TMI Blog2022 (1) TMI 287X X X X Extracts X X X X X X X X Extracts X X X X ..... by following the order in assessee s own case for A.Y. 2011-12 2012-13 [ 2019 (1) TMI 1654 - ITAT DELHI] , deleted the addition. as held ejecting the theory of dominant purpose in making investment in shares whether it was to acquire and retain controlling interest in the other company or to make profits out of the trading activity in such shares - clearly made a clear distinction between the dividend earned in respect of the shares which were acquired by the assessee in their exercise to acquire and retain the controlling interest in the investee company, and the shares that were purchased for the purpose of liquidating those shares whenever the share price goes up, in order to earn profits. It is, therefore, clear that though not the dominant purpose of acquiring the shares is a relevant for the purpose of invoking the provisions under section 14 A of the Act, the shares held as stock in trade stand on a different pedestal in relation to the shares that were acquired with an intention to acquire and retain the controlling interest in the investee company - no illegality or irregularity in the Ld. CIT(A) deleting the addition made by the Ld. AO under rule 8D (2) (ii) - Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad with rule 8D(2)(ii) of the Income Tax Rules, 1962? 4. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred both on facts and in law in deleting the addition of ₹ 85,05,92,380/- made by the Assessing Officer on account of disallowance of contribution to P S Bank employees Pension Fund Trust under section 36(1)(iv) of the Income-tax Act, 1961 read with Rule 87 88 of the Income Tax Rules, 1962, while computing book profit u/s 115JB of the Income- tax Act, 1961 ? 5. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred both on facts and in law in deleting the addition of ₹ 19,17,00,000/- made by the Assessing Officer u/s 14A of the Income-tax Act, 1961 read with rule under rule 8D(2)(ii) of the Income Tax Rules, 1962 while computing book profit u/s 115JB of the Income-tax Act, 1961? 6. The appellant craves to be allowed to add and alter any fresh ground/s) of appeal and / or delete or amend any of the ground(s) of appeal. 4. Ground No.1 is with respect to the deletion on account of disallowance of depreciation on securities. 5. During the course of assessment proceedings, AO n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate Bench of Tribunal in assessee s own case for A.Y. 2013-14 and the Coordinate Bench of Tribunal, by following the order in assessee s own case for A.Y. 2011-12 2012-13, deleted the addition by observing as under: 12. Coming to the other grounds of revenue s appeal in ITA No.1208/Del/2018 ground No.1 relates to the deletion of the addition of ₹ 176307641/- made by the AO in respect of depreciation on securities. 13. We find that an identical issue was considered by this Tribunal in assessee s own case in A.Y.2011-12 and 2012-13 (supra). The relevant findings of the Tribunal read as under :- 8. We have perused the record and the case law relied upon by both the sides. It is an admitted fact that the assessee being a nationalized bank is governed by the Banking Regulation Act, 1949; that they are following mercantile system of accounting both for book keeping purpose as well as for tax purposes; that they have been valuing the stock-in-trade (investments) at cost in the balance sheet whereas for the same period of time the appellant has been valuing the very same investment at cost or market value, whichever is lower for income tax purposes; that it is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g officer that in this particular year in respect of any particular security such a thing had happened. It is not the case of the Ld. Assessing officer that with reference to any particular scrip there was depreciation and the loss was claimed in the earlier years as deduction but without showing the reduced value of the scrip as the opening value of the stock, on the sale of the scrip, the cost price but not the reduced price was taken as the cost of acquisition and thereby any less amount was offered to tax. The entire edifice of the case of revenue is based on the theoretical suspicion of the Ld. Assessing officer that in as much as the assessee has not been showing in the balance sheet reduced value of the scrip but the cost price of the scrip as the value of the scrip, when the securities were sold it is the cost price of the scrip but not the reduced value of the scrip that was taken to estimate the profits and as a consequence of which the less amount has been offered to tax. It is a verifiable fact with reference to the sales of securities, if any, that took place during the year orinearlier or subsequent years. Such an exercise has not been undertaken by the learned Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... give the bifurcation of such payments and to justify the claim. Assessee made a detailed submissions which has been reproduced by the AO in his order. However AO did not agree with the submissions made by assessee as he was of the view that as per the provision of Section 36(1)(iv) r.w.r 87 88 of the Income Tax Rules, 1962, the contribution to employee s pension Fund can be allowed only as ordinary annual contribution or initial contribution. He was of the view that Rule 87 prescribed that contribution should be on definite percent of the salary of each employee