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2015 (11) TMI 419 - AT - Income TaxDisallowance u/s. 14A - CIT(A) deleted the addition - Held that:- We have observed that assessee company has its own funds amounting to ₹ 41.64 crores and the investment are to the tune of ₹ 20.41 crores. We have also observed that assessee company has duly demonstrated that the interest bearing funds to the tune of ₹ 12.20 crores on which the assessee company has paid interest have been raised from the banks towards the acquisition of fixed assets, car loan, book debts and stocks .The assessee company has also raised during the financial year , fresh equity capital of ₹ 9.86 crores and free reserve of ₹ 2.07 crores were utilised to make fresh investments of ₹ 11.93 crores during the assessment year. Thus , we hold that assessee has sufficient own funds to make investment and the assessee has also proved by cogent evidences that no interest bearing funds are utilized for making investments as the assesee company has demonstrated that the interest bearing funds are bank loans raised by the assessee company for specific purposes and also utilised for the said purposes from which diversion of fund is not permitted and hence the disallowance of the interest expenditure of ₹ 35,21,564/- under Ruled 8D2(ii) by the revenue is hereby deleted and order of the CIT(A) is upheld. - Decided in favour of assessee. Disallowance towards administrative and indirect expenses @0.5% of the average investments held by the assessee company - disallowance u/s 14A of the Act read with Rule 8D(2)(iii) - Submission of assessee that these are strategic investments and no disallowance made towards the administrative expenses - Held that:- In these type of strategic investments, the investor has to normally devote significant time to plan, execute and monitor these investments regularly and periodically to ensure that these strategic investments are turned viable and profitable. These Investment decisions are very complex in nature. They require substantial market research, day-to-day analysis of market trends and decisions with regard to acquisition, retention and sale of shares at the most appropriate time. They require huge investment in shares and consequential blocking of funds. Besides, investment decisions are generally taken in the meetings of the Board of Directors / Shareholders for which administrative and management expenses are incurred and in some businesses regulatory approvals are required before setting up the same. There will be regular monitoring of these investments which also may require participation in the meetings of committees, Board of Director and Shareholder meetings. There will definitely be an expenditure incurred towards administrative and management cost etc. towards planning, executing and maintaining these investments AO has rightly invoked the provisions of section 14A of the Act read with Rule 8D(2)(iii) of Income Tax Rules, 1962 for disallowing the expenditure of ₹ 7,22,027/- towards administrative and other indirect expenses which was affirmed by the CIT(A ) and the same is also hereby affirm by us as we have found no infirmity in the orders of the authorities below. - Decided against assessee.
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