STATE BANK OF INDIA (SUCCESSOR TO STATE BANK OF BIKANER & JAIPUR), MUMBAI V. THE DEPUTY COMMISSIONER OF INCOME TAX-CIRCLE-2(2)(1) -CIRCLE 2(2)(1), MUMBAI

MA 262/MUM/2023

AI Insights

The case involves the State Bank of India (successor to State Bank of Bikaner and Jaipur) appealing against an order related to the disallowance of expenses under section 14A of the Income-tax Act, 1961, read with rule 8D of the Income-tax Rules, 1962. The bank sought a recall of the Tribunal's earlier order, arguing that certain judicial decisions and facts were not considered, which led to an erroneous application of the law. The Tribunal examined the arguments and the cited decisions, including those from the Supreme Court and Delhi High Court, and concluded that the original decision was correct and no recall was necessary.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 123611 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 6 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 03-09-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 15-06-2023
• Assessment Year: 2015-2016
• Appeal Filed On: 27-03-2023
• Other Referred Cases: DCIT v. Era Infrastructure Pvt. Ltd., PCIT v/s. State Bank of Patiala, Maxopp Investment Ltd. v/s. CIT, ACIT v/s. Punjab and Sind Bank, MUFG Bank Ltd. v/s. ACIT, Union Bank of India v/s. DCIT, Central Bank of India v/s. DCIT, Cheminvest Ltd. v/s. CIT, IL&FS Energy Development Co. Ltd. v/s. CIT, Honda Siel Power Products Pvt. Ltd. v/s. CIT, Nawanshahar case, Commissioner of Income-tax v/s. Smt. Godaveri Devi Saraf
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Principle of natural justice; Earning of tax free income; Retrospective amendment; Rule 8D; Set aside
• Section: 10; 14A; 254(2); 113

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “G” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND MS. KAVITHA RAJAGOPAL (JUDICIAL MEMBER) M.A. No. 262/MUM/2023 (Arising out of ITA No. 2873/MUM/2019) Assessment Year: 2015-16 State Bank of India (successor to ‘State Bank of Bikaner and Jaipur’) Financial Reporting & Taxation, 3 rd floor, Corporate Centre, Madam Cama Road, Nariman Point Mumbai-400021. Vs. The DCIT Circle 2(2)(1), Room No. 545, 5 th floor, Aayakar Bhavan, Mumbai-400020. PAN No. AADCS 4750 R Appellant Respondent Assessee by : Mr. Jeet Kamdar Revenue by : Mr. Ujjwal Kumar, DR Date of Hearing : 16/06/2023 Date of pronouncement : 04/09/2023 ORDER PER OM PRAKASH KANT, AM By way of this Miscellaneous Application, the assessee is seeking recall of the order of the Tribunal dated 29.09.2022 passed in ITA No. 3033 and 2873/Mum/2019 for assessment year 2015- 16. 2. In the Miscellaneous Application, the assessee has submitted that decisions relied upon by the assessee in relation to the disallowance u/s 14A of the Income Act’) r.w.r. 8D of the Income have not been considered disallowance u/s 14A of the Act could be made in respect of shares held by the bank as stock in trade. The Ld. Counsel of the assessee has further submitted that the decision of the Hon’ble Delhi High Court in the of DCIT v. Era Infrastructure Pvt. Ltd. (supra) cited by either of the parties and therefore decision invoking the same constitute relevant paragraph reproduced as under: 11. In this connection, the Applic Tribunal while holding that the expenses incurred towards shares and securities held as stock in trade ought to be considered for computing the disallowance under section 14A r.w.r 8D : (i) Has failed to consider a deci Haryana High Court in the case of PCIT v/s. State Bank of Patiala reported in [2017] 78 taxmann.com 3, being one of the Associated Banks, wherein it has been held that the provisions of section 14A are not applicable where securities are held as stock has been upheld by the decision of Apex Court in the case of Maxopp Investment Ltd. v/s. CIT (supra); Accordingly, non is a binding precedent is an error apparent on record rectifiable under section 254(2) of the Income (ii) Has failed to appreciate the following illustrative list of decisions cited by the Applicant of the Tribunal and the Delhi High Court which after considering the decision of the Supreme Court in the case of Maxopp Investment Ltd. v/s. 14A are not applicable to banks where investments are held as stock in trade: State Bank of India In the Miscellaneous Application, the assessee has submitted s relied upon by the assessee in relation to the disallowance u/s 14A of the Income-tax Act, 1961 (in short ‘the Act’) r.w.r. 8D of the Income-tax Rules, 1962 (in short ‘the Rules’), not been considered. According to the assessee lowance u/s 14A of the Act could be made in respect of shares held by the bank as stock in trade. The Ld. Counsel of the assessee has further submitted that the decision of the Hon’ble Delhi High Court in the of DCIT v. Era Infrastructure Pvt. Ltd. (supra) either of the parties and therefore decision constitute a mistake apparent from record. The relevant paragraphs of the Miscellaneous Application are