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2021 (2) TMI 1082 - AT - Income TaxAddition u/s 14A r.w.r. 8D - Interest on interest bearing funds that is utilised for the purpose of making such investment - Direct and indirect expenses attributable to the process of making such investment such as expenditure incurred for due diligence, managerial expenditure, clerical expense, stationary expenditure, and portfolio management expenditure - HELD THAT:- Since in the case of the assessee the assessee company has utilised only its non-interest-bearing funds for making investment in its own subsidiary company, no interest cost can be attributable to the same because, there is no interest cost to the assessee as it can be treated that the assessee has withdrawn from its capital and reserves which are assessee's interest free funds for making such investment. For making investment in its own company there cannot be any cost attributable with respect to direct and indirect expenses towards the process of decision making, due diligence, managerial expenditure, and portfolio management expenditure because no such cost can arise for making investment in one's own entity. Only meagre expenses can be attributable with respect to clerical and stationary expenses which is negligible and that is deserved to be ignored. Therefore, factually there cannot be any expenditure attributable to the investment made in sister company when the investment is out of its own interest free fund. When the above facts were pointed out to the Ld. DR, he could not controvert to the same however, he relied on the order of the Ld. AO. If the assessee has made the entire investment out of its non-interest-bearing funds in its sister company, then provisions of section 14A of the Act will not be applicable. Therefore, in the interest of justice, We hereby remit the matter back to the file of the Ld. AO to examine whether the assessee has made the entire investment in its sister companies and out of its non-interest-bearing fund and if found so delete the addition made by invoking section 14A of the Act and if found otherwise, pass appropriate order in accordance with law and merit after affording proper opportunity to the assessee of being heard. We also make it clear that if the assessee's equity share and reserves exceed the investment, it should be construed that the assessee had made the investment out of its own non-interest-bearing fund - Appeal of assessee allowed for statistical purposes
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