PUNJAB & SIND BANK, NEW DELHI V. ACIT, CIRCLE- 20(1), NEW DELHI

ITA 781/DEL/2018

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 0976 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-07-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2013-2014
• Appeal Filed On: 01-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Depreciation; Principle of natural justice; Earning of tax free income; Question of law; Cost of acquisition; TDS; Rule 8D; Set aside
• Section: 43B; 143(3); 14A; 115JB; 13; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F, NEW DELHI BEFORE SH. N. K. BILLAIYA, ACCOUNTANT MEMBER AND SH. MAHAVIR SINGH, JUDICIAL MEMBER (THROUGH VIDEO CONFERENCING) ITA NO.781/DEL/2018 ASSESSMENT YEAR: 2013-14 PUNJAB & SIND BANK HO. ACCOUNTS & AUDIT DEPARTMENT, 1 ST FLOOR, 21, RAJENDRA PLACE, NEW DELHI-110008 PAN NO. AAACP1206G VS ACIT CIRCLE 20 (1) NEW DELHI (RESPONDENT) ITA NO.1208/DEL/2018 ASSESSMENT YEAR: 2013-14 ACIT CIRCLE 20 (1) NEW DELHI VS PUNJAB & SIND BANK HO. ACCOUNTS & AUDIT DEPARTMENT, 1 ST FLOOR,21, RAJENDRA PLACE, NEW DELHI-110008 PAN NO. AAACP1206G (RESPONDENT) APPELLANT BY SH. VIVEK GUPTA, CA RESPONDENT BY MS. SUSHMA SINGH, CIT DR SH. GOURAV PUNDIB, SR. DR. DATE OF HEARING: 12/07/2021 DATE OF PRONOUNCEMENT: 12/07/2021 2 ORDER PER N. K. BILLAIYA, AM: ITA NO.781/DEL/2018 AND ITA 1208/DEL/2018 ARE CROS S APPEALS BY THE ASSESSEE AND REVENUE PREFERRED AGAIN ST THE ORDER OF THE CIT(A)-7, NEW DELHI DATED 05.12.2017 PERTAIN ING TO A.Y. 2013-14. 2. BOTH THESE APPEALS WERE HEARD TOGETHER AND ARE B EING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CO NVENIENCE. 3. THE GRIEVANCE OF THE ASSESSEE READ AS UNDER :- 1. THAT ON THE F ACTS AND CIRCUMSTANCES OF THE CASE AND PROVISIONS O F THE LAW, THE LEARNED CIT(APPEAL) HAS ERRED IN SUSTAINING THE DISALLOWANC E U/S 14A R.W.R. 8D OF RS.85,98,000/- , (I.E.14% OF AVERAGE INVESTMENTS AGAINST EXEMPTED IN COME) IN RESPECT OF EXEMPTED INCOME OF RS.4,77,67,907/-. 2. THAT IN LIGHT OF THE GROUND NO.1 ABOVE, THE LEARNED CIT(APPEAL) HAS ERRED IN SUSTAINING THE ADDITION OF RS.85,98,000/- TO BOOK PROFIT UNDER MAT (SECTION 115JB) IN RESPECT OF EXEMPTED INCOME. 3. THAT ON THE FACTS & CIRCUMSTANCES OF THE CASE AND PROVISIONS OF THE LAW, THE LEARNED ASSESSING OFFICER HAS ERRED IN NOT GRANTING THE TDS CREDIT OF RS.2,06,817/ - . THE ID CIT(APPEAL) HAS ALSO ERRED IN NOT FULLY APPRECIATIN G AND ADJUDICATING THIS ISSUE IN LIGHT OF OUR SUBMISSIONS MADE BEFORE HIM RESULTING INTO PASS ING OF NON- SPEAKING ORDER WHICH IS AGAINST PRINCIPLE OF NATURAL JUSTICE. 3 4. THAT THE APPELLANTS REQUEST BE ALLOWED TO ADD, MODI FY AND DELETE ANY OTHER GROUND (S) OF APPEAL 4. THE GRIEVANCE OF THE REVENUE READ AS UNDER :- 1) ON THE FACTS AND UNDER THE CIRCUMSTANCES OF THE CASE, THE LD.CIT (A) ERRED IN LAW AND FACTS IN DELETING THE ADDITION OF RS. 17,63 ,07,641/- MADE BY THE AO IN RESPECT OF DEPRECIATION ON SECURITIES. 