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2016 (6) TMI 639 - AT - Income TaxAddition u/s 14A - Held that:- There is a reasonable disallowance to be made u/s 14A of the Act for administrative and other indirect expenses incurred by the assessee company for earning exempt income having regards to the accounts of the assessee company as laid down u/s 14A(2) of the Act. So, far as the contentions of the assessee company are concerned with respect to the investment of ₹ 1,10,30,000/- made in foreign subsidiary company, we are in agreement with the assessee company that such investments in foreign subsidiaries shall not be included for computing disallowance u/s 14A of the Act, as the income by way of dividend is chargeable to tax and is not an exempt income under the provisions of the Act. Thus , the said investments of ₹ 1,10,30,000/- in foreign subsidiary shall not be included for computing disallowance of indirect expenditure under Section 14A of the Act. However, with respect to the contentions of the assessee company regarding other investments in shares and mutual funds, in our considered view, the same shall be included for computing disallowance u/s 14A of the Act having regards to the accounts of the assessee company as contemplated u/s 14A(2) of the Act . The contentions of the assessee company that the investments are made in subsidiaries companies and hence no disallowance of indirect expenditure be made under Section 14A of the Act cannot be accepted. It is also a matter of fact as emerging from paper book/page 11 from Schedule F of audited financial statements that investments as at 31-3-2006 was ₹ 4.23 crores while investments as at 31-03-2007 was ₹ 7.53 crores, i.e. ₹ 3.30 crores net investments were made in the previous year relevant to the instant assessment year. We have observed that there are divergent view of the Tribunal on this issue and matter purely being factual is to be decided on the facts of the case keeping in view mandate of Section 14A of the Act whereby the AO shall determine the amount of expenditure incurred in relation to such income which does not form part of the total income under the Act having regards to the accounts of the assessee as contemplated u/s 14A(2) of the Act and hence the matter is to be decided on the facts of each case Addition being PMS Management Fee - Held that:- Respectfully following the orders of the Mumbai Tribunal in the case of Captain Avinash Chander Batra v. DCIT [2016 (5) TMI 155 - ITAT MUMBAI] we hold that the assessee company is not entitled for deductions of PMS Management fee paid to portfolio managers from the income computed under the head capital gains. Addition of being Interest Income as per the AIR information - Held that:- being Interest Income as per the AIR information - this issue of reconciliation of the difference in the interest income earned by the assessee company vide ITS database of the Revenue and the books of accounts of the assessee company needs to be set aside and remitted back to the file of the AO for denovo determination of the issue after making necessary enquiries and verifications with both the parties who have supposedly given interest to the assessee company as to the grant of interest in favour of the asssessee company as reflected in the AIR information database ITS. Disallowance u/s 14A - Held that:- Strategic investment in group concerns for the purpose of control and not for earning dividend attract disallowance u/s 14A of the Act read with rule 8D of the Income Tax Rules, 1962., we hold that the investment made by the assessee company in shares and units of mutual funds( excluding investment of ₹ 1,10,30,000/- in foreign subsidiary) shall attract disallowance u/s 14A of the Act having regards to the accounts of the assessee company as provided u/s 14A(2) of the Act keeping in view Rule 8D(2)(iii) of the Income Tax Rules, 1962,.We are therefore inclined to set aside the matter to the file of the AO for de-novo determination and quantification of disallowance u/s 14A of the Act of the indirect expenses incurred by the assessee company in relation to such income which does not form part of the total income having regards to the accounts of the assessee company as provided u/s 14A(2) of the Act and also keeping in view Rule 8D(2)(iii) of Income Tax Rules, 1962.
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