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TMI Blog2022 (4) TMI 968X X X X Extracts X X X X X X X X Extracts X X X X ..... ental facts permeating in the earlier years have not changed, and when certain position has been accepted by the department, then without any change in law, the consistent position/finding cannot be allowed to be changed - Decided in favour of assessee. Disallowance of expenditure by invoking section 14A read with Rule 8D(2)(ii) (iii) - HELD THAT:- The ratio decidendi which emerges is that, it was qua the assessee s covered by the Board Circular No. 18 of 2015 viz., cooperative societies banks (to whom Section 80P was applicable), that the Hon ble Supreme Court NAWANSHAHAR CENTRAL CO-OPERATIVE BANK LTD. [ 2005 (8) TMI 28 - SC ORDER] held that the provisions of disallowance u/s 14A cannot be applied to such assessee s. In the facts of the present case, the assessee is also a cooperative society which is engaged in the business of providing financial assistance to its members and is eligible for deduction u/s 80P of the Act. In our considered view therefore the above the judgment rendered in case of State Bank of Patiala [ 2017 (5) TMI 843 - PUNJAB AND HARYANA HIGH COURT] and South Indian Bank Ltd [ 2021 (9) TMI 566 - SUPREME COURT] is squarely applicable to the facts of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovide the cases where exact assessment of costs cannot be made. 4. That in law and on the facts of the case the CIT(A) got himself misdirected by following orders of his predecessors as res judicata does not apply in tax matters. 5. That the appellant humbly craves leave to add, amend, alter, withdraw, delete or substitute all or any of the ground(s) of appeal at the time of hearing. 4. From a perusal of the grounds it is discernible that first ground is general in nature and does not require any adjudication so, the same is dismissed. 5. First of all, we will take up the ground No. 4 of revenue s appeal wherein the Ld. CIT(A) has held that even though the principles of res judicata is not applicable, however, as per the rule of consistency, the action of the AO in accepting the assessee s treatment of the income from the sale of mutual funds and shares as income from business should be accepted. It is noted that the AO on this issue has taken note of the fact that for the previous assessment year i.e. AY 2011-12 even though the assessee has treated the units of mutual fund and equity as trading commodity, the predecessor AO has treated it as capital gains (AY 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of holding the listed shares and securities, opts to treat them as stock-in-trade, the income arising from transfer of such shares/securities would be treated as its business income. b) In respect of listed shares and securities held for a period of more than 12 months immediately preceding the date of its transfer, if the assessee desires to treat the income arising from the transfer thereof as Capital Gain, the same shall not be put to dispute by the Assessing Officer. However, this stand, once taken by the assessee in a particular Assessment Year, shall remain applicable in subsequent Assessment Years also and the taxpayers shall not be allowed to adopt a different/contrary stand in this regard in subsequent years. 6. It is also noted that the Ld. CIT(A) has examined the adverse observations of the AO that the ratio of opening stock, purchase, sales and closing stock were not commensurate to show that the activities of the assessee were in the nature of business income. The Ld. CIT(A) after examining this issue as pointed out by the AO repelled the same and found that I have carefully examined this aspect and I find that the ratio of sales to closing stock of shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invest borrowed funds for the purpose of investments or majority of the funds for investments are from investor s own fund. This issue was also dealt with by my predecessor-in-office in his Appellate order for assessment year 2011-12 at page 14 of his order wherein after analyzing the contentions of the assessee my predecessor-in-office held that the activity of purchase and sale of shares by the assessee was in the nature of business and was therefore, to be accordingly treated for the purpose of computation of income of the assessee. It has also been brought to my notice that the AO did not go in further appeal against the said order passed by my predecessor-in-office and the view taken by my predecessor has therefore become final. Once the view that the assessee is a trader in shares and mutual funds is accepted by the AO then on similar facts without any material change, the Ld. AO cannot take a different view in other years as has been held by the Hon ble Supreme Court in the case of Radhasoami Satsang Vs. CIT (1992) reported in 193 ITR 321. This view is also fortified by the CBDT Circular No. 6/2016 dated 29.02.2016 wherein the CBDT has instructed the AO to accept the stand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken. We are, therefore, of the view that these appeals should be allowed and the question should be answered in the affirmative, namely, that the Tribunal was justified in holding that the income derived by the Radhasoami Satsang was entitled to exemption under sections 11 and 12 of the Income-tax Act of 1961. Counsel for the Revenue had told us that the facts of this case being very special, nothing should be said in a manner which would have general application. We are inclined to accept this submission and would like to state in clear terms that the decision is confined to the facts of the case and may not be treated as an authority on aspects which have been decided for general application. 8. In the light of the facts and circumstances as afore-stated, we sustain the order of the Ld. CIT(A) and dismiss this ground of appeal of the revenue. 9. The second and third grounds of appeal of the revenue and the cross appeals of the assessee are against the action of the Ld. CIT(A) in interfering with the action of the AO wherein he has disallowed expenditure by invoking section 14A of the Income-tax Act, 1961 (hereinafter referred to as the Act ) read with Rule 8D(2)( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the given facts of the present case. Per contra the Ld. DR submitted that merely because the assessee was a dealer in shares, it could not take a stand that expenditure incurred in connection with earning of tax free income was not disallowable u/s 14A of the Act. Both the parties relied on the findings given by the Hon ble Supreme Court in the case of Maxopp Investment Ltd Vs CIT (402 ITR 640) which had considered the issue of disallowability of the expenditure incurred in the assessment of an assessee who derived exempt dividend income from shares held as stock-in-trade. 12. In order to address the issue at hand, it is first relevant to examine the findings given by the Hon ble Supreme Court in the case of Maxopp Investment Ltd Vs CIT (supra). It was brought to our notice that Hon ble Supreme Court in their decision dated 12.02.2018 had decided a large number of appeals which inter alia included Maxopp Investment Ltd (supra) as well as appeal filed by the Revenue in the case of State Bank of Patiala, decided by the Hon ble Punjab Haryana High Court reported in 391 ITR 218 wherein it was held that provisions of Section 14A cannot be applied to shares securities held as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... minant intention applied by the Punjab and Haryana High Court, which we have already discarded. In that event, the question is as to on what basis those cases are to be decided where the shares of other companies are purchased by the assessees as 'stock-in-trade' and not as 'investment'. We proceed to discuss this aspect hereinafter. 40. We note from the facts in the State Bank of Patiala cases 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 8D of the Rules and holding that section 14A 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Co-operative Bank Ltd (289 ITR 6). 14. We note that this particular proposition laid down in the above judgment (supra), was reiterated by the Hon ble Supreme Court in their decision rendered in the case of another banking company, South Indian Bank Ltd Vs CIT (438 ITR 1) also rendered of a banking company. The Hon ble Supreme Court took note of the Board s Circular No. 18 dated 02.11.2015 issued in the context of cooperative societies banking companies, and their earlier judgment in the case of CIT Vs Nawanshahar Central Co-operative Bank Ltd (supra), and it held that the income arising from trading in securities was attributable to banking business of the assessee and therefore the expenses were also relatable to the business of banking, and hence provisions of Section 14A were not attracted in case of banking companies. The relevant findings of the Hon ble Apex Court is as follows: 25. Proceeding now to another aspect, it is seen that the Central Board of Direct Taxes (CBDT) had issued the Circular no. 18 of 2015 dated 2-11-2015, which had analyzed and then explained that all shares and securities held by a bank which are not bought to maintain Statutory Liquidity Rati ..... X X X X Extracts X X X X X X X X Extracts X X X X
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