2) ON THE FACTS AND UNDER THE CIRCUMSTANCES OF THE CASE, THE LD.CIT (A) ERRED IN LAW AND FACTS IN DELETING DISALLOWANCE OF RS. 1,87, 35,15,770/- MADE BY THE AO OUT OF CONTRIBUTION TO P & S BANK EMPLOYEES PENSION FUN D TRUST. 3) ON THE FACTS AND UNDER THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) ERRED IN LAW AND FACTS IN DELETING THE DISALLOWANCE OF RS. 1 277.85 LAKHS MADE BY THE AO U/S 14A READ WITH RULE UNDER RULE 8D(2)(II). 4) ON THE FACTS AND UNDER THE CIRCUMSTANCES OF THE CASE, THE LD.CIT (A) ERRED IN LAW AND FACTS IN DELETING THE DISALLOWANCE OF RS. 1 ,87,35,15,770/- MADE BY THE AO OUT OF CONTRIBUTION TO P & S BANK EMPLOYEES PENSION FUND TRUST WHILE COMPUTING BOOK PROFIT U/S 115JB. 5) ON THE FACTS AND UNDER THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) ERRED IN LAW AND FACTS IN DELETING THE DISALLOWANCE OF RS. 1 277.85 LAKHS MADE BY THE AO U/S 14A READ WITH RULE UNDER RULE 8D(2)(II) WHILE C OMPUTING BOOK PROFIT U/S 115JB 6) THE APPELLANT CRAVES TO BE ALLOWED TO ADD AND AL TER ANY FRESH GROUND(S) OF APPEAL AND/OR DELETE OR AMEND ANY OF THE GROUND (S) OF APPEAL. 5. REPRESENTATIVES OF BOTH THE SIDES WERE HEARD AT LENGTH. CASE RECORD CAREFULLY PERUSED. 4 6. FACTS RELATING TO GROUND NO. 1 AND 2 OF ASSESSE S APPEAL AND GROUND NO.3 OF REVENUES APPEAL ARE IDENTICAL. 7. IDENTICAL ISSUES WERE CONSIDERED AND DECIDED BY THIS TRIBUNAL IN ASSESSEES OWN CASE IN ITA NOS. 1441 AN D 1442 /DEL/2015 FOR A.Y.2011-12 AND 2012-13 VIDE ORDER DA TED 09.01.2019. THE RELEVANT FINDINGS OF THE COORDINAT E 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 HONBLE APEX COURT CONSIDERED TWO CASES WHEREIN THE QUESTION OF PREDOMINANT INTENT OF INVESTMENT IN SHARES WAS P LEADED, THOUGH ON DIFFERENT FACTS, ON THE GROUND THAT THE OBJECTIV E 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 PROFIT FROM TRADING IN SHARES. THE QUESTION WAS WHETHER THE DISALLOWANCE UNDER SECTION 14 A OF THE ACT COULD BE INVOKED IN THE CASES WHERE EXEMPT INCOME WAS EARNED FROM SHARES HELD AS TRADING ASSETS OR STOCK IN TRADE. THE F IRST CASE RELATES TO MAXOPP INVESTMENT LTD AND THE SECOND CASE RELATES T O THE CASE OF STATE BANK OF PATIALA. IN THE CASE OF MAXOPP INVEST MENT LTD THE ASSESSEE COMPANY IS IN THE BUSINESS OF FINANCE, INV ESTMENT AND WAS DEALING IN SHARES AND SECURITIES; THAT THEY HEL D THE SHARES AND SECURITIES, PARTLY AS INVESTMENTS ON THE CAPITAL A CCOUNT AND PARTLY AS TRADING ASSETS FOR THE PURPOSE OF ACQUIRING AN D RETAINING CONTROL OVER ITS GROUP COMPANIES, PRIMARILY MAX INDIA LTD.; AND THAT THE 5 PROFITS RESULTING ON THE SALE OF SHARES HELD AS TRA DING ASSETS WERE DULY OFFERED TO TAX AS BUSINESS INCOME OF THE ASSES SEE. IN THE CASE OF STATE BANK OF PATIALA THE ASSESSEE HAS EXEMPT IN COME IN THE FORM OF DIVIDEND WAS EARNED