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2019 (11) TMI 206 - AT - Income TaxDisallowance u/s 14A - book profits for the purpose of computing the taxable liability under Section 115JB - HELD THAT:- CIT(A) is correct to the extent of directing the A.O. to exclude the investments in foreign entities and investment in shares and mutual funds which had not earned exempt income and restricting the amount of disallowance under Section 14A of the Act to the extent of exempt income. The decision of the CIT(A) is based on the ratio of the judgment of jurisdictional High Court in the case of Redington (India) Ltd. v. Addl. CIT [2017 (1) TMI 318 - MADRAS HIGH COURT] . The Special Bench of ITAT, Delhi in Vireet Investments Pvt. Ltd. [2017 (6) TMI 1124 - ITAT DELHI] held that the only investments which yielded exempt income alone had to be considered for the purpose of computing the amount of disallowance under Section 14A of the Act. However, the direction of the CIT(A) to A.O. to exclude the investment in subsidiary companies cannot be upheld in view of the law laid down by Hon'ble Supreme Court in Maxopp Investment Ltd. v. CIT [2018 (3) TMI 805 - SUPREME COURT] wherein it was laid down that the strategic investments cannot be excluded from the purview of the provisions of Section 14A of the Act. Therefore, the direction of the CIT(A) stands modified to this extent. Disallowance under Section 14A not be added back to the book profit for the purpose of computing taxable income under Section 115JB - CIT(A) cannot be faulted with as he followed the decision of Special Bench of this Tribunal in the case of Vireet Investments Pvt. Ltd. [ 2017 (6) TMI 1124 - ITAT DELHI] No contrary decision was cited before us. Hence, we confirm the decision of the CIT(A). Both the appeals filed by the Revenue are partly allowed for statistical purposes. Addition u/s 14A - assessee contended that the provisions of Section 14A of the Act are not applicable since the investments were made only in subsidiary companies for strategic purposes - HELD THAT:- The contention of the assessee was overruled by the Hon'ble Supreme Court in Maxopp Investment Ltd. [2018 (3) TMI 805 - SUPREME COURT] Hence, we confirm the order of the CIT(A).
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