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TMI Blog2019 (1) TMI 1654X X X X Extracts X X X X X X X X Extracts X X X X ..... our 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 cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -12 2012-13 respectively of the learned Commissioner of Income-tax (Appeals)-7, Delhi {for short CIT(A), Revenue preferred these appeals. 2. Brief facts of the case relevant for the disposal of these two appeals are that the Punjab Sind Bank ( the assessee ) is a wholly-owned Government of India undertaking. In respect of the assessment for the Assessment Years 2011-12 and 2012-13, Ld. AO made certain additions in respect of the depreciation on securities, contribution to PSB Employees Pension Fund Trust and under section 14 A of the Income-tax Act, 1961 ( the Act ) under the normal provisions of the Act and also while computing the book profits under section 115 JB of the Act. 3. Ld. CIT(A) in appeal deleted all these three additions. Hence the revenue is before us in these appeals. Ground 1: Depreciation on securities 4. Learned Assessing Officer found that the assessee had claimed deduction of ₹ 167,45,36,493/- for the assessment year 2011-12 and ₹ 348,36,62,436/in respect of the assessment year 2012-13 on account of depreciation on investment on account of valuation of securities. Case of the assessee is banked upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of UCO Bank vs. CIT 240 ITR 355 (SC)decided the issue in favour of the assessee bank. 7. It is the argument of the learned DR that though the assessee has been relying on the orders of the tribunal for the assessment year 2007-08 to 2009-10 questions involved in those matters are entirely different from the facts involved in this matter. It is the submission of the Ld. DR that in the present appeal the fact is that the revenue is challenging the deduction on the ground that the assessee on one hand is taking benefit of deduction on diminution of the value of securities in the closing stock and on the other hand not carrying forward the impact of this claim of diminution on the value of securities in the opening stock. Ld. DR placed reliance on the decision of the Hon ble Apex Court in the case of Southern Technologies Vs. ACIT [2010] 187 Taxman 346 (SC). 8. We have perused the record and the case law relied upon by both the sides. It is an admitted fact that the assessee being a nationalized bank is governed by the Banking Regulation Act, 1949; that they are following mercantile system of accounting both for book keeping purpose as well as for tax purposes; tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed earlier and resultantly the profit for the year is worked out correctly after taking into account both the folds of the transaction collectively. 11. On a careful consideration of the matter we are of the considered opinion that it is not the case of the Ld. Assessing officer that in this particular year in respect of any particular security such a thing had happened. It is not the case of the Ld. Assessing officer that with reference to any particular scrip there was depreciationand the loss was claimed in the earlier yearsas deduction but without showing the reduced value of the scrip as the opening value of the stock, on the sale of the scrip, the cost price but not the reduced price was taken as the cost of acquisition and thereby any less amount was offered to tax. The entire edifice of the case of revenue is based on the theoretical suspicion of the Ld. Assessing officer that inasmuch as the assessee has not been showing in the balance sheet reduced value of the scrip but the cost price of the scrip as the value of the scrip, when the securities were sold it is the cost price of the scrip but not the reduced value of the scrip that was taken to estimate the profi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iv) of the Act has to be looked into, according to which any sum paid by the assessee to an employer by way of contribution to a recognised provident fund or an approved superannuation fund or any fund of similar nature is allowable as a deduction, subject to condition laid down under Rule 87 and 88 of Income tax Rules, 1962. Ld. AO held that such contribution should not be in the nature of annual contributions of fixed amounts or annual contributions fixed on some definite basis. 16. Assessee argued before the Ld. CIT(A) that the Banking Companies Undertaking Act of 1970 created the assessee also and provides for the creation of a pension trust, which employees of bank will become members; Bank will become members and the bank is required to contribute the fund towards pension fund trust as per actuary evaluation carried out at the end of the financial year. It was further argued that carrying up banking business and funding the pension trust out of the income of banking are made obligation under the Act and the provisions of pension fund trust regulation makes it amply clear that payment directly attributable, compulsory and statutory for carrying on business on banki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... debited and various heads of profit and loss account, thereby calling for the application of section 14A of the Act read with rule 8D of the income tax rules, 1962 (for short the Rules ). On this premise learned Ld. AO disallowed the expenditure to the tune of ₹ 689.34 lacs and ₹ 943.35 Lacs respectively for these two years under section 14A of the Act. 20. Ld. CIT(A) while following the decision of his predecessor for the assessment year 2009-10 deleted the addition made under Rule 8D(2)(ii) of the Rules but sustained the addition made under Rule 8D(2)(iii) of the Rules. 21. It is the argument on behalf of the assessee that the investments made by the banking concern are part of the business or banking and therefore the expenses incurred for the purpose of such investment is the business investment. He further submitted that as is held by the Hon ble Apex Court in the case of Maxopp investment Ltd vs. CIT (2018) 402 ITR 640 (SC), holding off the investment becomes a business activity of the assessee as a business proposition and whether the dividend is earned or not becomes immaterial. He further brought to our notice the observations of the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p 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 shares held as trading assets were duly offered to tax as business income of the assessee. In the case of State Bank of Patiala the assessee has exempt income in the form of dividend was earned by the bank from securities held by as stock in trade. The Hon ble Supreme Court was considering the question that has arisen under varied circumstances where the shares/stocks were purchased by a company for the purpose of gaining control over the said company or as stock in trade , though incidentally income is also generated in the form of dividends as well. 24. It was argued before the Hon ble Apex Court that though incidentally income was also generated in the form of dividends, the dominan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther 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 earned by the assessee and the assessee alone. Therefore, even at the time of investing into those shares, the assessee knows that it may generate dividend income as well and as and when such dividend income is generated that would be earned by the assessee. In contrast, where the shares are held as stock-in-trade, this may not be necessarily a situation. The main purpose is to liquidate those shares whenever the share price goes up in order to earn profits. In the result, the appeals filed by the Revenue challenging the judgment of the Punjab and Haryana High Court in State Bank of Patiala also fail, though law in this respect has b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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