for each year not exceeding 27% of salary of each employee for each year. He noted that as per the working submitted by the assessee, the amount in excess of 27% of salary of pensioners and existing employees calculated employee wise worked out of ₹ 68,93,90,105/- and ₹ 16,12,02,275/- respectively, aggregating to ₹ 85,05,92,380/- which was not an allowable expenditure. He accordingly denied the claim and also added it for the purpose of computation of Book Profit u/s 115JB of the Act. 13. Aggrieved by the order of AO, assessee carried the matter before CIT(A). CIT(A) noted that identical issue arose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ranbaxy Laboratories Ltd (2009) 124 TTJ (Delhi) 771 wherein the expenses towards provision for pension fund were held to be allowable expenses and section 43B has no application, is applicable. The fact that the assessee had actually contributed/paid the amount to pension fund makes the case of the assessee even stronger. Following the above orders, Ld. CIT(A)held that the addition his score has to be deleted. 18. We do not find any difference in the facts of the case from their earlier years to render the binding precedents followed by the Ld. CIT(A) inapplicable to the case in hand. In the absence of any change of facts and circumstances, we find it difficult to take a different view. In these circumstances, we uphold the findings of the Ld. CIT(A) and dismiss this ground of appeal. 17. Respectfully following the decision of the coordinate Bench ground No.2 is dismissed. 17. Before us, no distinguishing feature in the facts of the present case and that of earlier year has been pointed out by Revenue nor has Revenue placed any material on record to demonstrate that the order of Tribunal in assessee s own case in earlier years has been set aside/overruled or stayed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e rival submissions and perused the material available on record. The issue in the present ground is with respect to the disallowance u/s 14A of the Act. We find that identical issue arose before the Co-ordinate Bench of Tribunal in assessee s own case for A.Y. 2013-14 and the Co-ordinate Bench of Tribunal deleted the addition by following the order in assessee s own case for A.Y. 2011-12 2012-13. The relevant observation of the Tribunal reads as under: 7. Identical issues were considered and decided by this Tribunal in assessee s own case in ITA Nos. 1441 and 1442 /Del/2015 for A.Y.2011-12 and 2012-13 vide order dated 09.01.2019. The relevant findings of the coordinate bench read as under :- 23. We have carefully perused the decision in the case of Maxopp investment Ltd versus CIT (2018) 91 taxman.com 154 (SC) wherein the Hon ble Apex Court considered two cases wherein the question of predominant intent of investment in shares was pleaded, though on different facts, on the ground that the objective of investing in shares was not to earn the dividend income, but to either retain controlling interest over the company in which the investment was made or to earn the profi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd income is not to be included in the total income and is exempt from tax. This triggers the applicability of Section 14A of the Act which is based on the theory of apportionment of expenditure between taxable and nontaxable income as held in Walfort Share and Stock Brokers P. Ltd. case. Therefore, to that extent, depending upon the facts of each case, the expenditure incurred in acquiring those shares will have to be apportioned. 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned by the assessee and assessee alone, and it would be in the common knowledge of the assessee that such shares would generate dividend income as well as and when such dividend income is generated that would be earned by the assessee only. Hon ble Apex Court in unequivocal terms held that in contrast, where the shares are held as stock in trade, this may not be necessarily a situation and the main purpose was to liquidate those shares whenever the share price goes up in order to earn profits. Hon ble Apex Court, therefore, while rejecting the theory of dominant purpose in making investment in shareswhether it was to acquire and retain controlling interest in the other company or to make profits out of the trading activity in such shares - clearly made a clear distinction between the dividend earned in respect of the shares which were acquired by the assessee in their exercise to acquire and retain the controlling interest in the investee company, and the shares that were purchased for the purpose of liquidating those shares whenever the share price goes up, in order to earn profits. It is, therefore, clear that though not the dominant purpose of acquiring the shares is a relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sallowed the entire deduction of expenditure. That view of the CIT(A) was clearly untenable and rightly set aside by ITAT. Therefore, on facts, the Punjab and Haryana High Court has arrived at a correct conclusion by affirming the view of ITAT, though we are not subscribing to the theory of dominant intention applied by the High Court. 50. It is to be kept in mind that in those cases where shares are held as stock-intrade , 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 investee company. In that case, whenever dividend 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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