BY THE BANK FROM SECURITIES HELD BY AS STOCK IN TRADE. THE HONBLE SUPREME COURT WAS CONSIDERING THE QUESTION THAT HAS ARISEN UNDER VARIED CIRCUMSTANCES WHERE TH E SHARES/STOCKS WERE PURCHASED BY A COMPANY FOR THE P URPOSE OF GAINING CONTROL OVER THE SAID COMPANY OR AS STOCK IN TRADE, THOUGH INCIDENTALLY INCOME IS ALSO GENERATED IN THE FORM O F DIVIDENDS AS WELL. 24. IT WAS ARGUED BEFORE THE HONBLE APEX COURT THA T THOUGH INCIDENTALLY INCOME WAS ALSO GENERATED IN THE FORM OF DIVIDENDS, THE DOMINANT INTENTION FOR PURCHASING THE SHARES WAS NO T TO EARN THE DIVIDEND INCOME BUT TO ACQUIRE AND RETAIN THE CONTR OLLING BUSINESS IN THE COMPANY IN WHICH SHARES WERE INVESTED, OR FOR T HE PURPOSE OF TRADING IN THE SHARES AS BUSINESS ACTIVITY. 25. AFTER CONSIDERING THE ENTIRE CASE LAW ON THIS A SPECT IN THE LIGHT OF THE PECULIAR FACTS INVOLVED IN BOTH THE MATTERS, TH E HONBLE 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 EA RN PROFITS THEREFROM. HOWEVER, WE ARE NOT CONCERNED WI TH 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 DIVID END IS ALSO EARNED, THOUGH INCIDENTALLY, WHICH IS ALSO AN INCOM E. HOWEVER, BY VIRTUE OF SECTION 10 (34) OF THE ACT, T HIS DIVIDEND INCOME IS NOT TO BE INCLUDED IN THE TOTAL INCOME AND IS EXEMPT FROM TAX. THIS TRIGGERS THE APPLICABI LITY OF SECTION 14A OF THE ACT WHICH IS BASED ON THE THEORY OF 6 APPORTIONMENT OF EXPENDITURE BETWEEN TAXABLE AND NO N- TAXABLE INCOME AS HELD IN WALFORT SHARE AND STOCK B ROKERS P LTD. CASE. THEREFORE, TO THAT EXTENT, DEPENDING U PON THE FACTS OF EACH CASE, THE EXPENDITURE INCURRED IN ACQ UIRING THOSE SHARES WILL HAVE TO BE APPORTIONED. 40) WE NOTE FROM THE FACTS IN THE STATE BANK OF PAT IALA CASES THAT THE AO, WHILE PASSING THE ASSESSMENT ORDER, HAD ALR EADY 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 W OULD BE APPLICABLE. IN SPITE OF THIS EXERCISE OF APPORTIONM ENT OF EXPENDITURE CARRIED OUT BY THE AO, CIT(A) DISALLOWE D THE ENTIRE DEDUCTION OF EXPENDITURE. THAT VIEW OF THE CIT(A) W AS CLEARLY UNTENABLE AND RIGHTLY SET ASIDE BY THE ITAT. THEREF ORE, ON FACTS, THE PUNJAB AND HARYANA HIGH COURT HAS ARRIVED AT A CORRECT CONCLUSION BY AFFIRMING THE VIEW OF THE ITAT, THOUG H WE ARE NOT SUBSCRIBING TO THE THEORY OF DOMINANT INTENTION APP LIED BY THE HIGH COURT. IT IS TO BE KEPT IN 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 BUSINE SS PROPOSITION. WHETHER DIVIDEND IS EARNED OR NOT BECOMES IMMATERIA L. IN FACT, IT WOULD BE A QUIRK OF FATE THAT WHEN THE INVESTEE COM PANY DECLARED DIVIDEND, THOSE SHARES ARE HELD BY THE ASSESSEE, TH OUGH THE ASSESSEE HAS TO ULTIMATELY TRADE THOSE SHARES BY SE LLING THEM TO EARN PROFITS. THE SITUATION HERE IS, THEREFORE, DIF FERENT 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 I S DECLARED BY THE INVESTEE COMPANY THAT WOULD NECESSARILY BE EARN ED BY THE ASSESSEE AND