TMI Blog2020 (2) TMI 948X X X X Extracts X X X X X X X X Extracts X X X X ..... HI HIGH COURT] wherein consider allowability of corporate membership fees of clubs as allowable business expenditure. We find merit in the submissions of the ld counsel and direct the AO to treat entrance fees paid to club as revenue expenditure. Disallowance u/s 40(a)(ia) for non-deposit of TDS - deduction and deposits before the due date of filing of return of income - HELD THAT:- We note that the said TDS was paid before the filing of return of income u/s. 139(1) of the I.T. Act, therefore no addition should be made for that we rely on the judgement of VIRGIN CREATIONS [ 2011 (11) TMI 348 - CALCUTTA HIGH COURT] wherein it was held that the said TDS should be allowed. Respectfully following the decision of jurisdictional High Court, we hold that since the assessee has deducted and deposited tax on contractual payments under consideration before the due date of filing of return of income, disallowance u/s 40(a)(ia) is not warranted, therefore, we delete the disallowance Disallowance u/s 14A r.w.r. 8D - HELD THAT:- As relying on NICE BOMBAY TRANSPORT (P) LTD. VERSUS ACIT (OSD) , CIT (V) , NEW DELHI [ 2019 (4) TMI 42 - ITAT DELHI] Application of Rule 8D to the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is general in nature and hence does not require adjudication. 4. Ground No. 2 raised by the assessee relates to disallowance of entrance fees of ₹ 551,500/-. 5. Brief facts qua the issue are that during the scrutiny proceedings AO noticed that assessee bank has debited in its Profit Loss account a sum of ₹ 5,51,500/- as club entrance fees. The AO was of the view that since assessee did not file satisfactory reply therefore he treated these expendituresin the natureof capital and added back with total income of the assessee. 6. On appeal, the ld. CIT(A) confirmed the addition made by the Assessing Officer.Aggrieved by the order of the ld. CIT(A), the assessee is in appeal before us. 7 . The ld. Counsel has reiterated the submissions made before the ld CIT(A).On the other hand, ld. DR has primarily reiterated the stand taken by the Assessing Officer which we have already noted in our earlier para and the same is not being repeated for the sake of brevity. 8. We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee relate to disallowance of ₹ 16,85,08,240/- u/s 40(a)(ia) of the Act for non-deposit of TDS. 10. Brief facts qua the issue are that in the course of assessment proceedings the AO noticed that the assessee has not deposited TDS on payments made amounting to ₹ 16,85,08,240/- which was required to be deposited within due time to the Central Govt, Accounts. Hence, the AO made addition of ₹ 16,85,08,240/- u/s 40(a)(ia) of the Act. 11. Aggrieved by the order of the Assessing Officer the assessee carried the matter in appeal before the ld. CIT(A) who has confirmed the order of the Assessing Officer. Aggrieved, the assessee is in appeal before us. 12. We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials available on record. Before us, ld. Counsel for the assessee has reiterated the submissions made before the ld. CIT(A) and on the other hand the ld. DR has primarily reiterated the stand taken by the Assessing Officer which we have already note ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the Dividend Reinvestment Plan and earned day to day dividend in the shape of units and value of the purchase account had increased by such units and the motive of the assessee company is clear to earn the dividend income. Ld. AO further observed that for a trader of shares, two types of gains are available, simultaneously. Firstly, earning profit from the settling of shares at higher prices from its cost price and secondly is the dividend income and without making investments, the assessee could not have earned dividend income. 7. Thus, as per Ld. AO the investments and dividend are integral part of financial transactions, and they are inseparable. One cannot claim that investment in shares is made only for earning trading benefits or for having dividend income only, because both the gains are existing simultaneously. Ld. AO further noted that in the same way, the expenditure incurred by way of interest on the money taken on loan for investment/purchase of shares cannot be segregated as the expenditure incurred exclusively for investment/purchase of shares. Actually, the expenditure has been incurred for having both the benefits. Thus, it is amply clear that the exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Max India Ltd.; and that the profits resulting on the sale of shares held as trading assets were duly offered to tax as business income of the assessee. In the case of State Bank of Patiala the assessee the exempt income in the form of dividend was earned by the bank from securities held by an stock in trade. 11. The Hon ble Supreme Court was considering the question that has arisen under varied circumstances where the shares/stocks were purchased of a company for the purpose of gaining control over the said company or as stock in trade , though incidentally income is also generated in the form of dividends as well. 12. It was argued before the Hon ble Apex Court that though incidentally income was also generated in the form of dividends, the dominant intention for purchasing the shares was not to earn the dividend income but to acquire and retain the controlling the business in the company in which shares were invested, or for the purpose of trading in the shares as business activity. 13. 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dend is declared by the investee company that would necessarily be earned by the assessee and the assessee alone. Therefore, even at the time of investing into those shares, the assessee knows that it may generate dividend income as well and as and when such 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. 14. It is, therefore, clear from the above observations of the Hon ble Apex Court that depending upon the facts of each case, the expenditure incurred in acquiring the shares will have to be apportioned. Hon ble Apex Court held that the tribunal and the Hon ble High Court 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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