be allowed u/s 36(1)(viia).\" 18. In view of the above, the order of the ITAT in assessee's own case, the deduction to the tune of Rs.114,15,17,210/- is hereby allowed. 14. We adopt the learned coordinate bench’s above detailed discussion mutatis mutandis to uphold the CIT(A)/NFAC’s findings deleting the impugned bad debts disallowance in very terms. 15. The seventh substantive issue between the parties herein is that of disallowance of deduction claimed as depreciation on investments amounting to Rs.191,98,78,857/-; deleted in the lower appellate discussion reading as under: “During the year under consideration, the appellant has claimed an amount of Rs. 191.98 crs. being depreciation on investments. The said provision is audited by the Central Statutory Auditors of the Bank appointed by the RBI Further the appellant has filed amputation of provision for depreciation on investment scrip wise before the AO. The appellant submits that the claim is made by the assessee as per the ICDS issued by the CBDT Printed from counselvise.com ITA No.3161/Del/2024 15 | P a g e The Central Board of Direct Taxes (CBDT) vide notification no. SO 3079(E) (No. 87/2016] dated 29.09.2016 has issued revised ICDS making it compulsory for all assesses following mercantile system of accounting to follow the standards for the purpose of computation of income under the head profits & gains of business and income from other source with effect from A.Y. 2017-18. The Income Computation and Disclosure Standard VIII (ICDS VIII) is relating to securities. Part B of the ICDS VIII deals with securities held by a scheduled bank or public financial institutions formed under a Central or a State Act or so declared under the Companies Act, 1956 (1 of 1956) or the Companies Act, 2013 (18 of 2013). In respect of securities ie, depreciation on investments, amortization of premium on HTM securities, profit/loss on sale of investments, ICDS-VIII part B, clause (3) provides - \"securities shall be classified, recognized and measured in accordance with the extent guidelines issued by RBI in this regard and any claim for deduction in excess of the said guidelines shall not be taken into account. To this extent, provisions of income computation and disclosure standard-6 on the effect of changes in foreign exchange rates relating to forward exchange contracts shall not apply\". RBI Master circular on Prudential Norms for Classification, Valuation and Operation of Investment Portfolio by Banks RBI/2015-16/97 DBR No BP. BC.6/21.04.141/2015-16 dated 01.07.2015, pages 32 to 34 cover the principles of valuation which has been submitted to the AO. The assessee submits that following ICDS is not optional but compulsory for the Bank and not following it will result in violation of Income Tax guidelines. If an investment was acquired for Rs 100. on day 1 it appears in the Balance Sheet at Rs 100. Further, say, as per ICDS (which refer to guidelines issued by RBI), as at year end, the valuation is to be done at lower of actual or market rates and the same works out to Rs. 98. Therefore, continuing the investment at Rs. 100 would be violation of RBI guidelines and hence violation of ICDS. Therefore, to comply with the ICDS, the Bank is required to debit the code 2405 (Expense Head in P & L) by the notional amount of loss i.e. Rs. 2. Correspondingly the investments in books is reflected at a value of Rs. 98. in the manner explained above, by debiting Rs 2 to the Profit & Loss account (provision for depreciation of investments), the investment got Printed from counselvise.com ITA No.3161/Del/2024 16 | P a g e valued as per RBI guidelines. In view of the above, the provision for depreciation of investments is clearly an allowable expenditure. The appellant submits that AO has never asked for the details of opening and closing stock as alleged in the order. Further the allegation of the AO that resultant profits on sale are not enhanced by the value of depreciation in subsequent year when these investments were actually sold is wrong, on assumptions and without any basis. Such fall in value of investments held by a Bank as part of its stock in trade is allowed as deduction in the Banks own case in all its previous assessment years and hence should be allowed in the year under consideration.” 16. The Revenue could hardly dispute that this is a recurring issue between the parties wherein the assessee has already succeeded upto hon’ble jurisdiction high court in ITA 306/2016 decided on 11th May, 2016 (in the department’s tax appeal for AY: 2007-08, pages 158 to 161 in the paper-book). Rejected accordingly. 17. Next comes the eighth substantive issue between the parties wherein the Revenue seeks to revive the Revenue’s action disallowing the assessee’s provision for depreciation of Govt. Securities “G-Sec” amounting to Rs.4,25,32,401/- which is stated to be on identical footing as in the preceding issue. Rejected in very terms therefore. 18. The ninth substantive issue between the parties in the instant appeal is that of the assessee’s loss on amortization of premium on Printed from counselvise.com ITA No.3161/Del/2024 17 | P a g e held to maturity “HTM” securities amounting to Rs. 91,63,76,063/- ; made by the Assessing Officer and deleted in the lower appellate discussion. Both the learned representatives are very much ad- idem during the course of hearing that the assessee has already succeeded on the very issue in assessment year 2016-17 before the tribunal (supra). Rejected accordingly. 19. The tenth substantive issue between the parties in the instant appeal is that of allowability of expenditure of the assessee’s claim on software amounting to Rs.14,06,86,873/- disallowed in the assessment order and deleted in the lower appellate discussion which is found to be on identical footing as it was the ground no. 5 hereinabove. Rejected in very terms therefore. 20. Lastly comes the eleventh substantive ground between the parties raising the issue of disallowance of the assessee’s provision for Non-Performing Investments amounting to Rs.153,23,72,250/- which is found to be a recurring one only and covered against the department in their lordship’s decision in assessment year 2007- 08 involving ITA No. 306/2016, dated 11th May, 2016. Rejected in very terms therefore. No other ground or argument has been pressed before us. Printed from counselvise.com ITA No.3161/Del/2024 18 | P a g e 21. This Revenue’s appeal is dismissed in above terms. Order pronounced in the open court on 24th October, 2025 Sd/- Sd/- (AVDHESH KUMAR MISHRA) (SATBEER SINGH GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 24th October, 2025. RK/- Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi Printed from counselvise.com "