THE ASSESSEE ALONE. THEREFORE, EVEN AT THE TIME OF INVESTING INTO THOSE SHARES, THE ASSESSEE KNOWS THA T IT MAY 7 GENERATE DIVIDEND INCOME AS WELL AND AS AND WHEN SU CH DIVIDEND INCOME IS GENERATED THAT WOULD BE EARNED B Y 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 PRI CE GOES UP IN ORDER TO EARN PROFITS. IN THE RESULT, THE APPEALS F ILED BY THE REVENUE CHALLENGING THE JUDGMENT OF THE PUNJAB AND HARYANA HIGH COURT IN STATE BANK OF PATIALA ALSO FAIL, THOU GH LAW IN THIS RESPECT HAS BEEN CLARIFIED HEREINABOVE.' 26. IT IS, THEREFORE, CLEAR FROM THE ABOVE OBSERVAT IONS OF THE HONBLE APEX COURT THAT DEPENDING UPON THE FACTS OF EACH CA SE, THE EXPENDITURE INCURRED IN ACQUIRING THE SHARES WILL H AVE TO BE APPORTIONED. HONBLE APEX COURT HELD THAT THE TRIBU NAL AND THE HONBLE 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 SH ARES 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 SHARE S WERE HELD BY THE ASSESSEE, THOUGH THE ASSESSEE HAS TO ULTIMATELY TRADE THOSE SHARES BY SELLING THEM TO EARN PROFITS. 27. HONBLE APEX COURT MADE CLEAR DISTINCTION OF TH IS CASE FROM THE CASE OF MAXOPP INVESTMENT LTD WHERE THE ASSESSEE KN EW THAT WHENEVER DIVIDEND WOULD BE DECLARED BY THE INVESTEE COMPANY SUCH DIVIDEND WOULD NECESSARILY BE EARNED BY THE AS SESSEE AND ASSESSEE ALONE, AND IT WOULD BE IN THE COMMON KNOWL EDGE OF THE ASSESSEE THAT SUCH SHARES WOULD GENERATE DIVIDEND I NCOME AS WELL AS AND WHEN SUCH DIVIDEND INCOME IS GENERATED THAT WOULD BE EARNED BY THE ASSESSEE ONLY. HONBLE APEX COURT IN UNEQUIVOCAL TERMS HELD THAT IN CONTRAST, WHERE THE SHARES ARE H ELD AS STOCK IN TRADE, THIS MAY NOT BE NECESSARILY A SITUATION AND THE MAIN PURPOSE 8 WAS TO LIQUIDATE THOSE SHARES WHENEVER THE SHARE PR ICE GOES UP IN ORDER TO EARN PROFITS. HONBLE APEX COURT, THEREFOR E, WHILE REJECTING THE THEORY OF DOMINANT PURPOSE IN MAKING INVESTMENT IN SHARES- WHETHER IT WAS TO ACQUIRE AND RETAIN CONTROLLING IN TEREST IN THE OTHER COMPANY OR TO MAKE PROFITS OUT OF THE TRADING ACTIV ITY IN SUCH SHARES - CLEARLY MADE A CLEAR DISTINCTION BETWEEN THE DIVI DEND EARNED IN RESPECT OF THE SHARES WHICH WERE ACQUIRED BY THE AS SESSEE IN THEIR EXERCISE TO ACQUIRE AND RETAIN THE CONTROLLING INTE REST IN THE INVESTEE COMPANY, AND THE SHARES THAT WERE PURCHASED FOR THE PURPOSE OF LIQUIDATING THOSE SHARES WHENEVER THE SHARE PRICE G OES UP, IN ORDER TO EARN PROFITS. IT IS, THEREFORE, CLEAR THAT THOUG H NOT THE DOMINANT PURPOSE OF ACQUIRING THE SHARES IS A RELEVANT FOR T HE PURPOSE OF INVOKING THE PROVISIONS UNDER SECTION 14 A OF THE A CT, THE SHARES HELD AS STOCK IN TRADE STAND ON A DIFFERENT PEDESTA L IN RELATION TO THE SHARES THAT WERE ACQUIRED WITH AN INTENTION TO ACQU IRE 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 T HE HONBLE HIGH COURT OF DELHI AND THE HONBLE HIGH COURT OF D ELHI 