ITAT Mumbai Ruling on Section 234D & Section 244A in DCIT Vs State Bank of India

Background of the Cross Appeals

The Income Tax Appellate Tribunal, Mumbai Bench, delivered a consolidated order in DCIT Vs State Bank of India involving cross appeals arising from orders passed by the Assessing Officer while giving effect to earlier appellate directions of the Ld. CIT(A).

Two assessment years were involved:

  • AY 2009-10 – Appeal by the Revenue in ITA No.5916/Mum/2017
  • AY 2011-12 – Appeal by the assessee in ITA No.2851/Mum/2019

The disputes essentially revolved around:

  • Taxability of write-back of employee benefit provisions
  • Levy and scope of interest under Section 234D
  • Method of computing interest under Section 244A, including treatment of excess self-assessment tax
  • Sequencing of refund adjustment between interest and tax components

The Tribunal dealt with these intertwined issues in a single composite order pronounced on 13/07/2026.

Revenue’s Appeal – AY 2009-10 (ITA No.5916/Mum/2017)

Issues Raised by the Revenue

The Revenue’s challenge arose from the order of the Ld. CIT(A) passed in the context of the Assessing Officer’s order giving effect to appellate directions for AY 2009-10. Four principal grounds were pressed:

  1. Deletion of addition connected with write-back of employee benefit provisions (leave travel, home travel concession, sick leave, casual leave) aggregating to Rs.15.47 crore.
  2. Deletion of interest levied under Section 234D amounting to Rs.4,26,94,071/-`.
  3. The direction to recast Section 244A interest by adjusting past refunds first towards interest and then towards principal tax.
  4. Grant of Section 244A interest on excess self-assessment tax.

The Tribunal examined each ground separately.

Write-Back of Employee Benefit Provisions – AY 2009-10

Revenue’s Stand

The Department argued that:

  • The provision for “pension and other employee benefits” had been disallowed in an earlier year on a composite basis.
  • The Ld. CIT(A) had, according to the Revenue, already upheld the full disallowance of such provisions in the quantum order.
  • Allowing reduction of the write-back from taxable income in the present year would effectively lead to double deduction and was inconsistent with the earlier disallowance.
  • Hence, the Ld. CIT(A)’s direction to reduce Rs.15.47 crore from taxable income was described as contradictory and perverse.

Assessee’s Contention

The assessee submitted before the Tribunal that:

  • The very provision corresponding to the present write-back had already been disallowed while computing income for AY 2008-09.
  • Until the final appellate position for AY 2008-09 is conclusively determined, taxing the write-back in AY 2009-10 could result in the same amount being hit twice – once by way of disallowance, and again as income.
  • Subsequently, the Tribunal had already allowed the assessee’s claim on that provision for AY 2008-09, but the order giving effect to that decision was still pending finality.
  • Therefore, the taxability of the write-back in AY 2009-10 must necessarily follow the final outcome and tax treatment of the provision in AY 2008-09.

Tribunal’s Findings on Write-Back

The ITAT agreed with the assessee’s line of reasoning and observed:

  • As a general rule, when an expenditure is allowed as a deduction in an earlier year, any subsequent reversal / write-back of that provision is taxable as income in the year of reversal.
  • Conversely, if the underlying expenditure was never allowed as a deduction, bringing the write-back to tax would amount to double taxation.
  • In the assessee’s case, the issue of allowability of the provision for AY 2008-09 had already been decided by the Tribunal and the consequential effect in assessment records was pending.
  • Therefore, the issue for AY 2009-10 could not be isolated from the final tax treatment of the provision in AY 2008-09.

Tribunal’s Direction
The matter relating to the write-back of Rs.15.47 crore was remanded to the Assessing Officer with a clear direction:

  1. First, give full and final effect to all appellate orders for AY 2008-09 concerning the employee benefit provision; and