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TMI Blog2018 (8) TMI 1972X X X X Extracts X X X X X X X X Extracts X X X X ..... here could be no differentiation between investments held for strategic purposes and investments held with the role intention of having dividend income. Reliance was placed on a judgment of the Hon'ble Apex Court in the case of M/s.Maxopp Investment Ltd., vs. CIT in Civil Appeal No.104 to 109 of 2015 dated 12.02.2018. 3. Per contra, the Ld.AR strongly supporting the order of the Ld.CIT(A) submitted that in assessee's own case for AY 2010-11, such exclusion of investments in subsidiary company was allowed by the Ld.CIT(A), and this was not challenged by the Revenue. As per the Ld.DR, the Special Bench of this Tribunal in the case of ACIT vs. Vireet Investment Pvt. Ltd. (2017) 165 ITD 27, had directed exclusion of investments made for strategic purposes while computing disallowance u/s.14A of the Act. Reliance was also placed on a Co-ordinate Bench order in the case of M/s.Real Talent Engineering Pvt. Ltd. Vs. DCIT (ITA No.121/Chny/2018 dated 12.07.2018. 4. We have heard the rival contentions and perused the orders of authorities below. The question whether strategic investments are to be excluded while computing disallowance u/s.14A of the Act, has been clearly addressed by the Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the dominant purpose test, which is pressed into service by the assessees would apply while interpreting Section 14A of the Act or we have to go by the theory of apportionment. We are of the opinion that the dominant purpose for which the investment into shares is made by an assessee may not be relevant. No doubt, the assessee like Maxopp Investment Limited may have made the investment in order to gain control of the investee company. However, that does not appear to be a relevant factor in determining the issue at hand. Fact remains that such dividend income is non-taxable. In this scenario, if expenditure is incurred on earning the dividend income, that much of the expenditure which is attributable to the dividend income has to be disallowed and cannot be treated as business expenditure. Keeping this objective behind Section14A of the Act in mind, the said provision has to be interpreted, particularly, the word 'in relation to the income' that does not form part of total income. Considered in this hue, the principle of apportionment of expenses comes into play as that is the principle which is engrained in Section 14A of the Act. This is so held in Walfort Share and Stock Broker ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt in Nawanshahar case wherein it is held that investments made by a banking concern are part of the business or banking. Therefore, the income arises from such investments is attributable to business of banking falling under the head 'profits and gains of business and profession'. On that basis, the Circular contains the decision of the Board that no appeal would be filed on this ground by the officers of the Department and if the appeals are already filed, they should be withdrawn. A reading of this circular would make it clear that the issue was as to whether income by way of interest on securities shall be chargeable to income tax under the head 'income from other sources' or it is to fall under the head 'profits and gains of business and profession'. The Board, going by the decision of this Court in Nawanshahar case, clarified that it has to be treated as income falling under the head 'profits and gains of business and profession'. The Board also went to the extent of saying that this would not be limited only to co-operative societies/Banks claiming deduction under Section 80P(2)(a)(i) of the Act but would also be applicable to all banks/commercial banks, to which Banking R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a 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 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, whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 02, and had also paid interest thereon. As per the Ld.AR, the said party did not refund any money after the year 2001- 02, and therefore the Board of the assessee decided to write off the loan as bad debt. Contention of the Ld.AR was that authorities lower took a view that only a trading debt could be written off. As per the Ld.AR, since the loan given by the assessee fell within its objects, it could be only considered as a trading debt. Thus, according to him, the write off was allowable under law. 8. Per contra, the Ld.DR supported the order of the lower authorities. 9. We have heard the rival contentions and perused the material placed on record. Assessee was a publisher of newspaper and magazines. Though it say that one of its objects is to carry on business of money lending, obviously, it was only one of the incidental and/or other object and not its main object. That apart, we find that the loan given to Mr. Sanjay Khemani was the sole instance of a loan given to any person other than those who were not related to its main business assessee. Hence, in our opinion assessee's claim that it had advanced loan to Mr. Sanjay Khemani as a part of its business is not acceptable. A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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