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 HONBLE HIGH COURT READ AS UNDER :- 9 5. INSOFAR AS THE DISALLOWANCE OF EXPENDITURE UNDER SECTION 14A IS CONCERNED, THE ITAT HAS RELIED UPON THE DECISION OF THE SUPREM E COURT MAXOPP INVESTMENT LTD VS. CIT (2018), 402ITR 640 (SC). THE DECISION O F 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 PROFIT S 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 B E INCLUDED IN THE TOTAL INCOME AND IS EXEMPT FROM TAX. THIS TRIGGERS THE AP PLICABILITY OF SECTION 14-A OF THE ACT WHICH IS BASED ON THE THEORY OF APP ORTIONMENT OF EXPENDITURE BETWEEN TAXABLE AND NON-TAXABLE INCOME AS HELD IN WALFORT SHARE AND STOCK BROKERS (P) LTD. CASE. THEREFORE, T O THAT EXTENT, DEPENDING UPON THE FACTS OF EACH CASE, THE EXPENDIT URE 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 RESTRICTE D THE DISALLOWANCE TO THE AMOUNT WHICH WAS CLAIMED AS EXEMPT INCOME BY APPLYI NG THE FORMULA CONTAINED IN RULE 8-D OF THE RULES AND HOLDING THAT SECTION 1 4-A OF THE ACT WOULD BE APPLICABLE. IN SPITE OF THIS EXERCISE OF APPORTIONM ENT OF EXPENDITURE CARRIED OUT BY THE AO, CIT(A) DISALLOWED THE ENTIRE DEDUCTION O F EXPENDITURE. THAT VIEW OF THE CIT(A) WAS CLEARLY UNTENABLE AND RIGHTLY SET AS IDE BY ITAT. THEREFORE, ON FACTS, THE PUNJAB AND HARYANA HIGH COURT HAS ARRIVE D AT A CORRECT CONCLUSION BY AFFIRMING THE VIEW OF ITAT, THOUGH WE ARE NOT SUBSC RIBING TO THE THEORY OF DOMINANT INTENTION APPLIED BY THE HIGH COURT. 10 50. IT IS TO BE KEPT IN MIND THAT IN THOSE CASES WH ERE SHARES ARE HELD AS STOCK-IN- TRADE, IT BECOMES A BUSINESS ACTIVITY OF THE ASSES SEE 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 INV ESTEE COMPANY DECLARED DIVIDEND, THOSE SHARES ARE HELD BY THE ASSESSEE, THOUGH THE A SSESSEE HAS TO ULTIMATELY TRADE THOSE SHARES BY SELLING THEM TO EARN PROFITS. THE S ITUATION 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 DECLARE D BY THE INVESTEE COMPANY THAT WOULD NECESSARILY BE EARNED BY THE ASSESSEE AN D 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-IN- TRADE, THIS MAY NOT BE NECESSARIL Y A SITUATION. THE MAIN PURPOSE IS TO LIQUIDATE THOSE SHARES WHENEVER THE SHARE PRI CE GOES UP IN ORDER TO EARN PROFITS. IN THE RESULT, THE APPEALS FILED BY THE RE VENUE 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 RESPONDEN T ASSESSEE THAT IT HAD EARNED THE REVENUE ON THE SHARES HELD AS STOCK IN T RADE ONLY BY A QUIRK OF FATE. 7. IN THE LIGHT OF AFORESAID CONCLUDED POSITION, BO TH ON FACTS AND IN LAW, IN OUR VIEW, NO QUESTION OF LAW ARISES FOR CONSIDERATI ON IN THE PRESENT APPEAL. ACCORDINGLY, PRESENT APPEALS STAND DISMISSED. 9. AS NO DISTINGUISHING DECISION HAS BEEN BROUGHT T O OUR NOTICE BY THE DR, RESPECTFULLY FOLLOWING THE DECISION OF T HIS TRIBUNAL AS 11 UPHELD BY THE HONBLE HIGH COURT (SUPRA) WE DIRECT THE AO TO DELETE THE DISALLOWANCE MADE U/S. 14A R.W.R. 8D OF THE ACT. ACCORDINGLY THE GROUND NO.1 AND 2 OF ASSESSEES APP EAL ARE ALLOWED AND GROUND NO.3 OF REVENUES APPEAL IS DISM ISSED. 