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2018 (8) TMI 2114 - ITAT KOLKATAWrite off of investments - assessee company was engaged in promoting the growth of electronics, IT and ITES sectors in the State of West Bengal - DR argued that the assessee had made certain investments in subsidiaries which were merely pure and simple investments and had written off the same in its books and write off is only a capital loss in the hands of the assessee company and hence cannot be allowed as deduction - assessee before us is not engaged in the business of financing - as argued assessee before us is a manufacturing company and hence every investment made in subsidiaries cannot be stretched further to have been made for the purpose of business and the investments made by the assessee company in the aforesaid subsidiaries were not meant for survival needs of the subsidiary companies - HELD THAT:- Assessee despite knowing the fact that the subsidiaries had incurred huge losses, had bothered to acquire the shares from outsiders during the year so as to enter into joint venture with renowned industrial houses for promoting the growth of IT and ITES sectors in the State of West Bengal. It is also not in dispute that the assessee company’s proposal to enter into joint venture with renowned industrial houses had been abandoned and hence the assessee had no other choice after making investments in shares but to write off the same. This conscious business decision of the assessee cannot be questioned by the revenue and if the shares held by the assessee results in any gain in future on sale of the same, the same would any way get taxed as income in the hands of the assessee company. We find that the objects of the assessee company includes financing also and that the financing could be by way of lending to parties by way of loans or by way of investing in shares of those companies. In effect the assessee had only brought down the value of investments on the ground of non-realisability of the value thereon. Hence we hold that the assessee is entitled for deduction in respect of write off of investments by respectfully following the decision of Tamil Nadu Industrial Investment Corporation Ltd [2017 (7) TMI 1048 - MADRAS HIGH COURT] Decided in favour of assessee. MAT computation - provision for investments and loans and advances in its profit and loss account and claimed the same as deduction while computing the book profits u/s 115JB - HELD THAT:- As in the instant case, it is not in dispute that the assessee had made only provision for doubtful investments and doubtful loans and advances in the sum which was not written off in the books by the assessee. Assessee had voluntarily added back the said provision under the normal computational provisions of the Act and had not disputed the same before the revenue. Hence it could be safely concluded that the amounts provided towards doubtful investments and advances were only in the nature of mere provisions and not write off. In the instant case, the provisions of section 115JB of the Act, being a complete code in itself having a deeming fiction , need to be strictly construed and and amendment has been brought by way of inserting clause (i) in Explanation 1 to section 115JB of the Act with retrospective effect from 1.4.2001 by the Finance (No. 2) Act, 2009. Accordingly, we hold that the addition while computing the book profits u/s 115JB of the Act by the ld AO is in order. The Ground No. 2 raised by the assessee for the Asst Year 2008-09 is dismissed. Disallowance u/s 14A - Necessity of recording satisfaction - Assessee claimed that no expenditure was incurred by it for earning dividend income - AO applied the provisions of second and third limb of Rule 8D(2) of the IT Rules and made disallowance - HELD THAT:- It could be safely concluded that even when the assessee claims that no expenditure was incurred by it for the purpose of earning exempt income, still it is incumbent on the part of the ld AO to record satisfaction having regard to the accounts of the assessee in terms of section 14A(2) / 14A(3) of the Act as to why the claim so made by the assessee is incorrect. Only after recording such satisfaction, he could resort to computation mechanism provided in Rule 8D(2) of the Rules. In the absence of any such recording of satisfaction, we hold that no disallowance u/s 14A of the Act read with Rule 8D of the Rules could be made by the ld AO. Thus no hesitation in directing the ld AO to delete the disallowance made u/s 14A - Decided in favour of assessee.
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