reproduced as under: 11. In this connection, the Applicant would like to point out that the Tribunal while holding that the expenses incurred towards shares and securities held as stock in trade ought to be considered for computing the disallowance under section 14A r.w.r 8D : Has failed to consider a decision cited by the Applicant of the Punjab & Haryana High Court in the case of PCIT v/s. State Bank of Patiala [2017] 78 taxmann.com 3, being one of the Associated Banks, wherein it has been held that the provisions of section 14A are not able where securities are held as stock-in-trade which proposition has been upheld by the decision of Apex Court in the case of Maxopp Investment Ltd. v/s. CIT (supra); Accordingly, non-consideration of a decision cited by the Appellant which precedent is an error apparent on record rectifiable under section 254(2) of the Income-tax Act, 1961 Has failed to appreciate the following illustrative list of decisions cited by the Applicant of the Tribunal and the Delhi High Court which after considering the decision of the Supreme Court in the case of Maxopp Investment Ltd. v/s. CIT (supra) have held that the provisions of section 14A are not applicable to banks where investments are held as stock in State Bank of India (successor to State Bank Of Bikaner and Jaipur) 2 M.A No. 262/Mum/2023 In the Miscellaneous Application, the assessee has submitted s relied upon by the assessee in relation to the tax Act, 1961 (in short ‘the tax Rules, 1962 (in short ‘the Rules’), According to the assessee, no lowance u/s 14A of the Act could be made in respect of shares held by the bank as stock in trade. The Ld. Counsel of the assessee has further submitted that the decision of the Hon’ble Delhi High Court in the of DCIT v. Era Infrastructure Pvt. Ltd. (supra) was not either of the parties and therefore decision by the Tribunal a mistake apparent from record. The of the Miscellaneous Application are ant would like to point out that the Tribunal while holding that the expenses incurred towards shares and securities held as stock in trade ought to be considered for computing the sion cited by the Applicant of the Punjab & Haryana High Court in the case of PCIT v/s. State Bank of Patiala [2017] 78 taxmann.com 3, being one of the Associated Banks, wherein it has been held that the provisions of section 14A are not trade which proposition has been upheld by the decision of Apex Court in the case of Maxopp consideration of a decision cited by the Appellant which precedent is an error apparent on record rectifiable under Has failed to appreciate the following illustrative list of decisions cited by the Applicant of the Tribunal and the Delhi High Court which after considering the decision of the Supreme Court in the case of Maxopp CIT (supra) have held that the provisions of section 14A are not applicable to banks where investments are held as stock in • ACIT v/s. Punjab and Sind Bank [IT affirmed by the Delhi High Court in ITA Nos. 904 and 906/2019; • MUFG Bank Ltd. v/s. ACIT [ITA Nos. 7895/Del/2019] (Delhi • Union Bank of India v/s. DCIT [ITA Nos. 1804 to 1807/Mum/2018 and 2227 to 2230/Mum2018] • Central Bank Accordingly, the decision of the Hon'ble Delhi High Court in the case of Punjab & Sind Bank (supra) being the only High Court decision ought to have been followed by the Bank (supra) is a binding precedent and in absence of any contrary judgements on the subject should be followed by the Tribunal. This principle has been laid down by the jurisdictional High Court in the case of Commissioner of Income [1978] 113 ITR 589. Therefore, the Applicant submits that the non aforementioned decisions constitutes "a mistake apparent on record" which should be rectified under s Further, non-consideration of the decision of the co the Tribunal which were cited during the course of hearing also tantamount to mistake apparent on record which ought to be rectified in view of the law laid down by the Supreme Court in the case of Honda Siel Power Products Pvt. (iii) Has relied upon the decision of the Delhi High Court in the case of ERA Infrastructure (India) Ltd. (supra): In this connection, it is submitted that this decision was neither cited by the Department's Representative nor was any reference made to the same by the Hon'ble Tribunal during the course of the hearing. Accordingly, placing reliance on the same while deciding t hand without giving the Applicant an opportunity to make its submissions on how the said case is not applicable is in violation of the 'principles of natural justice' and hence, constitutes a mistake apparent on record which ought to be rectifi Further, the said decision held as under: a. Explanation to section 14A inserted vide Finance Act, 2022 is w.e.f 01 April 2022 and cannot be presumed to have retrospective effects; b. No disallowance can be made under section 14A of the Act if no exempt inco Court has relied on the decisions of the Hon'ble Delhi High Court in the case of Cheminvest