10. THE OTHER GRIEVANCE OF THE ASSESSEE RELATES TO THE NON- GRANTING OF THE TDS CREDIT. WE FIND THAT THE CIT(A ) HAS ISSUED APPROPRIATE DIRECTIONS. WE ACCORDINGLY DIRECT THE AO TO ALLOW THE CREDIT AS PER PROVISIONS OF THE LAW AFTER VERIFICAT ION. 11. GROUND NO.3 IS ALLOWED FOR STATISTICAL PURPOSE. 12. COMING TO THE OTHER GROUNDS OF REVENUES APPEAL IN ITA NO.1208/DEL/2018 GROUND NO.1 RELATES TO THE DELETIO N OF THE ADDITION OF RS.176307641/- MADE BY THE AO IN RESPEC T OF DEPRECIATION ON SECURITIES. 13. WE FIND THAT AN IDENTICAL ISSUE WAS CONSIDERED BY THIS TRIBUNAL IN ASSESSEES OWN CASE IN A.Y.2011-12 AND 2012-13 (SUPRA). THE RELEVANT FINDINGS OF THE TRIBUNAL REA D AS UNDER :- 12 8. WE HAVE PERUSED THE RECORD AND THE CASE LAW REL IED UPON BY BOTH THE SIDES. IT IS AN ADMITTED FACT THA T THE ASSESSEE BEING A NATIONALIZED BANK IS GOVERNED BY THE BANKING REGULATION ACT, 1949; THAT THEY ARE FOLLOWI NG 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 WHEREA S FOR THE SAME PERIOD OF TIME THE APPELLANT HAS BEEN VALUING THE V ERY SAME INVESTMENT 'AT COST OR MARKET VALUE, WHICHEVER IS L OWER' FOR INCOME TAX PURPOSES; THAT IT IS AN ESTABLISHED RULE OF COM MERCIAL PRACTICE AND ACCOUNTANCY THAT CLOSING STOCK CAN BE VALUED AT COST OR MARKET PRICE, WHICHEVER IS LOWER. IT COULD BE SEEN FROM TH E RECORD THAT THE QUESTION AS TO THE REFLECTION OF THE INVESTMENTS BE ING STOCK IN TRADE IN THE AUDIT REPORT, PROFIT AND LOSS ACCOUNT AND TH E ANNUAL REPORT WITH THE QUESTION OF THE VALUE OF SECURITIES AS EMB EDDED IN THE CLOSING STOCK AND THE CORRESPONDING FIGURE AS BECOM ING THE OPENING STOCK IN THE SUBSEQUENT YEAR WAS ADVERTED TO INDIA JUDICIAL PRECEDENTS. 9. FURTHER, AS UNDERSTOOD FROM THE ARGUMENT OF THE LD. DR, HER CONTENTION IS THAT NO OPENING STOCK OR CLOSING STOC K 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 RE FLECTED IN THE RETURN OF INCOME, AUDIT REPORT, PROFIT AND LOSS ACC OUNT AND THE ANNUAL REPORT AND THE DIMINUTION OF THE VALUE OF SE CURITIES WILL BE EMBEDDED IN THE CLOSING STOCK AND THE CORRESPONDING FIGURE WILL BECOME THE OPENING STOCK IN THE SUBSEQUENT ASSESSME NT YEARS. ON THIS SHE SUBMITTED THAT WHEN ONCE THE ASSESSEE REDU CES THE 13 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 WIT H REFERENCE TO THE REDUCED VALUE OF THE SCRIPS IN THE EARLIER YEA RS, BUT HOWEVER IN THE CASE OF THE ASSESSEE, COST OF THE SECURITY AFTE R REDUCING THE SAME BECAUSE OF THE DEPRECIATION WAS NOT CHANGED OR ADJU STED IN THE BOOKS RESULTING IN THE BOOKS REFLECTING THE LOW PRO FIT AND THE RESULTANT OFFERING OF LESS AMOUNT TO TAX. 10. PLEA OF THE ASSESSEE, ON THE OTHER HAND, IS THA T THE TREATMENT OF THE PROFIT ON SALE OF SECURITIES IS TWO-FOLD. FIRST