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TMI Blog2023 (9) TMI 598X X X X Extracts X X X X X X X X Extracts X X X X ..... e disallowance made under section 14A read with Rule 8D. Decided in favour of assessee. - Shri G.S. Pannu, President, And Shri Sandeep Singh Karhail, Judicial Member For the Assessee : Shri Nitesh Joshi For the Revenue : Shri R.A. Dhyani ORDER The present appeal has been filed by the assessee challenging the impugned order dated 13/12/2022, passed under section 250 of the Income Tax Act, 1961 ( the Act ) by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, [ learned CIT(A) ], for the assessment year 2019 20. 2. In this appeal, the assessee has raised the following grounds. 1A On the facts and in the circumstances of the case and in law, the NFAC has erred in making disallowance of Rs. 1911,07,68,683 u/s 14A of the Income-tax Act, 1961 ( the Act ) read with Rule 8D of the Income- tax Rules, 1962 ( the Rules ) towards expenditure incurred in relation to income claimed exempt u/s. 10 of the Act without appreciating that disallowance u/s. 14A is not warranted in the Bank's case where securities are held as stock-in-trade and dividend/interest income is incidental to holding such securities for the purpose of tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in ground no.1, raised in assessee s appeal, is pertaining to disallowance under section 14A read with Rule 8D of the Income Tax Rules, 1962 ( the Rules ). 4. Brief facts of the case pertaining to this issue, as emanating from the record, are: The assessee is a banking company and the main activity includes the banking and other related activities. During the year under consideration, the assessee filed its revised return of income on 21/05/2020declaring a total loss of Rs. 3408.24 crore under normal provisions of the Act. During the year under consideration, the assessee earned Rs. 8,86,91,514, which is exempt under section 10 of the Act. In response to the show cause notice regarding the computation of disallowance under section 14A of the Act, the assessee submitted that it holds securities in the ordinary course of its banking business and such securities constitute stock in trade of its business. The assessee further submitted that the profits and gains on sale or maturity or redemption or transfer in any manner of such securities are consistently offered to tax while computing profits and gains from business or profession. It was submitted that the dividend/interest income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ule 8D can be made. The learned AR placed reliance on various decisions forming part of the caselaw paper book and submitted that in various decisions including in its own case for the assessment year 2012-13, similar disallowance made under section 14A read with Rule 8D was directed to be deleted. 7. On the contrary, the learned Departmental Representative vehemently relied upon the order passed by the lower authorities. 8. We have considered the submissions of both sides and perused the material available on record. The dispute raised by the assessee is limited to disallowance of expenditure under section 14A read with Rule 8D in respect of income exempted under section 10 of the Act. As per the assessee, the securities are held by it in the ordinary course of its business and the profits and gains on sale/transfer of such securities are offered to tax while computing the income under the head profits and gains from business or profession , therefore such securities constitute stock in trade of assessee s business. No dispute has been raised by the Revenue as regards the aforesaid submission. The assessee further submitted that since the exempt income earning securities ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case at hand, however, no submissions have been made with respect to the said 'distinguishing facts'. On the contrary, it is noted that the Supreme Court has held in the case of Maxopp Investment Ltd. v. CIT [2018] 91 taxmann.com 154/254 Taxman 325/402 ITR 640 that in cases where the main purpose for investing in shares was to hold the same as stock-in-trade, the expenditure incurred by the Respondent shall be permissible to be deducted from its gross income. The relevant paragraph of the judgment of the Supreme Court reads as under : 40 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 i ..... 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