TMI Blog2019 (1) TMI 1625X X X X Extracts X X X X X X X X Extracts X X X X ..... the year in which it has been paid and to disallow in the year of provision. We accordingly set aside Ground No. 4 back to Ld.AO with a direction to disallow the claim, in the year of provision and to allow claim in the year of payment. Ld. AO is directed not to levy any interest and penalty in the year of disallowance. - ITA No. 5481/Del/2014 - - - Dated:- 3-1-2019 - SMT. BEENA A PILLAI, JUDICIAL MEMBER AND Dr. B.R.R. KUMAR, ACCOUNTANT MEMBER For The Appellant : Sh. Karan Khanna, Adv. For The Department : Smt. Sulekha Verma, CIT, D.R. ORDER PER BEENA A PILLAI, JUDICIAL MEMBER Present appeal has been filed by assessee against order dated 27/07/2014 passed by Ld.CIT(A)-XVII, Delhi for Assessment Year (A.Y.) 2011-12 on following grounds of appeal: 1. That the order is against the law and facts of the case. 2. That on the facts and circumstances of the case and provisions of the law, the Ld.CIT(A) was not justified in sustaining the action of A.O. in disallowing an expenditure of ₹ 17,18,46,500/-to have been made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing its administrative, managerial and infrastructural setup for earning income, which does not form part of total income under the Act. He thus rejected claim of assessee regarding expenditure in relation to income which does not form part of total income, and made addition amounting to ₹ 1,71,77,09,500/-. 2.2 . Another issue observed by Ld.AO was in respect of deduction for provision of leave encashment amounting to ₹ 1,24,61,00,000/-. Ld.AO was of the opinion that provision was not claimed as expenditure, as per section 43B (f) of the Act and hence assessee was not entitled to any deduction to that extent. Further a sum of ₹ 3,67,157/- was disallowed as according to Ld.A.O. it was penal in nature. 3. Aggrieved by order of Ld.AO, assessee preferred appeal before Ld.CIT (A) who allowed claim of assessee under section 14 A read with Rule 8D(ii) but confirmed disallowance under Rule 8D(iii). As regards disallowance under section 36(1)(vii) of the Act, the same was confirmed by following decision of his predecessor for preceding Assessment Years. 4. Aggrieved by order of Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh Court pointed out that this circular carves out a distinction between 'stock-in-trade' and 'investment and provides that if the motive behind purchase and sale of shares is to earn profit, then the same would be treated as trading profit and if the object is to derive income by way of dividend then the profit would be said to have accrued from investment. To this extent, the High Court may be correct. At the same time, we do not agree with the test of dominant 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h dividend income is generated that would be earned by the assessee. In contrast, where the shares are held as stock-in-trade, this may not be necessarily a situation. The main purpose is to liquidate those shares whenever the share price goes up in order to earn profits. In the result, the appeals filed by the Revenue challenging the judgment of the Punjab and Haryana High Court in State Bank of Patiala also fail, though law in this respect has been clarified hereinabove. 6.2. On the contrary Ld.Sr.DR placed reliance upon the orders passed by authorities below and following decisions: * Godrej and Boyce manufacturing Co Ltd vs. DCIT reported in (2017) 81 Taxmann.com 111 (SC); * India Bulls financial services Ltd vs. DCIT reported in (2016) 76 Taxmann.com 268 (Del); * Punjab tractors Ltd vs. CIT reported in (2017) 78 Taxmann.com 65 (P H). 7. We have perused the submissions advanced by both sides in the light of records placed before us. 8. It is observed that decisions relied upon by Ld.Sr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in nature. Under such circumstances we have no option but to uphold the view of ld.CiT9A). 10.1. Accordingly this ground raised by assessee stands dismissed. 11. Ground No. 4 is in respect of claim of leave encashment claimed by assessee amounting to ₹ 1,24,61,00,000/- during the year under consideration. 11.1 . Ld.Counsel submitted that section 43B (f) of the Act do not cover any claim regarding leave encashment and therefore no disallowance could be made. He submitted that Hon ble Calcutta High Court in case of Exide Industries Ltd vs. Union of India reported in 292 ITR 470 had struck down constitutional validity of section 43B (f) of the Act being arbitrary, unconstitutional and de hors the facts of decision in case of Bharat Earth Movers reported in 245 ITR 428. 11.2. On contrary, Ld.Sr.DR placed reliance upon orders passed by authorities below and submitted that, certain deductions could be allowed, only on actual payment. He placed reliance upon decision of coordinate Bench in the case of Nainital Almora Kshetriya Bank in ITA No. 4240/Del/2012 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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