Case Details: Principal Commissioner of Income-tax vs. Punjab National Bank - [2026] 185 taxmann.com 1003 (Delhi)
Judiciary and Counsel Details
- Dinesh Mehta & Vinod Kumar, JJ.
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Puneet Rai, SSC, Ashvini Kumar & Rishabh Nangia, JSCs for the Appellant.
Facts of the Case
For AY 2020-21, the Assessee, Punjab National Bank, received sale proceeds from the auction of immovable properties of defaulting borrowers conducted under the SARFAESI Act. Tax was deducted at source at the time of and from such sale proceeds under section 194IA. During the assessment proceedings, the assessee explained that it had charged interest on the loan amount and adjusted all expenses from the sale proceeds.
On the sale of secured assets, it acted only as a trustee/custodian of the sale proceeds, returning any excess over its outstanding dues and auction-related expenses to the borrower, and recovering any deficit from the borrower.
The CIT(A) held that the assessee was entitled to a refund of the amount deducted from the sale proceeds. The Tribunal affirmed the CIT(A)’s order, and the matter reached the Delhi High Court.
High Court Held
The High Court held that the Bank cannot be treated as the owner of the property, as it has possession only to recover its dues. The property neither factually nor by any legal fiction belongs to the Bank. It is actually the borrower who is the owner of the property, having created a security interest in favour of the Bank or secured creditor.
The assessee had clearly explained before the AO that it had charged interest on the loan amount and adjusted all expenses from the sale proceeds it received consequent to the auction. When the assessee sells the secured assets, it is only a trustee or custodian of the sale proceeds, and any excess amount received in relation to the property over and above its outstanding dues and expenses incidental to the auction must be returned to the borrower. Similarly, if there is any deficit, the assessee can recover it from the borrower in accordance with the law. Thus, the assessee is entitled to get a refund of the amount deducted from the sale proceeds.
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