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TMI Blog2016 (2) TMI 905X X X X Extracts X X X X X X X X Extracts X X X X ..... 88/CIT(A)-1/09-10 both the orders dated 27.08.2015 passed U/s. 143(3) r.w.s.254 & u/s.143(3) r.w.s.147 of the Act for the assessment years 2004-05 & 2005-06 respectively and the other two appeals in ITA Nos.2171/Mds/2015 & No.2172/Mds/2015 are filed by the Revenue, aggrieved by the order of the learned CIT(A) in No.ITA.88/CIT(A)-1/09-10 (supra) & No.ITA.37/CIT(A)-1/10-11 both the orders dated 27.08.2015 for the assessment years 2005-06 & 2006-07 respectively. 2.1 Assessee's appeal The assessee has raised three elaborate identical grounds in its appeals, however the crux of the issue in both these appeals is that the Ld. CIT(A) has erred in directing the Ld. A.O to make proportionate disallowances on interest on the current investments in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll the three assessment years. 5. At the outset, learned AR submit ted before us that all the investments were made in sister company of the assessee and therefore section 14A of the Act will not be applicable in the case of the assessee. 6. Learned DR, on the other hand, relied on the orders of the Revenue. 7. We have heard both the parties and carefully perused the materials available on record. It is a normal practice to make investment in sister companies due to commercial exigencies. While doing so, no expense can be attributable other than interest expense for making such investments because all management costs will be absorbed for strategic decision making process which is allowable as business expenditure. In the case of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of interest is required to be made under rule 8D(i) & 8D(ii) where no direct or indirect interest expenditure was incurred for making investments. Where the assessee had utilized interest free funds for making fresh investments and that too into its subsidiaries, which was not for the purpose of earning exempt income and which was for strategic purposes only, no disallowance of interest was required to be made under Rule 8D(i) & 8D(ii) and strategic investment has to be excluded for purpose of arriving at disallowance under Rule 8D(iii)." iii) M/s.JM Financial Ltd., Vs. ACIT reported in 2014-TIOL-202-ITATMUM held as follows: "...the department has not disputed this fact out of the total investment about 98% of the investment are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. DCIT reported in 2013-TIOL-796- ITAT-MAD ".... The investments made by the assessee in the subsidiary company are not on account of investment for earning capital gains or dividend income. Such investments have been made by the assessee to promote subsidiary company into the hotel industry. The assessee is not into the business of investment and the investments made by the assessee are on account of business expediency. Any dividend earned by the assessee from investment in subsidiary company is purely incidental. Therefore the investment made by the assessee in its subsidiary is not to be reckoned for disallowance U/s.14A r.w.r.8D. The Assessing Officer is directed to recompute the average value of investment under the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the business of investment and the investments made by the assessee are on account of business expediency. Any dividend earned by the assessee from investment in subsidiary company is purely incidental. Therefore, the investments made by the assessee in its subsidiary are not to be reckoned for disallowance U/s. 14A r.w.r. 8D. The Assessing Officer is directed to recompute the average value of investment under the provisions of Rule 8D after deleting investments made by the assessee in subsidiary company - Decided in favour of assessee." For the above said reasons, we hereby hold that in the case of the assessee the provisions of Section 14A read with Rule 8D will not be applicable in regard to investments made for acquiring the shares ..... X X X X Extracts X X X X X X X X Extracts X X X X
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