2024 (8) TMI 732

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....tent of exempt income of Rs. 1,14,49,500/-. 2.1. The learned CIT(A) failed to appreciate the fact that no disallowance u/s 14A can be made in respect of securities held as Stock-in-trade. 2.2. The learned CIT(A) failed to appreciate the fact that the Appellant bank had not incurred any expenditure to earn the tax free income. For all these and other grounds, which may be urged at the time of the hearing of this appeal, the appellant prays that its appeal be allowed." 2. Brief facts of the case are as under: 2.1 The assessee is a private sector bank carrying on the business of banking. It filed its Return of Income for the impugned Assessment Year on 30/09/2013 declaring a total income of Rs. 297,42,62,580/- under the normal pro....

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....Hon'ble Supreme Court is necessarily to be noted as under. "36. There is yet another 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 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 investment made by a banking concern are part of the business or banking. Therefore, the income arises from such investment is attributable to business of banking falling under the head 'profits and gains of business and profess....

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....ention 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 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 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', c....

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....es 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....