Ltd. v/s. CIT reported in [2015] 378 ITR 33 and PCIT v/s. IL&FS Energy Development Co. Ltd. reported in [20 399 ITR 483. State Bank of India • ACIT v/s. Punjab and Sind Bank [ITA Nos. 1441 and 1442/Del/2015] affirmed by the Delhi High Court in ITA Nos. 904 and 906/2019; • MUFG Bank Ltd. v/s. ACIT [ITA Nos. 7895/Del/2019] (Delhi • Union Bank of India v/s. DCIT [ITA Nos. 1804 to 1807/Mum/2018 and 2227 to 2230/Mum2018] (Mumbai-Tribunal); • Central Bank of India v/s. DCIT [ITA Nos. 3739 & 3673/Mum/ 2018] Accordingly, the decision of the Hon'ble Delhi High Court in the case of Punjab & Sind Bank (supra) being the only High Court decision ought to have been followed by the Tribunal. The judgement of Punjab and Sind Bank (supra) is a binding precedent and in absence of any contrary judgements on the subject should be followed by the Tribunal. This principle has been laid down by the jurisdictional High Court in the case mmissioner of Income-tax v/s. Smt. Godaveri Devi Saraf reported in [1978] 113 ITR 589. the Applicant submits that the non-consideration of the aforementioned decisions constitutes "a mistake apparent on record" which should be rectified under section 254(2) of Income-tax Act, 1961. consideration of the decision of the co-ordinate benches of the Tribunal which were cited during the course of hearing also tantamount to mistake apparent on record which ought to be rectified in the law laid down by the Supreme Court in the case of Honda Siel Power Products Pvt. Ltd. v/s. CIT reported in [2007] 165 taxman 307. Has relied upon the decision of the Delhi High Court in the case of Infrastructure (India) Ltd. (supra): connection, it is submitted that this decision was neither cited by the Department's Representative nor was any reference made to the same by the Hon'ble Tribunal during the course of the hearing. Accordingly, placing reliance on the same while deciding t hand without giving the Applicant an opportunity to make its submissions on how the said case is not applicable is in violation of the 'principles of natural justice' and hence, constitutes a mistake apparent on record which ought to be rectified. Further, the said decision held as under: Explanation to section 14A inserted vide Finance Act, 2022 is w.e.f 01 April 2022 and cannot be presumed to have retrospective effects; No disallowance can be made under section 14A of the Act if no exempt income is earned by the assessee. While holding so, the High Court has relied on the decisions of the Hon'ble Delhi High Court in the case of Cheminvest Ltd. v/s. CIT reported in [2015] 378 ITR 33 and PCIT v/s. IL&FS Energy Development Co. Ltd. reported in [20 399 ITR 483. State Bank of India (successor to State Bank Of Bikaner and Jaipur) 3 M.A No. 262/Mum/2023 1442/Del/2015] affirmed by the Delhi High Court in ITA Nos. 904 and 906/2019; • MUFG Bank Ltd. v/s. ACIT [ITA Nos. 7895/Del/2019] (Delhi-Tribunal); • Union Bank of India v/s. DCIT [ITA Nos. 1804 to 1807/Mum/2018 and 3673/Mum/ 2018] Accordingly, the decision of the Hon'ble Delhi High Court in the case of Punjab & Sind Bank (supra) being the only High Court decision ought to Tribunal. The judgement of Punjab and Sind Bank (supra) is a binding precedent and in absence of any contrary judgements on the subject should be followed by the Tribunal. This principle has been laid down by the jurisdictional High Court in the case Smt. Godaveri Devi Saraf reported in consideration of the aforementioned decisions constitutes "a mistake apparent on record" tax Act, 1961. ordinate benches of the Tribunal which were cited during the course of hearing also tantamount to mistake apparent on record which ought to be rectified in the law laid down by the Supreme Court in the case of Honda Ltd. v/s. CIT reported in [2007] 165 taxman 307. Has relied upon the decision of the Delhi High Court in the case of connection, it is submitted that this decision was neither cited by the Department's Representative nor was any reference made to the same by the Hon'ble Tribunal during the course of the hearing. Accordingly, placing reliance on the same while deciding the issue at hand without giving the Applicant an opportunity to make its submissions on how the said case is not applicable is in violation of the 'principles of natural justice' and hence, constitutes a mistake apparent Explanation to section 14A inserted vide Finance Act, 2022 is w.e.f 01 April 2022 and cannot be presumed to have retrospective effects; No disallowance can be made under section 14A of the Act if no me is earned by the assessee. While holding so, the High Court has relied on the decisions of the Hon'ble Delhi High Court in the case of Cheminvest Ltd. v/s. CIT reported in [2015] 378 ITR 33 and PCIT v/s. IL&FS Energy Development Co. Ltd. reported in [2017] Accordingly, it is submitted that the Tribunal has failed to take cognizance of the alternate argument placed by the Applicant that without prejudice to the Applicant's contention that the provisions of section 14A