TaxTMI 
TaxTMI 
2023 (12) TMI 1119
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.... has preferred the appeal raising following grounds of appeal:- "1. Whether on the fact and circumstances of the case and in law the learned CIT (A) was right in holding that if there are funds available both interest free and loans fund then presumption would arise that investment is made out of interest free fund for calculation of disallowance under Section 14A read with Rule 8D2(ii) when the issue of mixed fund as pending before larger Bench of Supreme Court. More so when no nexus is established by the assessee to prove that own i.e. interest free funds were initiated to make the investment? 2. Whether on the facts and in the circumstances of the case and in law, the learned CIT (A) was correct in holding that the interest portion of the refund issued earlier has to be ignored for the purpose of calculating interest under Section 244A of the Income-tax Act, 1961 (the Act), payable to the assessee, on refund arising out of the order giving effect to order of appellate authority? 3. the learned CIT (A)'s order is contrary in law and on the facts and deserves to be set aside. 4. The appellant prays that the order of CIT (A) on the above grounds ....
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....ls). The appellate order was passed wherein the learned CIT (A) held that he does not agree with the contentions of the assessee that if the bank is holding shares as investment or stock-in-trade, the provisions of Section 14A of the Act would apply. He held so as per the decision of Hon'ble Supreme Court in case of Maxopp Investment Ltd. However, he found that the stand of the learned Assessing Officer in invoking the provisions of Section 14A of the Act is proper. However, with respect to the indirect expenses disallowance cannot be made as the assessee having huge interest free funds more than the investment yielding tax free income. Further, the disallowance made by the learned Assessing Officer under Rule 8D(2)(ii) of the Act was restricted up to Rs.5,92,74,298/- over and above the suo moto disallowance of the assessee at Rs.11,73,702/-. This is computed at the rate of 0.5% of average investment of Rs.1,208.96 crores computed originally. 08. With respect to the granting of the interest he followed the decision of the co-ordinate Bench, wherein it has been held that amount of refund has to be adjusted towards interest payable to the assessee and then it shall be adjusted....
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....4A 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 interpretation 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 scenarios 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 position, 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 ....
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....ear the Tribunal had observed that no part of the borrowed funds were utilised by the Respondent for making investments yielding tax free income. It was also observed that the Assessing Officer had not brought on record any nexus between the borrowed funds and amounts invested by the Respondent. The Tribunal, therefore, held that the disallowance made by the Assessing officer under rule 8D(2)(ii) of the Rules was not permissible. The learned Counsel for the Appellant has not disputed the aforesaid facts and on this ground additionally, no challenge can be maintained to the deletion of the disallowance made under this Rule. 16. The learned counsel for the Appellant has contended that the decision of the Tribunal deleting the addition of Rs. 1,58,00,000/- made by the JAO under section 14A of the Act read with rule 8D(iii) is incorrect since the said amount was offered for disallowance suo moto by the Respondent. 17. In this regard, the Tribunal has observed that the facts of the Respondent in the present appeal are similar to the order passed by another Bench of the Tribunal in the case of Nice Bombay Transport (P.) Ltd. v. Asstt. CIT [2019] 103 taxmann.com 338/175 ....
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....dgment upheld the decision of the High Court of Punjab and Haryana arising under section 14A of the Act with respect to an assessee bank. It further held that when the shares were held as stock-in-trade and not as investment particularly by banks, the main purpose was to trade in those shares and earn profits there from and therefore section 14A of the Act was not attracted and the expenditure could not be disallowed. The judgment of Maxopp Investment Ltd. (supra) has been duly noted by the Tribunal in its impugned order and in our opinion the Tribunal has correctly disallowed the disallowance under rule 8D(2)(iii) of the Rules. 20. In the present case as well, the Tribunal has considered that the Respondent was holding the shares as a stock-in-trade and has, therefore, disallowed the addition made by the JAO. Learned counsel for the Appellant has not disputed the fact that the shares are held as stock-in-trade by the Respondent. 21. In the aforesaid view of the matter, the questions of law proposed by the Appellant do not arise for consideration either in fact or in law in view of the judgments of the Supreme Court, which have conclusively decided the questions s....