TMI Blog2019 (2) TMI 1713X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee Disallowance on account of broken period interest which was treated as capital expenditure by the AO - HELD THAT:- CIT(A) allowed the issue in favour of the assessee by following the order of his predecessor in assessee s own case for A.Y. 2007-08, 2008-09 2009-10 by following the decision of the Hon ble Supreme Court in the case of CIT vs. Citi Bank [ 2008 (8) TMI 766 - SUPREME COURT] Fresh issue admitted before the appellate authority - New claim of deduction under section 35D can be admitted first time which was not raised before the AO at all - HELD THAT:- After perusing the appellate order, we find that the appellate authority has passed the order after following the decisions of the Hon ble Bombay High Court in the case of CIT vs. Pruthvi Brokers and Shareholders Pvt. Ltd. [ 2012 (7) TMI 158 - BOMBAY HIGH COURT] and Grasim Industries Ltd. [ 2016 (2) TMI 1124 - BOMBAY HIGH COURT] wherein the decisions of the Hon ble Supreme Court in the case of Goetz India Ltd. [ 2006 (3) TMI 75 - SUPREME COURT] has been considered and it was held that the fresh issue can be admitted before the appellate authority. We, therefore, do not find any infirmity in the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellate proceedings deleted the disallowance made under rule 8D2(ii) of ₹ 2,02,60,000/- while the disallowance under rule 8D2(iii) of ₹ 18,50,000/- was sustained. The assessee has challenged the upholding of addition under rule 8D(2)(iii) whereas the Revenue has challenged by way of ground No.1 the deletion of addition of ₹ 2,02,60,000/-. 5. The Ld. Counsel of the assessee, at the outset, submitted that the assessee is a banking company and shares/securities were held in the ordinary course of business. The Ld. A.R. submitted that in terms of circular No.18/2015 dated 02.11.2015 issued by CBDT , investments made by the banking concerns are part of business activity of banking and therefore income arising from such investments is attributable to business of banking falling under the head Profits and gains from business and profession . The Ld. A.R. also submitted that the identical issue has been decided in favour of the assessee in its own case in ITA No.5331 5332/M/2016 A.Y. 2008-09 and 2009-10 by the coordinate bench by following the ruling of Punjab Haryana High Court in the case of PCIT vs. State Bank of Patiala 391 ITR 218 and CBDT Circ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rities in question constituted the assessee's stock-in-trade and the income that arises on account of the purchase and sale of the securities is its business income and is brought to tax as such. That income is not exempt from tax and/ therefore, the expenditure incurred in relation thereto does not fall within the ambit of section 14A. Now, the dividend and interest are income. The question then is whether the assessee can be said to have incurred any expenditure at all or any part of the said expenditure in respect of the exempt income viz. dividend and interest that arose out of the securities that constituted the assessee's stock-in-trade. The answer must be in the negative. The purpose of the purchase of the said securities was not to earn income arising therefrom, namely, For Subsequent orders see ITA -277-2016 16 of 21 ITA-244-2016 17- dividend and interest, but to earn profits from trading in i.e. purchasing and selling the same. It is axiomatic, therefore, that the entire expenditure including administrative costs was incurred for the purchase and sale of the stock-in-trade and, therefore, towards earning the business income from the trading activity of purchasing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12. After hearing both the parties and perusing the material on record, we find that in this case the issue has been decided by the ITAT co-ordinate bench in favour of the assessee which has been followed by the Ld. CIT(A) while allowing the relief to the assessee in the current year. The operative part of Ld. CIT(A) s order is reproduced as below: 7.4.3 I have considered the above submissions of the appellant as well as the facts of the case. The Hon'ble Mumbai Tribunal in the appellant's own case for A.Y.200910 had held as under: 9. Disallowance of expenditure on ESOP is the subject matter of Ground No.4 for the year under appeal. During the assessment proceedings the AO held that the assesses had not incurred the expenditure for issuing ESOPs, that it was an unascertainable item of expenditure, that it depended upon the option to be exercised by the employees at a future date. In the appellate proceedings the FAA upheld the order of the AO. 9.1 Before us, the AR argued that share under ESOP were issued to the employee at below market price to retain them in co., that it was a form of compensation for services rendered, that SE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our of the assessee and accordingly the ground No.3 of the Revenue is dismissed by upholding the order of Ld. CIT(A). 17. The issue raised in ground Nos.4, 5 6 is against the order of Ld. CIT(A) holding that new claim of deduction under section 35D can be admitted first time which was not raised before the AO at all. 18. The facts in brief are that the assessee has raised the issue of non granting of deduction under section 35D in respect of preliminary expenses of ₹ 4.55 crore incurred in connection with issue of shares under qualified institutional placement. The assessee has incurred expenditure of ₹ 11.03 crores in A.Y. 2010-11 and ₹ 14.11 crores in A.Y. 2011-12 respectively on shares issued under QIP route. As the issue was raised before the Ld. CIT(A) for the first time, the AO was asked to give his comments by way of remand report which was filed by the AO vide remand report bearing No.ACIT-2(3)(2)/remand report2016-17 dated 27.06.2016 in which the AO stated that assessee has not claimed the said expenses either in the original or in the revised return and submitted that in view of the decision of Hon ble Supreme Court in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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