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TMI Blog2016 (10) TMI 998X X X X Extracts X X X X X X X X Extracts X X X X ..... last ground is with regard to disallowance under Section 14A of the Act. 3. The brief facts of the case are that the assessee-company is distributor of information technology products, telecom products, consumer durables and also after sales service. The assessee-company filed its return of income on 29.11.2011 with a total income of Rs. 1,98,82,01,376/-. Subsequently a revised return was filed on 30.03.2013 with taxable income of Rs. 1,98,32,01,376/-. As the case was selected for scrutiny, notice under Section 143(2) of the Act was issued. In compliance to the notice, the Ld. AR of the assessee appeared and filed the details. The Assessing Officer found that the assessee-company is having international transactions and for determining the arm's length price, the matter was referred to the Transfer Pricing Officer. The Ld. TPO vide order dated 28.01.2015, based on the information submitted and the international transactions with Associate Enterprises, made upward adjustment of Rs. 9,62,22,632/- and also downward adjustment of Rs. 1,81,51,501/- on trademark fees, total aggregating to Rs. 11,43,74,133/-. The Assessing Officer considered this information in the assessment order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndian company in the year 1993 and shall be attributable to Indian company's growth. Therefore, the Ld. TPO found that there is no rationality behind the payment of trademark licence fee. The assessee-company had applied Transaction Net Margin Method (TNMM) as most appropriate method which the TPO has not accepted. The assessee relied on the judicial decisions and also made a finding that the Hon'ble Tribunal in the assessee's own case has allowed this issue in favour of the assessee, but the Revenue being not satisfied with the decision, has filed appeal before the jurisdictional High Court and the matter is pending and the TPO made downward adjustment of Rs. 1,81,51,501/-. The Ld. DRP has confirmed the action of the TPO. The Ld. AR in support of his arguments, relied on the orders of the co-ordinate Bench of this Tribunal in the assessee's own case in I.T.A. No.1743/Mds/2011 dated 26.06.2015 for assessment year 2007-08 and I.T.A. No.221/Mds/2013 dated 07.08.2015 for assessment year 2008-09 and I.T.A. Nos.513/Mds/2014 & 619/Mds/2014 dated 07.07.2014 for assessment year 2009-10 and prayed for allowing the grounds. 5. Contra, the Ld. Departmental Representative oppo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act read with Rule 8D of the Income-tax Rules, 1962. The Ld. AR explained before the Assessing Officer that the income from these investments shall not be part of total income and no expenditure was incurred for earning such exempt income. The Ld. AO was of the view that no deduction shall be allowed in respect of expenditure incurred by the assessee. During the financial year 2010-11, the subsidiary company M/s Easyaccess Financial Services Limited, which is owned 100% by the assessee-company, has paid dividend of Rs. 3,02,06,000/- which is tax free. During the financial year 2010-11, the assessee- company has made investment of Rs. 395 lakhs as an additional investment along with other sister concern. The contention of the Ld. AR that these investments were made out of accruals and income earned and not out of any borrowed capital, therefore, disallowance under Section 14A of the Act does not apply. Further, the assessee has incurred interest expenses of Rs. 43,05,28,000/- and also administrative and other expenses were claimed in the Profit & Loss account. But, the Assessing Officer was of the strong view that the provisions of Section 14A read with Rule 8D(2) are mandato ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer nor the assessee-company could establish whether the cash flow statement or receipts and payments regarding the investment made out of own funds. Further, on similar issue, co-ordinate Bench of this Tribunal in Regen Powertech (P) Ltd. in I.T.A. No.766/Mds/2016 and 786/Mds/2016 dated 17.08.2016 at para 9.4 on page 24, held as follows:- "9.4 We heard the rival submissions, perused the material on record and judicial decisions cited. The crux of the issue being the assessee has made investments in subsidiary/sister companies and the contention that own funds are generated out of business and no borrowed funds were utilized for the purpose of investments. Further, investments in subsidiary/sister company shall not be considered for the purpose of calculation of disallowance under Rule 8D(2). The ld. Authorised Representative drew our attention to the statement of details of subsidiary group companies and the investments reflected in financial statements and relied on judicial decisions. The assessee company made investments in these companies on Business expediency and no income has been generated by sister/group companies and also shareholding pattern varied from c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is directed to re-compute 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 of the assessee's sister concerns. Accordingly we restrain ourselves from interfering with the Order of the Ld.CIT(A) on this regard." It is ordered accordingly''. We remit the disputed issue to the file of the ld. Assessing Officer to verify and exclude the investments in subsidiary companies for the purposes of calculation of disallowance under Rule 8D(2) and the assessee should be provided adequate opportunity of being heard before passing the order on merits. The ground of the Department is allowed for statistical purpose." Based on the above decision of this Tribunal, we remit the issue back to the file of the Assessing Officer to verify and exclude the investments made in subsidiary companies for the purpose of calculation of disallowance under Rule 8D(2) of the Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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