TaxTMI 
TaxTMI 
2022 (1) TMI 287
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....er dated 28.12.2018 and the total income was determined at Rs. 519,14,68,198/- and the Book Profit u/s 115JB of the Act at Rs. 1002,46,68,618/-. Aggrieved by the order of AO, assessee carried the matter before CIT(A) who vide order dated 22.11.2018 in Appeal No.10897/566/CIT(A)-7/Del/2016-17 granted substantial relief to the assessee. Aggrieved by the order of CIT(A), Revenue is now in appeal and has raised the following grounds: "1. 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 Rs. 372,70,70,520/- made by the Assessing Officer on account of disallowance of depreciation on securities? 2. 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 Rs. 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 Rule, 1962? 3. 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 deleti....
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....T(A) noted that identical issue arose in assessee's own case in A.Y.s 2007-08, 2008-09, 2009-10, 2011-12, 2012-13 & 2013-14 and his predecessor have decided the issue in favour of the assessee. He, therefore following the decision of his predecessor, deleted the addition made by AO. Aggrieved by the order of CIT(A), Revenue is now before us. 7. Before us, at the outset, Learned AR submitted that identical issue of disallowance of depreciation arose in assessee's own case before the Hon'ble ITAT in A.Y. 2013-14 and the Hon'ble Tribunal vide order dated 12.07.2021 in ITA Nos.781 & 1208/Del/2018 had dismissed the appeal of the Revenue. He pointed to the relevant para 12 to 14 of the order. He therefore submitted that since the facts of the case for the year under consideration are identical to that of A.Y. 2013-14, no interference to the order of CIT(A) is called for. 8. Learned DR on the other hand did not controvert the submissions made by Learned AR but however supported the order of lower authorities. 9. We have heard the rival submissions and perused the material available on record. The issue in the present ground is with respect to the deletion of addition of Rs. 372,70,70,5....
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.... assessee reduces the depreciation and reaches a particular figure as the book value of the securities, then naturally when the securities were sold in the subsequent years the profit should be estimated with reference to the reduced value of the Scrip's in the earlier years, but however in the case of the assessee, cost of the security after reducing the same because of the depreciation was not changed or adjusted in the books resulting in the books reflecting the low profit and the resultant offering of less amount to tax. 10. Plea of the assessee, on the other hand, is that the treatment of the profit on sale of securities is two-fold. Firstly, the profit on sale of securities will be lower due to the nonattachment of cost of securities with deregulated appreciation claimed, but simultaneously at the second stage of the said transaction, claim of depreciation on securities for the year is also reduced to the extent of a community depreciation claimed earlier and resultantly the profit for the year is worked out correctly after taking into account both the folds of the transaction collectively. 11. On a careful consideration of the matter we are of the considered opinion that....
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....ons on either side we are of the considered opinion that the question is now fully covered by the orders of the tribunal in assessee's own case for the earlier years, and while respectfully following the same, we hold the issue in favour of the assessee." 14. Respectfully following the decision of the coordinate bench (supra) ground No.1 is dismissed." 10. Before us, no distinguishing feature in the facts of the present case and that of earlier year has been pointed out nor has Revenue placed any material on record to demonstrate that the order of Tribunal in assessee's own case for earlier years has been set aside/overruled or stayed by higher judicial forum. We therefore find no reason to interfere with the order of CIT(A) and thus the Ground of Revenue is dismissed. 11. Ground No.2 & 4 are interconnected and with respect to the disallowance of contribution to Punjab & Sind Bank Employees Pension Fund Trust under Section 36(1)(iv) of the Act r.w. Rule 87 & 88 of the Income Tax Rule, 1962. 12. During the course of assessment proceedings, AO noticed that assessee had contributed to P&S Bank Employees Pension Fund Trust under the head regular and additional contribution. The as....
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....val submissions and perused the material available on record. The issue in the present ground is with respect to the disallowance of contribution to Punjab & Sind Bank Employees Pension Fund Trust under Section 36(1)(iv) of the Act r.w. Rule 87 & 88 of the Income Tax Rule, 1962. 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 Coordinate 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 Co-ordinate Bench reads as under: "15. Ground No.2 relates to the deletion of the disallowance made by the AO out of contribution to Punjab and Sind Bank Employees Pension Fund Trust. 16. A similar grievance was considered by this Tribunal in A.Y.2011-12 and 2012-13 (supra). The relevant findings of the Tribunal read as under :- "17. Ld. CIT(A) found that on similar issue in the Assessment year 2009-10, the issue was decided in of the assessee wherein it was held that similar expenses were allowed in the earlier assessments made under section 143(3) of the Act and the decision of Delhi ITAT in the case of DCIT vs Ranbaxy Labor....
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.... noted that identical issue arose in assessee's own case in A.Y.s 2007-08, 2008-09, 2009-10, 2011- 12, 2012-13 & 2013-14 and his predecessor had granted partial relief to the assessee. He following the order of his predecessor, upheld the disallowance to the extent of Rs. 132.03 lakhs under Rule 8D(2)(iii) and deleted the disallowance to the extent of Rs. 1917.17 made under Rule 8D(2)(ii) of the Income Tax Rule. He also held that the disallowance under Ruled 8D(2)(iii) needs to be sustained in the addition made u/s 115JB of the Act. Aggrieved by the order of CIT(A), Revenue is now in appeal before us. 21. Before us, Learned DR supported the order of AO. 22. Learned AR on the other hand submitted that identical issue arose in assessee's own case in A.Y. 2013-14 and Co-ordinate Bench of Tribunal in ITA Nos.781 & 1208/Del/2018 had decided the issue in assessee's favour by dismissing the appeal of the Revenue. He submitted that since the facts in the year under consideration are identical to that of earlier years, no interference to the order of CIT(A) is called for. He thus supported the order of CIT(A). 23. We have heard the rival submissions and perused the material available on ....
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....ted in the form of dividends as well. "24. 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 business in the company in which shares were invested, or for the purpose of trading in the shares as business activity. 25. 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 follows:- 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 the shares are held as 'stock-in-trade', certain dividend is also earned, though incidentally, which is also an income. However, by virtue of Section 10 (34) of the Act, this dividend income is not to be included in the total income and is exempt from t....
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....ment of the Punjab and Haryana High Court in State Bank of Patiala also fail, though law in this respect has been clarified hereinabove." 26. 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 trade, because such shares were held during the business activity of the assessee and it is only by a quirk of fate that when the investee company declared dividend, those shares were held by the assessee, though the assessee has to ultimately trade those shares by selling them to earn profits. 27. Hon'ble Apex Court made clear distinction of this case from the case of maxopp investment Ltd where the assessee knew that whenever dividend would be declared by the investee company such dividend would necessarily be earned by the assessee and assessee alone, and it would be in the common knowledge o....
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....ns from business and profession". What happens is that, in the process, when the shares are held as "stock-in-trade", certain dividend is also earned, though incidentally, which is also an income. However, by virtue of Section 10(34) of the Act, this dividend income is not to be included in the total income and is exempt from tax. This triggers the applicability of Section 14-A of the Act which is based on the theory of apportionment of expenditure between taxable and non-taxable 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. 49. We note from the facts in State Bank of Patiala case 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 8-D of the Rules and holding that Section 14-A 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 ....