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TMI Blog2021 (7) TMI 622X X X X Extracts X X X X X X X X Extracts X X X X ..... ate those shares whenever the share price goes up in order to earn profits. Issue held in favour of the respondent assessee that it had earned the revenue on the shares held as stock in trade only by a quirk of fate. 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 deleting the addition made by the Ld. AO under rule 8D (2) (ii) of the Rules. - Appeals of the revenue are dismissed. Disallowance made by the AO out of contribution to Punjab and Sind Bank Employees Pension Fund Trust - HELD THAT:- As decided in own case [ 2019 (1) TMI 1654 - ITAT DELHI] 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 Labo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owance of ₹ 1,87,35,15,770/- made by the AO out of contribution to P & S Bank employees Pension Fund Trust. 3) On the facts and under the circumstances of the case, the Ld.CIT(A) erred in law and facts in deleting the disallowance of ₹ 1277.85 lakhs made by the AO u/s 14A read with rule under rule 8D(2)(ii). 4) On the facts and under the circumstances of the case, the Ld.CIT (A) erred in law and facts in deleting the disallowance of ₹ 1,87,35,15,770/- made by the AO out of contribution to P & S Bank employees Pension Fund Trust while computing book profit u/s 115JB. 5) On the facts and under the circumstances of the case, the Ld.CIT(A) erred in law and facts in deleting the disallowance of ₹ 1277.85 lakhs made by the AO u/s 14A read with rule under rule 8D(2)(ii) while computing book profit u/s 115JB 6) The appellant craves to be allowed to add and alter any fresh ground(s) of appeal and/or delete or amend any of the ground (s) of appeal. 5. Representatives of both the sides were heard at length. Case record carefully perused. 6. Facts relating to ground No. 1 and 2 of assesse's appeal and ground No.3 of revenue's appeal are identical. 7. Identica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. After considering the entire case law on this aspect in the light of the peculiar facts involved in both the matters, the Hon'ble Apex Court vide paragraph No. 39 and 40 held as follows:- 39) In those cases, where shares are held as stock-in-trade, the main purpose is to trade in those shares and earn profits therefrom. However, we are not concerned with those profits which would naturally be treated as 'income' under the head 'profits and gains from business and profession'. What happens is that, in the process, when the shares are held as 'stock-in-trade ', certain dividend is also earned, though incidentally, which is also an income. However, by virtue of Section 10 (34) of the Act, this dividend income is not to be included in the total income and is exempt from tax. This triggers the applicability of Section 14A of the Act which is based on the theory of apportionment of expenditure between taxable and nontaxable income as held in Walfort Share and Stock Brokers P Ltd. case. Therefore, to that extent, depending upon the facts of each case, the expenditure incurred in acquiring those shares will have to be apportioned. 40) We note from the facts in the State Bank of Pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt of Punjab and Haryana arrived at a correct conclusion by setting aside the disallowance under section 14 A of the Act in respect of the dividend earned on the shares held as stock in trade, because such shares were held during the business activity of the assessee and it is only by a quirk of fate that when the investee company declared dividend, those shares were held by the assessee, though the assessee has to ultimately trade those shares by selling them to earn profits. 27. Hon'ble Apex Court made clear distinction of this case from the case of maxopp investment Ltd where the assessee knew that whenever dividend would be declared by the investee company such dividend would necessarily be earned by the assessee and assessee alone, and it would be in the common knowledge of the assessee that such shares would generate dividend income as well as and when such dividend income is generated that would be earned by the assessee only. Hon'ble Apex Court in unequivocal terms held that in contrast, where the shares are held as stock in trade, this may not be necessarily a situation and the main purpose was to liquidate those shares whenever the share price goes up in order to earn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the theory of apportionment of expenditure between taxable and non-taxable income as held in Walfort Share and Stock Brokers (P) Ltd. case. Therefore, to that extent, depending upon the facts of each case, the expenditure incurred in acquiring those shares will have to be apportioned. 49. We note from the facts in State Bank of Patiala case that the AO, while passing the assessment order, had already restricted the disallowance to the amount which was claimed as exempt income by applying the formula contained in Rule 8-D of the Rules and holding that Section 14-A of the Act would 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 ITAT. Therefore, on facts, the Punjab and Haryana High Court has arrived at a correct conclusion by affirming the view of ITAT, though we are not subscribing to the theory of dominant intention applied by the High Court. 50. It is to be kept in mind that in those cases where shares are held as "stock-intrade", it becomes a business activity of the assessee to deal in those shares as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... letion of the addition of ₹ 176307641/- made by the AO in respect of depreciation on securities. 13. We find that an identical issue was considered by this Tribunal in assessee's own case in A.Y.2011-12 and 2012-13 (supra). The relevant findings of the Tribunal read as under :- "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; that they have been valuing the stock-in-trade (investments) "at cost" in the balance sheet whereas for the same period of time the appellant has been valuing the very same investment "at cost or market value, whichever is lower" for income tax purposes; that it is an established rule of commercial practice and accountancy that closing stock can be valued at cost or market price, whichever is lower. It could be seen from the record that the question as to the reflection of the investments being stock in trade in the audit report, profit and loss account and the annual report ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crip 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 in as much 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 profits and as a consequence of which the less amount has been offered to tax. 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, learned 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. 12. If we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ange of facts and circumstances, we find it difficult to take a different view. In these circumstances, we uphold the findings of the Ld. CIT(A) and dismiss this ground of appeal." 17. Respectfully following the decision of the coordinate Bench ground No.2 is dismissed. 18. Ground No.4 and 5 taken together relates to the disallowances considered vide ground No.2 and 3 of revenue's appeal. Since the additions have been deleted grievance raised by vide ground No. 4 and 5 become otiose. 19. Similar treatment was given in A.Y.2011-12 and 2012-13 by this Tribunal and the findings read as under :- "29. These grounds relate to the additions made by the learned AO in respect of the depreciation on securities, contribution to P&S Bank Employees Pension Fund Trust, and disallowance under section 14A of the Act, while computing the book profits under section 115 JB of the Act. In view of our finding in the preceding three grounds deleting the additions made on all these counts, these grounds do not survive and are dismissed." 20. In the result, the appeal filed by the assessee is allowed and that of the revenue is dismissed. 21. Decision announced in the open court in the presence of b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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