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TMI Blog2019 (4) TMI 42X X X X Extracts X X X X X X X X Extracts X X X X ..... g the shares is a relevant for the purpose of invoking the provisions under section 14A 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. In the circumstances we are of the considered opinion that Application of Rule 8D to the facts of the case is not correct, hence, the addition on this account is hereby directed to be deleted. MAT tax credit u/s 115JAA - Disallowance of the MAT credit in respect of surcharge and cess - Held that:- We set aside the impugned order and remit the matter to the file of the Ld. AO for ascertaining the correct amount of MAT tax credit available to the assessee including of surcharge / cess and then allow tax credit as indicated in the decision of the Consolidated Securities Ltd. [2018 (7) TMI 1722 - ITAT DELHI] - I.T.A. No. 1331/DEL/2012 - - - Dated:- 19-11-2018 - SHRI G.D. AGRAWAL, PRESIDENT AND SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER For The Assessee : Ms. Jyoti Narula, CA For The Department : M s. Rashmita Jha, Sr. DR. ORDER PER K. NARASIMHA CHARY, J.M. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 8D as set forth below. It was further submitted that Ld. AO cannot introduce a fiction in Rule 8D of the Income Tax Rules, 1962, (for short the Rules ) whereby he treats the stock in trade of the assessee company as an investment and unjustly computed the disallowance under section 14A. Notwithstanding this fact, the assessee company made disallowance on an adhoc basis taking ratio of exempt income over the total income. 5. Per contra, Ld. DR heavily relied upon the orders of the authorities below. 6. We have carefully considered the submissions and perused the records. There is no denial of the assertions by the assessee that the assessee is engaged in the business of trading in share and all the shares are held by the assessee company as part of its stock-in-trade and not as an investment as is evidenced by the balance sheet of the company. However, Ld. AO recorded that a profit making company pays dividend to its shareholders who have invested some money to its shares, whether the Shareholder is a trader of share or not. Ld. AO further noted that the assessee company has purchased units from the mutual funds under the Dividend Reinvestment Plan and earned day to day div ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stment Ltd versus CIT (2018) 91 taxman.com 154 (SC), wherein the Hon ble Apex Court considered two cases wherein the question of apportionment of expenditure had arisen and predominant intent of investment in shares was pleaded, though an different facts, on the ground that the objective of investing in shares was not to the dividend income, but to either retain controlling interest over the company in which the investment was made or to earn the profit from trading in shares. The question was whether the disallowance under section 14 A of the Act could be invoked in the cases where exempt income was earned from shares held as trading assets or stock in trade . The first case relates to Maxopp investment Ltd and the second case relates to the case of State Bank of Patiala. In the case of Maxopp investment Ltd the assessee company is in the business of finance, investment and was dealing in shares and securities; that they held the shares and securities, partly as investments on the capital account and partly as trading assets for the purpose of acquiring and retaining control over its group companies, primarily Max India Ltd.; and that the profits resulting on the sale of sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be applicable. In spite of this exercise of apportionment of expenditure carried out by the AO, CIT(A) disallowed the entire deduction of expenditure. That view of the CIT(A) was clearly untenable and rightly set aside by the ITAT. Therefore, on facts, the Punjab and Haryana High Court has arrived at a correct conclusion by affirming the view of the ITAT, though we are not subscribing to the theory of dominant intention applied by the High Court. It is to be kept in mind that in those cases where shares are held as stock-in-trade , it becomes a business activity of the assessee to deal in those shares as a business proposition. Whether dividend is earned or not becomes immaterial. In fact, it would be a quirk of fate that when the investee company declared dividend, those shares are held by the assessee, though the assessee has to ultimately trade those shares by selling them to earn profits. The situation here is, therefore, different from the case like Maxopp Investment Ltd. where the assessee would continue to hold those shares as it wants to retain control over the investee company. In that case, whenever dividend is declared by the investee company that would necessarily be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Apex Court, therefore, while rejecting the theory of dominant purpose in making investment in shareswhether 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. 17. In the circumstances and respectfully following the aforesaid binding precedent, we are of the considered opinion that Application of Rule 8D to the facts of the case is not correct, hence, the addition on this account is h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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