TMI Blog2023 (10) TMI 459X X X X Extracts X X X X X X X X Extracts X X X X ..... vations by Hon ble Supreme Court in Maxopp case (supra) and in the case of Gajanan Enterprises [ 2020 (2) TMI 17 - ITAT MUMBAI] we are of the considered view that Ld. CIT(Appeals) has not erred in facts and in law holding that the provisions of section 14A of the Act are applicable and thereby restricting the disallowance to the extent of dividend income earned by the assessee. Decided against assessee. - Smt. Annapurna Gupta, Accountant Member And Shri Siddhartha Nautiyal, Judicial Member For the Appellant : Shri Manish J Shah, A.R. For the Respondent : Shri Ashok Kumar Suthar, Sr. D.R. ORDER PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER: This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax(Appeals)-8, (in short Ld. CIT(A) ), Ahmedabad in Appeal No. CIT(A)-8/ 10362/2017-18 vide order dated 08.07.2019 passed for Assessment Year 2015-16. 2. The assessee has taken the following grounds of appeal:- 1. The C.I.T.(A) erred in law and in facts in confirming the disallowance u/s. 14A of the I.T. Act to the extent of exempt income of Rs. 1,77,00,024/- without appreciating the facts and law of the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accept the contention of the assessee and held that even if a particular stock / instrument is held as stock-in-trade and the income earned out of such investment is exempt as per the provisions of the Act, the provision of Section 14A of the Act would be applicable. However, the Ld. CIT(A) observed that in the instant case the Assessing Officer had made a disallowance of Rs. 2,04,57,396/- under Section 14A of the Act, whereas the assessee had earned exempt income of Rs. 1,77,00,024/-. Accordingly, Ld. CIT(A) held that in view of various judicial precedents, the disallowance made under Section 14A of the Act cannot exceed the exempt income claimed by the assessee. Accordingly, the Ld. CIT(A) restricted the disallowance under Section 14A of the Act to the amount of extent of exempt income earned by the assessee. While partly allowing the appeal of the assessee, the Ld. CIT(A) made the following observations:- 5.6 In view of the above legal position, as very explicitly expounded by the Hon ble Supreme Court, the clear position of law emerges that even if a particular stock/instrument is held as stock-in-trade or the same is acquired by the assessee for the purpose of vesting i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of Section 14A of the Act would be applicable to such exempt income earned by the assessee in such shares / securities / instruments and other investments held as stock-in-trade . The Counsel for the assessee drew our attention to the recent decision in the case of PCIT vs. Ms. PNB Housing Finance Ltd. 146 taxmann.com 445 (Delhi) and on the decision of ITAT in the case of Nice Bombay Transport Pvt. Ltd. vs. ACIT 103 taxmann.com 338 (Delhi-Trib.) , in which it was held that where the shares were held by the assessee as stockin- trade , dividend earned on said shares would not attract Section 14A of the Act. 6. In response, the Ld. D.R. placed reliance on the observations made by Ld. CIT(A) in the appellate order. 7. We have heard the rival contentions and perused the material on record. We observe that the Hon'ble Supreme Court in the case of Maxopp Investment Ltd. 91 taxmann.com 154 (SC) held that the Hon ble Punjab and Haryana High Court in the case of State Bank of Patiala is correct on the issue when it carves out a distinction between stock-in-trade and investment . However, the SC did not agree to the test of dominant intention as applied by the Punjab an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owed any deduction in respect of income which is not chargeable to tax. Therefore, he disallowed the entire expenditure claimed instead of restricting the disallowance to the amount which was claimed as exempt income as done by the AO. The ITAT set aside the order of the AO as well as CIT(A). It referred to a CBDT Circular No.18/2015 dated 02.11.2015 which states that income arising from investment of a banking concern is attributable to the business of banking which falls under the head Profits and gains of business and profession . The circular states that shares and stock held by the bank are 'stock-in-trade' and not 'investment'. Referring to certain judgments (which we will also refer to) and the earlier orders of the Tribunal, it was held that if shares are held as stock-in-trade and not as investment even the disallowance under rule 8D would be nil as rule 8D(2)(i) would be confined to direct expenses for earning the tax exempt income. In the aforesaid factual backdrop, in appeal filed by the Revenue, the High Court noted that following substantial question of law arose for consideration: Whether in the facts and circumstances of the case, the Hon' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aspect, CBDT has issued circular No. 18/2015 dated November 02, 2015. 37. This Circular has already been reproduced in Para 19 above. This Circular takes note of the judgment of this Court in Nawanshahar case wherein it is held that investments made by a banking concern are part of the business or banking. Therefore, the income arises from such investments is attributable to business of banking falling under the head 'profits and gains of business and profession'. On that basis, the Circular contains the decision of the Board that no appeal would be filed on this ground by the officers of the Department and if the appeals are already filed, they should be withdrawn. A reading of this circular would make it clear that the issue was as to whether income by way of interest on securities shall be chargeable to income tax under the head 'income from other sources' or it is to fall under the head 'profits and gains of business and profession'. The Board, going by the decision of this Court in Nawanshahar case, clarified that it has to be treated as income falling under the head 'profits and gains of business and profession'. The Board also went ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat 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. 8. We would also like to place reliance on the decision of Mumbai Tribunal in the case of Gajanan Enterprises Vs ACIT (ITAT Mumbai) in ITA No.5599/Mum/2018, which made the following observations on this issue: 7. We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record, as well as the judicial pronouncements relied upon by them. Admittedly, the exempt income yielding shares were held by the assessee as stock-in-trade . Although, the opening stock of inventories as on 01.04.2013 was reflected at Rs. 21,46,64,955/-, however, the same as on 31.03.2014 stood reduced to nil. In sum and substance, the stock ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 14A 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. Accordingly, in terms of our aforesaid observations, we are of the considered view that no infirmity emerges from the order the CIT(A) who after relying on the judgment of the Hon ble Supreme Court in the case of Maxopp Investment Ltd. Vs. CIT, New Delhi (2018) 402 ITR 640(SC), had rightly concluded that the shares which were held by the assessee as stock-in trade were to be considered for the purpose of computing the disallowance under Sec. 14A of the Act. As regards the reliance placed by the Ld. A.R on the order of a coordinate bench of the ITAT, Delhi in the case of Nice Bombay Transport (P) Ltd. Vs. ACIT(OSD), New Delhi (2019) 175 ITD 684 (Del), the same in our considered view, not being consistent with the view taken by the Hon ble Apex Court in the case of Maxopp Investment Ltd. (supra), would thus not be binding as a judicial precedent. Insofar the relian ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that there is only one decision of any one High Court on a particular point or that a number of different High Courts have taken identical views in that regard is not at all relevant for that purpose. Whatever may be the conclusion, the decisions cannot have the force of binding precedent on other High Courts or on any subordinate courts or Tribunals within their jurisdiction. That status is reserved only for the decisions of the Supreme Court which are binding on all courts in the country by virtue of article 141 of the Constitution. 10. Accordingly, we observe that since there is no decision of the jurisdiction High Court on this issue and in view of the judgment of Hon'ble Supreme Court in the Maxopp case (supra), wherein it has been held that when the shares are held as 'stock-in-trade', 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, which triggers the applicability of Section 14A of the Act which is based on the theory of apportionment of expenditure between taxable and non-taxable income as held in Walfort Share Stock Brokers (P.) Ltd. case. Therefore, to that extent, depend ..... X X X X Extracts X X X X X X X X Extracts X X X X
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