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TMI Blog2024 (2) TMI 1548X X X X Extracts X X X X X X X X Extracts X X X X ..... he value of the securities. 2. Whether in facts and circumstances of the case the CIT(A) has erred in not appreciating the fact that the assessee is claiming double deduction on the notional change in value of securities by debiting the same to profit and account and also reducing the value of closing stock of securities at the end of the year. 3. Whether in facts and circumstances of the case the CIT(A) has erred in not appreciating the fact that the reduced value of closing stock of outstanding securities for the current financial year becomes the opening stock of securities for the next financial year at the same reduced price amounting to double deduction claimed by the assessee as depreciation on investment is debited to profit and loss account. 4. Whether in facts and circumstances of the case the CIT(A) has erred in not appreciating the issue that the additional contribution to pension funds does not have a statutory claim despite the fact that the additional contribution do not confirm to Rule 87 & 88 r.w.s 36(1)(iv) of I.T. Act, 1961. 5. Whether in facts and circumstances of the case the CIT(A) has erred in not appreciating the issue that the additional contributio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d valuation of investment by Bank was made as per RBI's guidelines which were mandatory in nature. The submissions of the assessee was found acceptable to AO as he was of the view that since the investments have not been shown by assessee as 'Stock-in-Trade' and its resultant profits and sale were not enhanced by the value of depreciation in subsequent years when those investments were actually sold, the claim of assessee was not allowable. He accordingly denied the claim of depreciation amounting to Rs. 372,70,70,520/-. 6. Aggrieved by the order of AO, assessee carried the matter before CIT(A). CIT(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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erted to India judicial precedents. 9. Further, as understood from the argument of the Ld. DR, her contention is that no opening stock or closing stock of securities was mentioned in the profit and loss account though the assessee had claimed their investment in securities as stock in trade; and that if the investments are stock in trade, it should be reflected in the return of income, audit report, profit and loss account and the annual report and the diminution of the value of securities will be embedded in the closing stock and the corresponding figure will become the opening stock in the subsequent assessment years. On this she submitted that when once the 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 of less amount to tax. 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een maintaining its accounts on mercantile system, they are entitled to show his real income by taking into account market value of such investments in arriving at real taxable income. All the aspects argued by the Ld. DR were considered by the Hon'ble Apex Court in the case of UCO Bank vs. CIT 240 ITR 355 (SC) and were held in favour of the assessee. The decision in Southern Technologies Ltd (supra) has no application to the facts of the case. 13. There is consistency of the facts on this aspect quite for a long time and all possible arguments have come before the adjudicatory authorities. On a careful consideration of the matter in the light of the submissions 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 reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs. 68,93,90,105/- and Rs. 16,12,02,275/- respectively, aggregating to Rs. 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 in assessee's own case in earlier years and since the facts of the case for the year under consideration were identical to that of earlier years, he following the order of his predecessor, deleted the addition of Rs. 85,05,92,380/-. With respect to the disallowance of contribution for the purpose of calculation of book profit u/s 115JB, he noted that since the main issue is decided in assessee's favour, the issue of adjustment to book profit u/s 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 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourse of assessment proceedings, AO noticed that assessee had earned exempt income amounting to Rs. 6,59,77,025/-. AO was therefore of the view that provision of Section 14A of the Act are applicable to the assessee. AO therefore asked the assessee to explain as to why expenses attributable to exempt income may not be disallowed u/s 14A of the Act. On the query of the AO, assessee made the detailed submissions which are reproduced by the AO in the order. However, the submissions of the assessee were not found acceptable to AO. AO thereafter, by following the methodology prescribed under Rule 8D worked out the disallowance u/s 14A of the Act at Rs. 20,49,20,000/- and made its addition. He also held that u/s 115JB of the Act, the amount of expenditure of Rs. 2049.20 lakhs in relation to exempt income were required to be added to compute book profit u/s 115JB of the Act. 20. Aggrieved by the order of AO, assessee carried the matter before the CIT(A). CIT(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 had granted partial relief to the assessee. He following the order of his predecessor, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvestment Ltd and the second case relates to the case of State Bank of Patiala. In the case of Maxopp investment Ltd the assessee company is in the business of finance, investment and was dealing in shares and securities; that they held the shares and securities, partly as investments on the "capital account" and partly as "trading assets" for the purpose of acquiring and retaining control over its group companies, primarily 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 has exempt income in the form of dividend was earned by the bank from securities held by as stock in trade. The Hon'ble Supreme Court was considering the question that has arisen under varied circumstances where the shares/stocks were purchased by 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. "24. It was argued before the Hon'ble Apex Court that though incidentally income was also generated in the form of dividends, the dominant i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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, 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-intrade, 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." 26. It i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quire and retain the controlling interest in the investee company. 28. We, therefore, while respectfully following the above decision do not find any illegality or irregularity in the Ld. CIT(A) deleting the addition made by the Ld. AO under rule 8D (2) (ii) of the Rules." 8. This order of the Tribunal was appealed before the Hon'ble High Court of Delhi and the Hon'ble High Court of Delhi in ITA No. 904/2019 and ITA No. 906/2019 vide order dated 16.10.2019 dismissed the appeals of the revenue. The relevant findings of the Hon'ble High Court read as under: 5. Insofar as the disallowance of expenditure under Section 14A is concerned, the ITAT has relied upon the decision of the Supreme Court Maxopp Investment Ltd us. CIT (2018), 402 ITR 640 (SC). The decision of the Supreme Court reads as follows: 48. 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-tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. The Tribunal has held in favour of the respondent assessee that it had earned the revenue on the shares held as stock in trade only by a quirk of fate. 7. In the light of aforesaid concluded position, both on facts and in law, in our view, no question of law arises for consideration in the present appeal. Accordingly, present appeals stand dismissed." 9. As no distinguishing decision has been brought to our notice by the DR, respectfully following the decision of this Tribunal as upheld by the Hon'ble High Court (supra) we direct the AO to delete the disallowance made u/s. 14A r.wir. 8D of the Act. Accordingly the ground No. 1 and 2 of assessee's appeal are allowed and ground No. 3 of revenue's appeal is dismissed." 24. Before us, no distinguishing feature in the facts of the present case and that of earlier years ..... X X X X Extracts X X X X X X X X Extracts X X X X
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