of the Income securities held as stock disregarded then the disallowance ought to be restricted to the exempt dividend income earned by the Appellant of Rs. The Tribunal has misinterpreted the decision of the Hon'ble Delhi High Court in the case of ERA Infrastructure (India) Ltd. (supra) to remit the issue to the file of the Assessing Officer for computing the disallowance under section 14A of the Income fact that in terms of the said decision the disallowance ought to be restricted to exempt income earned during the year under consideration. In view of the above it is submitted that the Applicant was never given an opportunity to expl decision of the Delhi High Court in the case of ERA Infrastructure (India) Ltd. (supra) and hence, the same constitutes an "mistake record" which ought to be rectified under section 254(2) of the Inco (iv) Has failed to consider that the total investment portfolio of the Appellant is Rs. 22,465.41 crores which earned total income of Rs. 1824.34 crores. Out of the total investments, only investments to the extent of Rs. 135 crores earned exempt in Appellant submits that the Tribunal failed to consider these facts on record and restrict the disallowance under section 14A of the Act which should be worked out as per Rule 8D by considered only those investments which yielde total investments while working out the calculation as per Rule 8D. 12. The Applicant therefore prays that a. The Hon'ble Tribunal may be pleased to recall its Order dated 29 September 2022 on the ground of appe disallowance under section (iii) to sub-rule (2) to Rule 8D to the extent of 0.5% of average investments even when the investments are held as stock b. The Tribunal may be plea the nature and circumstances so require. 3. We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. We find that the Tribunal has adjudicated the issu r.w.r. 8D in the case of the assessee observing as under: State Bank of India Accordingly, it is submitted that the Tribunal has failed to take cognizance of the alternate argument placed by the Applicant that without prejudice to the Applicant's contention that the provisions of section 14A of the Income-tax Act, 1961 are not applicable to shares and securities held as stock-in-trade, in any event if the said contention is disregarded then the disallowance ought to be restricted to the exempt dividend income earned by the Appellant of Rs. 2,12,54,282/ has misinterpreted the decision of the Hon'ble Delhi High Court in the case of ERA Infrastructure (India) Ltd. (supra) to remit the issue to the file of the Assessing Officer for computing the disallowance 14A of the Income-tax Act, 1961 without considering the fact that in terms of the said decision the disallowance ought to be restricted to exempt income earned during the year under consideration. In view of the above it is submitted that the Applicant was never given an opportunity to explain its case with respect to the reliance placed on the decision of the Delhi High Court in the case of ERA Infrastructure (India) Ltd. (supra) and hence, the same constitutes an "mistake record" which ought to be rectified under section 254(2) of the Income-tax Has failed to consider that the total investment portfolio of the Appellant is Rs. 22,465.41 crores which earned total income of Rs. 1824.34 crores. Out of the total investments, only investments to the extent of Rs. 135 crores earned exempt income of Rs. 2.12 crores. The Appellant submits that the Tribunal failed to consider these facts on record and restrict the disallowance under section 14A of the Act which should be worked out as per Rule 8D by considered only those investments which yielded exempt income and not by considering the total investments while working out the calculation as per Rule 8D. 12. The Applicant therefore prays that - a. The Hon'ble Tribunal may be pleased to recall its Order dated 29 September 2022 on the ground of appeal No. 3 on the issue of disallowance under section 14A of the Act vis-a-vis invoking the clause rule (2) to Rule 8D to the extent of 0.5% of average investments even when the investments are held as stock-in-trade. b. The Tribunal may be pleased to grant such further and other relief as the nature and circumstances so require.” We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. We find that adjudicated the issue of disallowance u/s 14A r.w.r. 8D in the case of the assessee observing as under: State Bank of India (successor to State Bank Of Bikaner and Jaipur) 4 M.A No. 262/Mum/2023 Accordingly, it is submitted that the Tribunal has failed to take cognizance of the alternate argument placed by the Applicant that without prejudice to the Applicant's contention that the provisions of 961 are not applicable to shares and trade, in any event if the said contention is disregarded then the disallowance ought to be restricted to the exempt 2,12,54,282/-. has misinterpreted the decision of the Hon'ble Delhi High Court in the case of ERA Infrastructure (India) Ltd. (supra) to remit the issue to the file of the Assessing Officer for computing the disallowance hout considering the fact that in terms of the said decision the disallowance ought to be restricted to exempt income earned during the year under consideration. In view of the above it is submitted that the Applicant was never given an ain its case with respect to the reliance placed on the decision of the Delhi High Court in the case of ERA Infrastructure (India) Ltd. (supra) and hence, the same constitutes an "mistake record" which Has failed to consider that the total investment portfolio of the Appellant is Rs. 22,465.41 crores which earned total income of Rs. 1824.34 crores. Out of the total investments, only investments to the come of Rs. 2.12 crores. The Appellant submits that the Tribunal failed to consider these facts on record and restrict the disallowance under section 14A of the Act which should be worked out as per Rule 8D by considered only those d exempt income and not by considering the total investments while working out the calculation as per Rule 8D. a. The Hon'ble Tribunal may be pleased to recall its Order dated 29 al No. 3 on the issue of vis invoking the clause rule (2) to Rule 8D to the extent of 0.5% of average investments sed to grant such further and other relief as We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. We find that e of disallowance u/s 14A r.w.r. 8D in the case of the assessee observing as under: “12. of disallowance of Rs.3,08,02,935/ 8D(2)(iii) of rules. In view of the the case of Maxoop investment Ltd. (supra) the expenses incurred towards shares and securities held as stock in trade are also to be considered for disallowance u/s 14A of the Act real with rule 8D of rules, but those expenses has to be apportioned between the taxable income earned from sale or trading of those securities and non earned by way of dividend. The relevant finding of the Hon’ble Supreme Court is reproduced as under: 36) There is yet anothe What happens when the shares are held as stock not as investment, particularly, by the banks? On this specific aspect, CBDT has issued circular No. 18/2015 dated November 02, 2015. 37) This Circula 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 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 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 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 busine extent of saying that this would not be limited only to co societies/Blanks claiming deduction under Section 80P(2)(a)(i) of the Act but would also be applicable to all banks/commercial banks, to whic 38) From this, Punjab and Haryana High Court pointed out that this circular carves out a distinction between stock investment and provides that if the motive behind purchase and sale of shares is to earn 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 agr 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 State Bank of India We have heard rival submission of the parties on the issue of disallowance of Rs.3,08,02,935/- u/s 14A of the Act read with rule 8D(2)(iii) of rules. In view of the decision of the Hon’ble Supreme Court in the case of Maxoop investment Ltd. (supra) the expenses incurred towards shares and securities held as stock in trade are also to be considered for disallowance u/s 14A of the Act real with rule 8D of rules, se expenses has to be apportioned between the taxable income earned from sale or trading of those securities and non-taxable income earned by way of dividend. The relevant finding of the Hon’ble Supreme Court is reproduced as under: 36) There is yet another aspect which still needs to be looked into. What happens when the shares are held as stock not as investment, particularly, by the banks? On this specific 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 to the extent of saying that this would not be limited only to co societies/Blanks claiming deduction under Section 80P(2)(a)(i) of the Act but would also be applicable to all banks/commercial banks, 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 investment and provides that if the motive behind purchase and sale of 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 State Bank of India (successor to State Bank Of Bikaner and Jaipur) 5 M.A No. 262/Mum/2023 We have heard rival submission of the parties on the issue u/s 14A of the Act read with rule decision of the Hon’ble Supreme Court in the case of Maxoop investment Ltd. (supra) the expenses incurred towards shares and securities held as stock in trade are also to be considered for disallowance u/s 14A of the Act real with rule 8D of rules, se expenses has to be apportioned between the taxable income taxable income earned by way of dividend. The relevant finding of the Hon’ble Supreme r aspect 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 r 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, 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 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 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 ss and profession. The Board also went to the extent of saying that this would not be limited only to co-operative societies/Blanks claiming deduction under Section 80P(2)(a)(i) of the Act but would also be applicable to all banks/commercial h 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 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 ee 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 are purchased by the not as investment. We proceed to discuss this aspect hereinafter. 39) In those cases, where shares are held as stock main purpose is to trade in those shares and earn profits therefrom. However, we are not con 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 certain dividend is also earned, though in an income. However, by virtue of Section 10 (34) of the Act, this dividend income 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 theor expenditure between taxable and non 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 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 income by applying the formula contained in 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 dominating intention applied by the High Court. It is to be kept in mind that in those cases where shares are held as stock of the assessee to deal in those shares as a business proposition. Whether dividend is earned or not becomes immaterial. In fact, i 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 fr 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 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 cont trade, this may not be necessarily a situation. The main purpose State Bank of India companies are purchased by the assessees as stock not as investment. We proceed to discuss this aspect hereinafter. 39) In those cases, where shares are held as stock 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 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 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 income by applying the formula contained in 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 tenable 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 dominating intention applied by the 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 business proposition. Whether dividend is earned or not becomes immaterial. In fact, i 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 fr 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 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 trade, this may not be necessarily a situation. The main purpose State Bank of India (successor to State Bank Of Bikaner and Jaipur) 6 M.A No. 262/Mum/2023 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 cerned 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, cidentally, which is also an income. However, by virtue of Section 10 (34) of the Act, this dividend income not to be included in the total income and is exempt from tax. This triggers the applicability of Section 14A of y of apportionment of 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 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 income 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 tenable 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 dominating intention applied by the Court. It is to be kept in mind that in those cases where trade, it becomes a business activity of the assessee 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 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 rast, 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 appeals filed by the Revenue challenging High Court in State Bank of Patiala also fail, though law in this respect has been clarified hereinabove. 12.1 Since the lower authorities have not carried out any apportioning such expenses incurred fo income from securities, which were held as stock in trade, therefore this issue need to be restored back to the file of the Ld. A.O. for verification and computation of the disallowance accordingly. 12.2 As far as the con 14A should not exceed exempted income, we find that Hon’ble Delhi High Court in the case of DCIT v/s m/s ERA infrastructure (I) Ltd. In ITA/204/2022 held that the amendment introduced to section by way finance Act, 2022 14A of the Act for disallowance even if the same exceeds exempted income, is prospective in nature and cannot be applied retrospectively. The relevant finding of the Hon’ble Delhi High Court is reproduced as under: 8. Consequently, this Court Section 14A, which is "for removal of doubts" cannot be presumed to be retrospective even where such language is used, if it alters or changes the law as it earlier stood. 