LY, THE PROFIT ON SALE OF SECURITIES WILL BE LOWER DUE TO THE NONATTACHMENT O F COST OF SECURITIES WITH DEREGULATED APPRECIATION CLAIMED, BUT SIMULTAN EOUSLY AT THE SECOND STAGE OF THE SAID TRANSACTION, CLAIM OF DEPR ECIATION ON SECURITIES FOR THE YEAR IS ALSO REDUCED TO THE EXTE NT OF A COMMUNITY DEPRECIATION CLAIMED EARLIER AND RESULTANTLY THE PR OFIT 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 IT IS NOT THE CASE OF THE LD. ASSESSIN G OFFICER THAT IN THIS PARTICULAR YEAR IN RESPECT OF ANY PARTICULAR SECURI TY SUCH A THING HAD HAPPENED. IT IS NOT THE CASE OF THE LD. ASSESSING O FFICER THAT WITH REFERENCE TO ANY PARTICULAR SCRIP THERE WAS DEPRECI ATION AND THE LOSS WAS CLAIMED IN THE EARLIER YEARS AS DEDUCTION BUT W ITHOUT 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 R EDUCED PRICE WAS TAKEN AS THE COST OF ACQUISITION AND THEREBY ANY LE SS AMOUNT WAS OFFERED TO TAX. THE ENTIRE EDIFICE OF THE CASE OF R EVENUE IS BASED ON THE THEORETICAL SUSPICION OF THE LD. ASSESSING OFFI CER 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 14 BUT NOT THE REDUCED VALUE OF THE SCRIP THAT WAS TAK EN TO ESTIMATE THE PROFITS AND AS A CONSEQUENCE OF WHICH THE LESS AMOU NT HAS BEEN OFFERED TO TAX. IT IS A VERIFIABLE FACT WITH REFERE NCE TO THE SALES OF SECURITIES, IF ANY, THAT TOOK PLACE DURING THE YEAR ORINEARLIER OR SUBSEQUENT YEARS. SUCH AN EXERCISE HAS NOT BEEN UND ERTAKEN BY THE LEARNED ASSESSING OFFICER BUT MERELY BASING ON THE FIGURES REFLECTED IN THE BALANCE SHEET WHICH WAS PREPARED IN ACCORDAN CE WITH THE RBI GUIDELINES, LEARNED ASSESSING OFFICER REACHED A CON CLUSION THAT THERE WAS AN ESCAPEMENT OF. INCOME DUE TO THE PREPARATION OF THE BALANCE SHEET IN A PARTICULAR WAY, AS PRESCRIBED BY THE RBI . 12. IF WE APPRECIATE THE FACTS OF THIS CASE IN THE LIGHT OF THE DECISION OF THE HONBLE APEX COURT IN UCO BANK VS. CIT 240 I TR 355 (SC), IT IS CLEAR THAT SINCE THE ASSESSEE HAS BEEN MAINTAINI NG ITS ACCOUNTS ON MERCANTILE SYSTEM, THEY ARE ENTITLED TO SHOW HIS REAL INCOME BY TAKING INTO ACCOUNT MARKET VALUE OF SUCH INVESTMENT S IN ARRIVING AT REAL TAXABLE INCOME. ALL THE ASPECTS ARGUED BY THE LD. DR WERE CONSIDERED BY THE HONBLE 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 N O APPLICATION TO THE FACTS OF THE CASE. 13. THERE IS CONSISTENCY OF THE FACTS ON THIS ASPEC T QUITE FOR A LONG TIME AND ALL POSSIBLE ARGUMENTS HAVE COME BEFORE TH E ADJUDICATORY AUTHORITIES. ON A CAREFUL CONSIDERATION OF THE MATT ER IN THE LIGHT OF THE SUBMISSIONS ON EITHER SIDE WE ARE OF THE CONSID ERED OPINION THAT THE QUESTION IS NOW FULLY COVERED BY THE ORDERS OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE EARLIER YEARS, AND WHIL E RESPECTFULLY FOLLOWING THE SAME, WE HOLD THE ISSUE IN FAVOUR OF THE ASSESSEE. 15 14. RESPECTFULLY FOLLOWING THE DECISION OF THE COOR DINATE BENCH (SUPRA) GROUND NO.1 IS DISMISSED. 