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2019 (1) TMI 1654 - AT - Income TaxDepreciation on securities - HELD THAT - It is a verifiable fact with reference to the sales of securities, if any, that took place during the year orinearlier or subsequent years. Such an exercise has not been undertaken by the learned Assessing officer but merely basing on the figures reflected in the balance sheet which was prepared in accordance with the RBI guidelines, Assessing officer reached a conclusion that there was an escapement of income due to the preparation of the balance sheet in a particular way, as prescribed by the RBI. If we appreciate the facts of this case in the light of the decision of the Hon ble Apex Court in UCO Bank vs. CIT 1999 (9) TMI 4 - SUPREME COURT it is clear that since the assessee has been maintaining its accounts on mercantile system, they are entitled to show his real income by taking into account market value of such investments in arriving at real taxable income. All the aspects argued by the Ld. DR were considered by the Hon ble Apex Court in the case of UCO Bank vs. CIT and were held in favour of the assessee. The decision in Southern Technologies Ltd 2010 (1) TMI 5 - SUPREME COURT has no application to the facts of the case. There is consistency of the facts on this aspect quite for a long time and all possible arguments have come before the adjudicatory authorities.On a careful consideration of the matter in the light of the submissions on either side we are of the considered opinion that the question is now fully covered by the orders of the tribunal in assessee s own case for the earlier years, and while respectfully following the same, we hold the issue in favour of the assessee. P S Bank Employees Pension Fund Trust - HELD THAT - CIT(A) found that on similar issue in the Assessment year 2009-10, the issue was decided in of the assessee wherein it was held that similar expenses were allowed in the earlier assessments made under section 143(3) of the Act and the decision of Delhi ITAT in the case of DCIT vs Ranbaxy Laboratories Ltd 2009 (6) TMI 126 - ITAT DELHI-I wherein the expenses towards provision for pension fund were held to be allowable expenses and section 43B has no application, is applicable. The fact that the assessee had actually contributed/paid the amount to pension fund makes the case of the assessee even stronger. Following the above orders, Ld. CIT(A)held that the addition made on this score has to be deleted. We do not find any difference in the facts of the case from their earlier years to render the binding precedents followed by the CIT(A) inapplicable to the case in hand. In the absence of any change of facts and circumstances, we find it difficult to take a different view. In these circumstances, we uphold the findings of the CIT(A) and dismiss this ground of appeal. Section 14A - HELD THAT - MAXOPP INVESTMENT LTD. VERSUS COMMISSIONER OF INCOME TAX, NEW DELHI AND PRINCIPAL COMMISSIONER OF INCOME TAX-I VS. D.B. CORP LTD. 2018 (3) TMI 805 - SUPREME COURT while rejecting the theory of dominant purpose in making investment in shares- whether it was to acquire and retain controlling interest in the other company or to make profits out of the trading activity in such shares - clearly made a clear distinction between the dividend earned in respect of the shares which were acquired by the assessee in their exercise to acquire and retain the controlling interest in the investee company, and the shares that were purchased for the purpose of liquidating those shares whenever the share price goes up, in order to earn profits. It is, therefore, clear that though not the dominant purpose of acquiring the shares is a relevant for the purpose of invoking the provisions under section 14 A of the Act, the shares held as stock in trade stand on a different pedestal in relation to the shares that were acquired with an intention to acquire and retain the controlling interest in the investee company. We, therefore, while respectfully following the above decision do not find any illegality or irregularity in the Ld. CIT(A) deleting the addition made by the Ld. AO under rule 8D (2) (ii) of the Rules. - Appeals of the revenue are dismissed.
Issues Involved:
1. Depreciation on securities. 2. Contribution to P&S Bank Employees Pension Fund Trust. 3. Disallowance under Section 14A of the Income-tax Act, 1961. 4. Computation of book profits under Section 115JB of the Income-tax Act, 1961. Issue-wise Detailed Analysis: 1. Depreciation on Securities: The assessee, a nationalized bank, claimed deductions for depreciation on securities for the assessment years 2011-12 and 2012-13. The Assessing Officer (AO) contested this, arguing that the investments were not shown as "stock in trade" in the books, leading to potential tax discrepancies. The CIT(A) sided with the assessee, referencing past tribunal decisions and the Supreme Court ruling in UCO Bank vs. CIT. The Tribunal upheld CIT(A)'s decision, noting that the AO's concerns were speculative and not based on specific instances of tax evasion. The decision emphasized the consistency of the bank's accounting practices and the legitimacy of valuing stock-in-trade at cost or market price, whichever is lower. 2. Contribution to P&S Bank Employees Pension Fund Trust: The AO disallowed the bank's contributions to its pension fund, arguing that such payments were not deductible under Section 43B of the Income-tax Act. The assessee countered that these contributions were statutory obligations under the Banking Companies Undertaking Act of 1970 and should be considered legitimate business expenses. The CIT(A) agreed with the assessee, referencing previous assessments and the Delhi ITAT's decision in DCIT vs. Ranbaxy Laboratories Ltd. The Tribunal upheld this view, noting no change in facts or circumstances to warrant a different conclusion. 3. Disallowance under Section 14A: The AO disallowed expenses related to earning exempt income under Section 14A, applying Rule 8D of the Income-tax Rules. The CIT(A) partially upheld this disallowance but excluded certain expenses. The assessee argued that investments made by a bank are part of its business operations, and expenses related to such investments should be considered business expenses. The Tribunal referenced the Supreme Court's decision in Maxopp Investment Ltd vs. CIT, which distinguished between shares held as stock-in-trade and those held for controlling interest. The Tribunal concluded that the CIT(A) correctly excluded certain expenses, as the shares were held as stock-in-trade. 4. Computation of Book Profits under Section 115JB: The AO made additions for depreciation on securities, contributions to the pension fund, and disallowance under Section 14A while computing book profits under Section 115JB. Given the Tribunal's findings on the previous issues, these additions were deemed unnecessary and dismissed. Conclusion: The appeals by the revenue were dismissed, with the Tribunal upholding the CIT(A)'s decisions on all counts. The Tribunal emphasized the consistency of the bank's accounting practices and the legitimacy of its claims, referencing relevant judicial precedents and statutory obligations. The order was pronounced in the open court on January 9, 2019.
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