A W Industries Private Limited , Bangalore V. Deputy Commissioner of Income TAx Circle-1(1)(1), Bangalore

ITA 1986/BANG/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 4864 (ITAT-BANGALORE)
• Duration Of Justice: 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 13-10-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR P V PRADEEP KUMAR
• Assessee Lawyers: G N BHAT
• Keywords: Business expenditure; Earning of tax free income
• Section: 143(3); 14A; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, B ENGALURU BEFORE S HRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER I TA NO S . 1985, 1986, 1987 & 1988 / BANG/2 0 1 7 (ASSESSMENT YEAR S : 2011 - 12, 20 12 - 13, 2014 - 15 & 2015 - 16 ) M/ S. A.W.INDUSTRIES PVT. LTD. NO.47/1, MOTHINAGAR, G.C.STREET, BENGALURU - 560002. PAN: AACCA3955D APPELLANT VS. DEPUTY COMMISSIONER OF INCOME - TAX, CIRCLE 1(1)(1), BENGALURU. RESPONDENT APPELLANT BY : SHRI G.N.BHAT, ADVOCATE. RESPONDENT BY : DR. P.V.PRADEEP KUMAR, ADDL.CIT(DR) DATE OF HEARING : 04/ 0 4 /2018 DATE OF PRONOUNCEMENT : 13 / 0 4 /201 8 O R D E R PER BENCH: THESE ARE THE APPEALS FILED BY THE ASSESSEE - COMPA N Y DIRECTED AGAINST DIFFERENT ORDERS OF THE LEARNED COMM ISSIONER OF INCOME - TAX (APPEALS) - I, BENGALURU, DATED 06/06/2017 FOR THE ASSESSMENT YEARS 2011 - 12, 2012 - 13, 2014 - 15 AND 2015 - 16. 2. SINCE IN ALL THESE APPEALS, COMMON ISSUE IS INVOLVED, WE PROCEED TO DISPOSE OF THE SAME VIDE THIS ORDER. FOR THE SAKE OF CO NVENIENCE AND CLARITY, T HE FACTS RELEVANT TO ASSESSMENT YEAR 2012 - 13 IN ITA NO.1986/BANG/2017 ARE STATED HEREUNDER: ITA NO S . 1985 TO 1988 /BANG/20 17 PAGE 2 OF 9 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956. IT IS ENGAGED IN THE BUSINESS OF MANUFACTURING ROOFING SHEETS, PROFILES AND ROLL FORMING SECTIONS. THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2012 - 13 WAS FILED ON 29/09/2012 DECLARING INCOME OF RS.56,56,185/ - . AGAINST THE SAID RETURN OF INCOME, THE ASSESSMENT WAS CO MPLETED BY THE DEPUTY COMMISSIONER OF INCOME - TAX, CIRCLE 1(1), BENGALURU,[HEREINAFTER REFERRED TO AS THE AO ] VIDE ORDER DATED 31/10/2014 PASSED U/S 143(3) OF THE INCOME - TAX ACT, 1961 [HEREINAFTER REFERRED TO AS 'THE ACT' FOR SHORT] AT TOTAL INCOME OF RS. 63,82,791/ - . WHILE DOING SO, THE ASSESSING OFFICER DISALLOWED RS.6,26,376/ - UNDER THE PROVISIONS OF SECTION 14A OF THE ACT ON THE GROUND THAT THE ASSESSEE HAD NOT DISALLOWED ANY SUM OF EXPENDITURE ATTRIBUTABLE TO TAX - FREE INCOME EARNED IN THE FORM OF DIVID END FROM INVESTMENTS IN SUBSIDIARY COMPANIES. THE CONTENTION OF THE ASSESSEE THAT NO EXPENDITURE WAS INCURRED TO EARN TAX - FREE INCOME IS REJECTED BY THE AO. IT WAS FURTHER CONTENDED BEFORE THE AO THAT NO BORROWED FUNDS WERE UTILIZED FOR THE PURPOSE OF MA KING INVESTMENT IN SUBSIDIARY COMPANY. THIS CONTENTION WAS REJECTED BY THE AO SAYING THAT NO DOCUMENTARY EVIDENCE WAS FILED IN SUPPORT OF THE CONTENTION. THE AO ALSO MADE DISALLOWANCE OF EXPENDITURE ON ACCOUNT OF EMPLOYEES CONTRIBUTION TO PF AND ESI O N ACCOUNT OF BELATED REMITTANCE OF RS.1,00,230/ - . 4. BEING AGGRIEVED, AN APPEAL WAS FILED BEFORE THE LD.CIT(A) WHO VIDE IMPUGNED ORDER HAD DELETED THE ADDITION ON ACCOUNT OF BELATED REMITTANCE OF EMPLOYEE S PF AND ESI CONTRIBUTION FOLLOWING THE JUDGMENT OF HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. SABRI ENTERPRISES (298 ITR 141 ) (KAR), CIT VS. ANZ INFORMATION PVT. LTD. (318 ITR 123)(KAR) AND ESSAE TEROAKA (P) LTD. VS. CIT (3K66 ITR 408)(KAR). HOWEVER, CONFIRMED DISALLOWANCE U/S 14A OF THE ACT . 5. BEING AGGRIEVED, ASSESSEE IS BEFORE US IN THE PRESENT APPEAL RAISING THE FOLLOWING GROUNDS OF APPEAL: ITA NO S . 1985 TO 1988 /BANG/20 17 PAGE 3 OF 9 ITA NO S . 1985 TO 1988 /BANG/20 17 PAGE 4 OF 9 6. THE LEARNED AR OF THE ASSESSEE CONTENDED THAT THE PROVISIONS OF SECTION 14A CANNOT BE INVOKED IN THE PRESENT CASE IN ABSENCE OF EXEMPT IN COME AND FURTHER IT IS SUBMITTED THAT INVESTMENT IN SUBSIDIARY COMPANY WAS MADE IN THE PREVIOUS YEAR ENDING ON 31/03/2010 OUT OF ITS OWN FUNDS AND RESERVES AND NO BORROWED FUNDS WERE UTILIZED FOR THE PURPOSE OF MAKING INVESTMENTS. THUS IT WAS SUBMITTED TH AT DISALLOWANCE U/S 14A WAS NOT CALLED FOR. ON THE OTHER HAND, LEARNED DEPARTMENTAL REPRESENTATIVE PLACED RELIANCE ON THE ORDERS OF THE LOWER AUTHORITIES. 7. WE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ONLY SOLITARY ISSUE IN THE PR ESENT APPEAL IS WHETHER, HAVING REGARD TO FACTS OF THE PRESENT CASE, DISALLOWANCE U/S 14A WAS NOT CALLED FOR WHEN THERE WAS NO EXEMPT INCOME. THE PROPOSITION THAT PROVISIONS OF SECTION 14A CANNOT BE INVOKED WHEN THERE WAS NO EXEMPT INCOME , HAD BEEN REJECT ED BY THE HON BLE APEX COURT IN THE CASE OF MAXOPP INVESTMENTS. ITA NO S . 1985 TO 1988 /BANG/20 17 PAGE 5 OF 9 LTD. VS. CIT (2018) 91 TAXMAN.COM 154 (SC) WHEREIN IT WAS HELD AS FOLLOWS: 31. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO THE ARGUMENT OF COUNSEL FOR THE PARTIES ON BOTH SIDES, IN THE LIGHT OF VARIOUS JUDGMENTS WHICH HAVE BEEN CITED BEFORE US, SOME OF WHICH HAVE ALREADY BEEN TAKEN NOTE OF ABOVE. 32. IN THE FIRST INSTANCE, IT NEEDS TO BE RECOGNISED THAT AS PER SECTION 14A(1) OF THE ACT, DEDUCTION OF THAT EXPENDITURE IS NOT TO BE ALL OWED WHICH HAS BEEN INCURRED BY THE ASSESSEE 'IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT'. AXIOMATICALLY, IT IS THAT EXPENDITURE ALONE WHICH HAS BEEN INCURRED IN RELATION TO THE INCOME WHICH IS INCLUDIBLE IN TOTAL INC OME THAT HAS TO BE DISALLOWED. IF AN EXPENDITURE INCURRED HAS NO CAUSAL CONNECTION WITH THE EXEMPTED INCOME, THEN SUCH AN EXPENDITURE WOULD OBVIOUSLY BE TREATED AS NOT RELATED TO THE INCOME THAT IS EXEMPTED FROM TAX, AND SUCH EXPENDITURE WOULD BE ALLOWED A S BUSINESS EXPENDITURE. TO PUT IT DIFFERENTLY, SUCH EXPENDITURE WOULD THEN BE CONSIDERED AS INCURRED IN RESPECT OF OTHER INCOME WHICH IS TO BE TREATED AS PART OF THE TOTAL INCOME. 