15. GROUND NO.2 RELATES TO THE DELETION OF THE DISA LLOWANCE MADE BY THE AO OUT OF CONTRIBUTION TO PUNJAB AND SI ND BANK EMPLOYEES PENSION FUND TRUST. 16. A SIMILAR GRIEVANCE WAS CONSIDERED BY THIS TRIB UNAL IN A.Y.2011-12 AND 2012-13 (SUPRA). THE RELEVANT FIND INGS 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 W HEREIN IT WAS HELD THAT SIMILAR EXPENSES WERE ALLOWED IN THE EARL IER ASSESSMENTS MADE UNDER SECTION 143(3) OF THE ACT AND THE DECISI ON OF DELHI ITAT IN THE CASE OF DCIT VS RANBAXY LABORATORIES LTD (20 09) 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 ASSES SEE HAD ACTUALLY CONTRIBUTED/PAID THE AMOUNT TO PENSION FUND MAKES T HE 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 T HE CASE FROM THEIR EARLIER YEARS TO RENDER THE BINDING PRECEDENT S 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 DIFFI CULT TO TAKE A 16 DIFFERENT VIEW. IN THESE CIRCUMSTANCES, WE UPHOLD T HE FINDINGS OF THE LD. CIT(A) AND DISMISS THIS GROUND OF APPEAL. 17. RESPECTFULLY FOLLOWING THE DECISION OF THE COOR DINATE BENCH GROUND NO.2 IS DISMISSED. 18. GROUND NO.4 AND 5 TAKEN TOGETHER RELATES TO THE DISALLOWANCES CONSIDERED VIDE GROUND NO.2 AND 3 OF REVENUES APPEAL. SINCE THE ADDITIONS HAVE BEEN DELETED GRIE VANCE RAISED BY VIDE GROUND NO. 4 AND 5 BECOME OTIOSE. 19. SIMILAR TREATMENT WAS GIVEN IN A.Y.2011-12 AND 2012-13 BY THIS TRIBUNAL AND THE FINDINGS READ AS UNDER :- 29. THESE GROUNDS RELATE TO THE ADDITIONS MADE BY THE LEARNED AO IN RESPECT OF THE DEPRECIATION ON SECURITIES, CONTR IBUTION TO P&S BANK EMPLOYEES PENSION FUND TRUST, AND DISALLOWANCE UNDE R SECTION 14A OF THE ACT, WHILE COMPUTING THE BOOK PROFITS UNDER SECTION 115 JB OF THE ACT. IN VIEW OF OUR FINDING IN THE PRECEDING TH REE GROUNDS DELETING THE ADDITIONS MADE ON ALL THESE COUNTS, TH ESE GROUNDS DO NOT SURVIVE AND ARE DISMISSED. 20. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED AND THAT OF THE REVENUE IS DISMISSED. 17 21. DECISION ANNOUNCED IN THE OPEN COURT IN THE PR ESENCE OF BOTH THE REPRESENTATIVES ON 12.07.2021. SD/- SD/- (MAHAVIR SINGH) (N . K. BILLAIYA) JUDICIAL MEMBER A CCOUNTANT MEMBER *NEHA* DATE:-12.07.2021 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGI STRAR ITAT NEW DELHI DATE OF DICTATION 12.07.2021 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 12.07.2021 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER 12.07.2021 DATE ON WHICH T HE APPROVED DRAFT COMES TO THE SR.PS/PS 12.07.2021 DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 12.07.2021 DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/ PS 12.07.2021 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 12.07.2021 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH FILE GOES TO THE HEAD CLERK. THE DATE ON WHICH FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER