TaxTMI 
TaxTMI 
2019 (2) TMI 1713
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....penses. 3. The facts in brief are that the assessee is a banking company and is engaged in the business of banking activities. The case of the assessee was selected for scrutiny and during the course of assessment proceedings, the AO found that assessee has earned exempt income by way of dividend of Rs. 2,86,21,328/- while no disallowance was made of any expenses attributable to earning of the said exempt income. Accordingly, the AO issued show cause notice to the assessee as to why the expenses attributable to earning of exempt income should not be disallowed which was replied by assessee by submitting that assessee has own interest free funds available with the bank and net profit of Rs. 577.324 besides having net worth at the year end of Rs. 4049 crores. The assessee submitted that the entire portfolio of the assessee of securities and shares was of Rs. 37.45 crores which was invested out of interest free funds available with the assessee and therefore no expenses attributable to the said exempt income. The reply of the assessee did not find favour with the AO and he disallowed and added a sum of Rs. 2,21,10,000/- under section 1....
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.... assessee in assessee's own case in ITA No.5331 & 5332/M/2016 A.Y. 2008-09 and 2009-10. The operative part is reproduced as under: "4. We have heard the rival contentions and perused the material placed before us including the impugned orders and case law relied upon by the assessee. The undisputed facts of the case are that the assessee is a banking company and is carrying on by Banking business. The Id AR submitted that shares/securities are held in the ordinary course of business as investments in the shares/securities are part of assessee activity. It is only by virtue of investments in the securities held as stock in trade the dividend accrued to the assessee and it is settled law that provisions of section 14A rule 8D are not applicable to such case. The case of the assessee is also supported by the decision of Hon'ble Punjab & Haryana High Court in the case of PCIT V/s SBOP (supra) vide para 26 in which it has been held that: "26. What is of vital importance in the above judgment are the observations emphasised by us. Each of them expressly states that what is disallowed is expenditure incurred to "earn" exempt income. The words "in relation to" i....
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....and Haryana High Court and the direction of the CBDT vide circular dated 2.11.2015 inclined to set aside the order of the Id.CIT(A) and direct the AO to delete the disallowance u/s 14A of the Act. Resultantly, the appeal of the assessee for the assessment year 2008-09 is allowed." 8. We, therefore, respectfully following the decision of the various Tribunals and also the co-ordinate bench of the Tribunal in assessee's own case decide the issue in favour of the assessee by holding that no disallowance under section 14A is called for. The AO is directed accordingly. Thus the assessee's appeal is allowed and ground no.1 of the revenue appeal is dismissed. 9. The issue raised in ground No.2 of Revenue's appeal is against the deletion of disallowance of amortization of Employee Stock Plan (ESOP) expenses of Rs. 6,45,53,097/- as made by the AO without appreciating the fact that it is a capital expenditure incurred for the purpose of business being employee compensation cost. 10. At the outset, the Ld. A.R. submitted that the issue in the present ground has been decided by the AO while giving effect to ITAT's direction in a....
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....ble opportunity of hearing to the assessee, Gr.No.4 is decided in favour of the assesses, in part." The facts of this ground are same decided by the coordinate bench in assessee's own case supra, We, therefore, do find any infirmity in the order of the ld CIT(A) on this issue and the ground no. 2 of the revenue appeal is dismissed. 13. The issue raised in ground No.3 is against the deletion of disallowance of Rs. 2,81,01,155/- and Rs. 10,40,07,375/- on account of broken period interest which was treated as capital expenditure by the AO. 14. The Ld. A.R., at the outset, submitted that the issue of broken period interest is covered in favour of the assessee by the decision of the co-ordinate bench of the Tribunal in ITA No.4274 & 4275/M/2016 in assessee's own case and also by the Hon'ble Bombay High Court in the case of HDFC Bank 366 ITR 505. The ld DR relied on the ground raised by the revenue. 15. After hearing both the parties and perusing the material on record, we find that the Ld. CIT(A) allowed the issue in favour of the assessee by following the order of his predecessor in assessee's own case for A.Y. 2007-08, 2008-09 & 2009-1....
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....own in the said decisions, the Ld. CIT(A) recorded a finding of fact that share issue expenditure is covered under section 35D of the Act and is a legal issue and thus came to the conclusion that the assessee is eligible for deduction under section 35D equal to 1/5th of the total preliminary expenses. Accordingly the ld CIT(A) decided the issue in favour of the assessee by directing the AO to allow the same. 20. After hearing both the parties and perusing the material on record, we find that the Revenue has challenged that the Ld. CIT(A) has erred in accepting the issue of grant of deduction in respect of share issue expenses under section 35D which was not raised before the AO. After perusing the appellate order, we find that the appellate authority has passed the order after following the decisions of the Hon'ble Bombay High Court in the case of CIT vs. Pruthvi Brokers and Shareholders Pvt. Ltd. and Grasim Industries Ltd. (supra) wherein the decisions of the Hon'ble Supreme Court in the case of Goetz India Ltd. has been considered and it was held that the fresh issue can be admitted before the appellate authority. We, therefore, do not ....