9. Though the judgment of this Court has been c pending adjudication before the Supreme Court, yet there is no stay of the said judgment till date. Consequently, in view of the judgments passed by the Supreme Court in Kunhayammed and Others vs. State of Kerala and Another, (2000) 6 SCC Shree Chamundi Mopeds Ltd. Vs. Church of South India Trust Association CSI Cinod Secretariat, Madras (1992) 3 SCC 1. the present appeal is dismissed being covered by the judgment passed by the learned predecessor Division Bench in PCIT vs. IL&FS En Limited vs. Commissioner of Income Tax 10. Accordingly, the appeal and application are dismissed. However, it is clarified that the order passed in the present appeal shall abide by the SLP filed in the case of PCIT vs. IL & FS Energy Development Company Ltd (supra). 12.3 Accordingly, the issue of disallowance u/s 14A read with rule 8D(2)(iii) of the rules, is restored to the file of the L computation in view of the finding of the Hon’ble Supreme Court in the case of Maxopp investment Ltd (supra) and decision of the Hon’ble Delhi High Court in the case of Era Infrastructure P. (Ltd.) (supra). The ground State Bank of India 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. Since the lower authorities have not carried out any apportioning such expenses incurred for earning taxable and non income from securities, which were held as stock in trade, therefore this issue need to be restored back to the file of the Ld. A.O. for verification and computation of the disallowance accordingly. As far as the contention of the Ld. counsel that disallowance u/s 14A should not exceed exempted income, we find that Hon’ble Delhi High Court in the case of DCIT v/s m/s ERA infrastructure (I) Ltd. In ITA/204/2022 held that the amendment introduced to section by way ce Act, 2022 14A of the Act for disallowance even if the same exceeds exempted income, is prospective in nature and cannot be applied retrospectively. The relevant finding of the Hon’ble Delhi High Court is reproduced as under: 8. Consequently, this Court is of the view that the amendment of Section 14A, which is "for removal of doubts" cannot be presumed to be retrospective even where such language is used, if it alters or changes the law as it earlier stood. 9. Though the judgment of this Court has been challenged and is pending adjudication before the Supreme Court, yet there is no stay of the said judgment till date. Consequently, in view of the judgments passed by the Supreme Court in Kunhayammed and Others vs. State of Kerala and Another, (2000) 6 SCC Shree Chamundi Mopeds Ltd. Vs. Church of South India Trust Association CSI Cinod Secretariat, Madras (1992) 3 SCC 1. the present appeal is dismissed being covered by the judgment passed by the learned predecessor Division Bench in PCIT vs. IL&FS Energy Development Company Ltd (supra) and Cheminvest Limited vs. Commissioner of Income Tax-VI, (2015) 378 ITR 33. 10. Accordingly, the appeal and application are dismissed. However, it is clarified that the order passed in the present appeal shall abide by the final decision of the Supreme Court in the SLP filed in the case of PCIT vs. IL & FS Energy Development Company Ltd (supra). Accordingly, the issue of disallowance u/s 14A read with rule 8D(2)(iii) of the rules, is restored to the file of the Ld. A.O. for fresh computation in view of the finding of the Hon’ble Supreme Court in the case of Maxopp investment Ltd (supra) and decision of the Hon’ble Delhi High Court in the case of Era Infrastructure P. (Ltd.) (supra). The ground State Bank of India (successor to State Bank Of Bikaner and Jaipur) 7 M.A No. 262/Mum/2023 is to liquidate those shares whenever the share price goes up in order to earn profits. In the result, the appeals filed by the the judgment of the Punjab and Haryana High Court in State Bank of Patiala also fail, though law in this Since the lower authorities have not carried out any -exercise of r earning taxable and non-taxable income from securities, which were held as stock in trade, therefore this issue need to be restored back to the file of the Ld. A.O. for verification tention of the Ld. counsel that disallowance u/s 14A should not exceed exempted income, we find that Hon’ble Delhi High Court in the case of DCIT v/s m/s ERA infrastructure (I) Ltd. In ITA/204/2022 held that the amendment introduced to section by way ce Act, 2022 14A of the Act for disallowance even if the same exceeds exempted income, is prospective in nature and cannot be applied retrospectively. The relevant finding of the Hon’ble Delhi High Court is is of the view that the amendment of Section 14A, which is "for removal of doubts" cannot be presumed to be retrospective even where such language is used, if it alters hallenged and is pending adjudication before the Supreme Court, yet there is no stay of the said judgment till date. Consequently, in view of the judgments passed by the Supreme Court in Kunhayammed and Others vs. State of Kerala and Another, (2000) 6 SCC 359 and Shree Chamundi Mopeds Ltd. Vs. Church of South India Trust Association CSI Cinod Secretariat, Madras (1992) 3 SCC 1. the present appeal is dismissed being covered by the judgment passed by the learned predecessor Division Bench in PCIT vs. ergy Development Company Ltd (supra) and Cheminvest VI, (2015) 378 ITR 33. 