33. THERE IS NO QUARREL IN ASSIGNING THIS MEANING TO SECTION 14A OF THE ACT. IN FACT, ALL THE HIGH COURTS, WHETHER IT IS THE DELHI HIGH COURT ON THE ONE HAND OR THE PUNJAB AND HARYANA HIGH COURT ON THE OTHER HAND, HAVE AGREED IN PROVIDING THIS INTERPRETATION TO SECTION 14A OF THE ACT. THE ENTIRE DISPUTE IS AS TO WHAT INTERPRET ATION IS TO BE GIVEN TO THE WORDS 'IN RELATION TO' IN THE GIVEN SCENARIO, VIZ. WHERE THE DIVIDEND INCOME ON THE SHARES IS EARNED, THOUGH THE DOMINANT PURPOSE FOR SUBSCRIBING IN THOSE SHARES OF THE INVESTEE COMPANY WAS NOT TO EARN DIVIDEND. WE HAVE TWO SCEN ARIOS IN THESE SETS OF APPEALS. IN ONE GROUP OF CASES THE MAIN PURPOSE FOR INVESTING IN SHARES WAS TO GAIN CONTROL OVER THE INVESTEE COMPANY. OTHER CASES ARE THOSE WHERE THE SHARES OF INVESTEE COMPANY WERE HELD BY THE ASSESSEES AS STOCK - IN - TRADE (I.E. AS A BUSINESS ACTIVITY) AND NOT AS INVESTMENT TO EARN DIVIDENDS. IN THIS CONTEXT, IT IS TO BE EXAMINED AS TO WHETHER THE EXPENDITURE WAS INCURRED, IN RESPECTIVE SCENARIOS, IN RELATION TO THE DIVIDEND INCOME OR NOT. 34. HAVING CLARIFIED THE AFORESAID POSIT ION, THE FIRST AND FOREMOST ISSUE THAT FALLS FOR CONSIDERATION IS AS TO WHETHER THE DOMINANT PURPOSE TEST, WHICH IS PRESSED INTO SERVICE BY THE ASSESSEES WOULD APPLY WHILE INTERPRETING SECTION 14A OF THE ACT OR WE HAVE TO GO BY THE THEORY OF APPORTIONMENT. WE ARE OF THE OPINION THAT THE DOMINANT PURPOSE FOR WHICH THE INVESTMENT INTO SHARES IS MADE BY AN ASSESSEE MAY NOT BE RELEVANT. NO DOUBT, THE ASSESSEE LIKE MAXOPP INVESTMENT LIMITED MAY HAVE MADE THE INVESTMENT IN ORDER TO GAIN CONTROL OF THE INVESTEE CO MPANY. HOWEVER, THAT DOES NOT APPEAR TO BE A RELEVANT FACTOR IN DETERMINING THE ISSUE AT HAND. FACT REMAINS THAT SUCH DIVIDEND INCOME IS NON - TAXABLE. IN THIS SCENARIO, IF EXPENDITURE IS INCURRED ON EARNING THE DIVIDEND INCOME, THAT MUCH OF THE EXPENDITURE WHICH IS ATTRIBUTABLE TO THE DIVIDEND INCOME HAS TO BE DISALLOWED AND CANNOT BE TREATED AS BUSINESS EXPENDITURE. KEEPING THIS OBJECTIVE BEHIND SECTION14A OF THE ITA NO S . 1985 TO 1988 /BANG/20 17 PAGE 6 OF 9 ACT IN MIND, THE SAID PROVISION HAS TO BE INTERPRETED, PARTICULARLY, THE WORD 'IN RELATION TO T HE INCOME' THAT DOES NOT FORM PART OF TOTAL INCOME. CONSIDERED IN THIS HUE, THE PRINCIPLE OF APPORTIONMENT OF EXPENSES COMES INTO PLAY AS THAT IS THE PRINCIPLE WHICH IS ENGRAINED IN SECTION 14A OF THE ACT. THIS IS SO HELD IN WALFORT SHARE AND STOCK BROKERS P LTD. , RELEVANT PASSAGE WHEREOF IS ALREADY REPRODUCED ABOVE, FOR THE SAKE OF CONTINUITY OF DISCUSSION, WE WOULD LIKE TO QUOTE THE FOLLOWING FEW LINES THEREFROM. 'THE NEXT PHRASE IS, 'IN RELATION TO INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME UNDER TH E ACT'. IT MEANS THAT IF AN INCOME DOES NOT FORM PART OF TOTAL INCOME, THEN THE RELATED EXPENDITURE IS OUTSIDE THE AMBIT OF THE APPLICABILITY OF SECTION 14A .. ** ** ** THE THEORY OF APPORTIONMENT OF EXPENDITURE BETWEEN TAXABLE AND NON - TAXABLE HAS, IN PR INCIPLE, BEEN NOW WIDENED UNDER SECTION 14A.' 35. THE DELHI HIGH COURT, THEREFORE, CORRECTLY OBSERVED THAT PRIOR TO INTRODUCTION OF SECTION 14A OF THE ACT, THE LAW WAS THAT WHEN AN ASSESSEE HAD A COMPOSITE AND INDIVISIBLE BUSINESS WHICH HAD ELEMENTS O F BOTH TAXABLE AND NON - TAXABLE INCOME, THE ENTIRE EXPENDITURE IN RESPECT OF SAID BUSINESS WAS DEDUCTIBLE AND, IN SUCH A CASE, THE PRINCIPLE OF APPORTIONMENT OF THE EXPENDITURE RELATING TO THE NON - TAXABLE INCOME DID NOT APPLY. THE PRINCIPLE OF APPORTIONMENT WAS MADE AVAILABLE ONLY WHERE THE BUSINESS WAS DIVISIBLE. IT IS TO FIND A CURE TO THE AFORESAID PROBLEM THAT THE LEGISLATURE HAS NOT ONLY INSERTED SECTION 14A BY THE FINANCE (AMENDMENT) ACT, 2001 BUT ALSO MADE IT RETROSPECTIVE, I.E., 1962 WHEN THE INCOME TAX ACT ITSELF CAME INTO FORCE. THE AFORESAID INTENT WAS EXPRESSED LOUDLY AND CLEARLY IN THE MEMORANDUM EXPLAINING THE PROVISIONS OF THE FINANCE BILL, 2001. WE, THUS, AGREE WITH THE VIEW TAKEN BY THE DELHI HIGH COURT, AND ARE NOT INCLINED TO ACCEPT THE OPI NION OF PUNJAB & HARYANA HIGH COURT WHICH WENT BY DOMINANT PURPOSE THEORY. THE AFORESAID REASONING WOULD BE APPLICABLE IN CASES WHERE SHARES ARE HELD AS INVESTMENT IN THE INVESTEE COMPANY, MAY BE FOR THE PURPOSE OF HAVING CONTROLLING INTEREST THEREIN. ON T HAT REASONING, APPEALS OF MAXOPP INVESTMENT LIMITED AS WELL AS SIMILAR CASES WHERE SHARES WERE PURCHASED BY THE ASSESSEES TO HAVE CONTROLLING INTEREST IN THE INVESTEE COMPANIES HAVE TO FAIL AND ARE, THEREFORE, DISMISSED. 36. THERE IS YET ANOTHER ASP ECT WHICH STILL NEEDS TO BE LOOKED INTO. WHAT HAPPENS WHEN THE SHARES ARE HELD AS 'STOCK - IN - TRADE' AND NOT AS 'INVESTMENT', PARTICULARLY, BY THE BANKS? ON THIS SPECIFIC ASPECT, CBDT HAS ISSUED CIRCULAR NO. 18/2015 DATED NOVEMBER 02, 2015. 37. THIS CIR CULAR 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 F ROM 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 ITA NO S . 1985 TO 1988 /BANG/20 17 PAGE 7 OF 9 GROUND BY THE OFFICERS O F 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 'INCOM E 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 GAIN S OF BUSINESS AND PROFESSION'. THE BOARD ALSO WENT TO THE EXTENT OF SAYING THAT THIS WOULD NOT BE LIMITED ONLY TO CO - OPERATIVE SOCIETIES/BANKS CLAIMING DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT BUT WOULD ALSO BE APPLICABLE TO ALL BANKS/COMMERCIAL BAN KS, TO WHICH BANKING REGULATION ACT, 1949 APPLIES. 38. FROM THIS, PUNJAB AND HARYANA HIGH COURT POINTED OUT THAT THIS CIRCULAR CARVES OUT A DISTINCTION BETWEEN 'STOCK - IN - TRADE' AND 'INVESTMENT' AND PROVIDES THAT IF THE MOTIVE BEHIND PURCHASE AND SALE O F SHARES IS TO EARN PROFIT, THEN THE SAME WOULD BE TREATED AS TRADING PROFIT AND IF THE OBJECT IS TO DERIVE INCOME BY WAY OF DIVIDEND THEN THE PROFIT WOULD BE SAID TO HAVE ACCRUED FROM INVESTMENT. TO THIS EXTENT, THE HIGH COURT MAY BE CORRECT. AT THE SAME TIME, WE DO NOT AGREE WITH THE TEST OF DOMINANT INTENTION APPLIED BY THE PUNJAB AND HARYANA HIGH COURT, WHICH WE HAVE ALREADY DISCARDED. IN THAT EVENT, THE QUESTION IS AS TO ON WHAT BASIS THOSE CASES ARE TO BE DECIDED WHERE THE SHARES OF OTHER COMPANIES AR E PURCHASED BY THE ASSESSEES AS 'STOCK - IN - TRADE' AND NOT AS 'INVESTMENT'. WE PROCEED TO DISCUSS THIS ASPECT HEREINAFTER. 39. IN THOSE CASES, WHERE SHARES ARE HELD AS STOCK - IN - TRADE, THE MAIN PURPOSE IS TO TRADE IN THOSE SHARES AND EARN PROFITS THEREFR OM. 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 D IVIDEND 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 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. 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 INCO ME 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 IS TO BE KEPT IN ITA NO S . 1985 TO 1988 /BANG/20 17 PAGE 8 OF 9 MIND THAT IN THOSE CASES WHERE SHARES ARE HELD AS 'STOCK - IN - TRADE', IT BECOMES A BUSINESS ACTIVITY OF THE ASSESSEE TO DEAL IN THOSE SHARES AS A BUSINESS PROPOSITION. WHETHER DIVIDEND IS EARN ED 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 SITUAT ION 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 WOUL D 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 APPE ALS 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. 8. AS REGARDS THE OTHER CONTENTION OF THE ASSESSEE THAT NO BORROWED FUNDS WERE UTILIZED FOR THE PURPOSE OF MAKING INVESTMENTS IN SUBSIDIARY COMPANY, REQUIRES VERIFICATION BY THE AO THOUGH THE LOWER AUTHORITIES REJECTED THIS CONTENTION FOR WANT OF EVIDENCE. HOWEVER, KEEPING IN VIEW THE AUDITED FINANCIAL STATEMENTS OF THE ASSESSEE WERE BEFORE THE AO, HE SHOULD HAVE RENDERED A SPECIFIC FINDING AS TO THE CORRECTNESS OR OTHERWISE OF THE CLAIM MADE BY THE ASSESSEE. THEREFORE, IN THE FITNESS OF THINGS, WE REMIT THIS ISSUE BACK TO THE FILE OF THE LD.CIT(A) FOR DE NOVO ADJUDICATI ON OF THE ISSUE IN THE LIGHT OF THE SETTLED POSITION OF LAW. IN THE RESULT, THE GROUND OF APPEAL OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2012 - 13 IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 9. FOR THE ASSESSMENT YEAR 2014 - 15 (ITA NO.1287/BANG/2017) T HERE IS ANOTHER ISSUE OF ADDITION ON ACCOUNT OF SUNDRY CREDITORS WHICH REMAINED UNCONFIRMED BY THE CREDITORS. IT IS THE CASE OF THE AO THAT SUMMONS ISSUED TO THE CREDITORS WERE RETURNED UN - SERVED. THEREFORE, ADDITION IS WARRANTED. IN OUR CONSIDERED OPI NION, THIS CANNOT BE A VALID REASON TO MAKE ADDITION OF SUNDRY CREDITORS. HOWEVER, WE RESTORE THIS ISSUE BACK TO THE FILE OF THE LD. CIT(A) TO EXAMINE WHETHER THERE IS ANY OTHER EVIDENTIARY VALUE ESTABLISHING GENUINENESS OR CREDIT WORTHINESS OF ITA NO S . 1985 TO 1988 /BANG/20 17 PAGE 9 OF 9 THE TRANSA CTION AND TO COME TO THE CONCLUSION WHETHER SUNDRY CREDITORS ARE GENUINE OR NOT. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2014 - 15 IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 10. FOR PARITY OF REASONS GIVEN IN ASSESSMENT Y EAR 2012 - 13, THE APPEALS OF THE ASSESSEE FOR ASSESSMENT YEARS 2011 - 12 AND 2015 - 16 ARE ALSO TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH APRIL , 2018 SD/ - SD/ - ( SUNIL KUMAR YADAV ) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE : BENGALURU. D A T E D : 13 / 0 4 /201 8 SRINIVASULU, SPS COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A) 4 CI T 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY INCOME - TAX APPELLATE TRIBUNAL BANGALORE