10. Accordingly, the appeal and application are dismissed. However, it is clarified that the order passed in the present the final decision of the Supreme Court in the SLP filed in the case of PCIT vs. IL & FS Energy Development Accordingly, the issue of disallowance u/s 14A read with rule d. A.O. for fresh computation in view of the finding of the Hon’ble Supreme Court in the case of Maxopp investment Ltd (supra) and decision of the Hon’ble Delhi High Court in the case of Era Infrastructure P. (Ltd.) (supra). The ground No.3 of the appeal purposes.” 3.1 We find that the assessee has cited various Hon’ble High Court and decided the issue in the light of the decision of the Hon’b Court in the case of Maxopp Investment Ltd. (supra). In the judicial hierarchy Hon’ble Supreme Court being highest judicial body of the country, therefore, there is no in deciding the issue following the deci Court in the case of Maxopp Investment Ltd. (supra). The first ground of the assessee of the Miscellaneous Application is therefore accordingly rejected. 3.2 As far as the second ground of the Miscellaneous Application is concerned, we find that the decision of the Hon’ble Supreme Court in the case of Era Infrastructure P Ltd (supra) domain and deciding the issue following the same same was not referred by the parties, does not constitute a mi apparent from record. More so in the case matter has been restored back to the Assessing Officer for deciding the issue by way of decision of the Hon’ble Supreme Court in the case of Maxopp of Investment Ltd. (supra) decision of the Hon’ble Delhi Hig the case of Era Infrastructure opinion, there is no mistake apparent from record in the order of the Tribunal. State Bank of India No.3 of the appeal of the assessee is accordingly allowed for statistical We find that the assessee has cited various decisions and Tribunal, whereas the Tribunal (supra) has decided the issue in the light of the decision of the Hon’b Court in the case of Maxopp Investment Ltd. (supra). In the judicial hierarchy Hon’ble Supreme Court being highest judicial body of the therefore, there is no mistake in the order of the Tribunal in deciding the issue following the decision of the Hon’ble Supreme Court in the case of Maxopp Investment Ltd. (supra). The first ground of the assessee of the Miscellaneous Application is therefore accordingly rejected. As far as the second ground of the Miscellaneous Application is we find that the decision of the Hon’ble Supreme Court in the case of Era Infrastructure P Ltd (supra) is available in public domain and deciding the issue following the same same was not referred by the parties, does not constitute a mi apparent from record. More so in the case matter has been restored back to the Assessing Officer for deciding the issue by way of decision of the Hon’ble Supreme Court in the case of Maxopp of Investment Ltd. (supra) decision of the Hon’ble Delhi Hig Infrastructure Pvt. Ltd. (supra). In our considered there is no mistake apparent from record in the order of State Bank of India (successor to State Bank Of Bikaner and Jaipur) 8 M.A No. 262/Mum/2023 lowed for statistical decisions of the whereas the Tribunal (supra) has decided the issue in the light of the decision of the Hon’ble Supreme Court in the case of Maxopp Investment Ltd. (supra). In the judicial hierarchy Hon’ble Supreme Court being highest judicial body of the in the order of the Tribunal sion of the Hon’ble Supreme Court in the case of Maxopp Investment Ltd. (supra). The first ground of the assessee of the Miscellaneous Application is therefore As far as the second ground of the Miscellaneous Application is we find that the decision of the Hon’ble Supreme Court is available in public domain and deciding the issue following the same, even though same was not referred by the parties, does not constitute a mistake apparent from record. More so in the case matter has been restored back to the Assessing Officer for deciding the issue by way of decision of the Hon’ble Supreme Court in the case of Maxopp of Investment Ltd. (supra) decision of the Hon’ble Delhi High Court in Pvt. Ltd. (supra). In our considered there is no mistake apparent from record in the order of 4. In the result, the Miscellaneous Application of the assessee is dismissed. Order pronounced Sd/ (KAVITHA RAJAGOPAL JUDICIAL MEMBER Mumbai; Dated: 04/09/2023 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// State Bank of India In the result, the Miscellaneous Application of the assessee is Order pronounced in the open Court on 04/0 Sd/- KAVITHA RAJAGOPAL) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT MEMBER Copy of the Order forwarded to : BY ORDER, (Assistant Registrar) ITAT, Mumbai State Bank of India (successor to State Bank Of Bikaner and Jaipur) 9 M.A No. 262/Mum/2023 In the result, the Miscellaneous Application of the assessee is /09/2023. Sd/- OM PRAKASH KANT) ACCOUNTANT MEMBER BY ORDER, (Assistant Registrar) ITAT, Mumbai