TMI Blog2016 (12) TMI 54X X X X Extracts X X X X X X X X Extracts X X X X ..... e applied. Applying the proposition of law as cited by Ld. A.R. and referred by us in para 8 to the facts of instance case, we found that no disallowance is warranted under Rule 8D(2)(iii), in so far as after excluding such investment there remains to be nil investment. However, keeping in view the working given by the assessee, we restrict the disallowance to the extent of ₹ 14,79,411/-. Addition made on account of provision for wealth tax for MAT calculation - Held that:- Issue is squarely covered by the decision of Jurisdictional High Court in case of Echjay Forgings Pvt. Ltd. [2001 (2) TMI 56 - BOMBAY High Court]. Respectfully following the same, we do not find any infirmity in the order of CIT(A) for deleting the addition made on account of provision of wealth tax while computing book profit u/s.115JB of the IT Act. - ITA No. 5340/MUM/2011, ITA Nos. 5151/MUM/2012 - - - Dated:- 23-11-2016 - Shri R. C. Sharma ( Accountant Member ) And Shri Amit Shukla ( Judicial Member ) Appellant By : Shri. Arvind Sonde Revenue By : Shri. Satyapal Kumar ORDER Per R. C. Sharma, Accountant Member These are the cross appeal filed by the Revenue and Assessee agains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmission. Having considered both, I find that the A.O. has not given his detailed reasons for making the disallowance u/s. 14 A r.w. Rule 8D of the Income Tax Rules. Further, I find that the Hon'ble Bombay High Court in the case of Godrej Boyc Manufacturing Co. Ltd. Vs. DCIT reported in 328 ITR page 81, has held that the provisions of Rule 8D are applicable from A.Y. 2008-09 onwards and that the disallowance u/s 14A has to be computed as per the prescribed Rule 8D having regard to the accounts of the appellant and if the A.O. is not justified about the correctness of the appellant s claim of expenses. Respectfully, following the decision of the Hon'ble Jurisdictional High Court, I consider it proper and appropriate to hold that the provisions of Rule 8D are applicable for the impugned year in appeal. However, it is seen that during the course of assessment proceedings, the appellant s AR has submitted that the company has not incurred any part of its interest towards earning of exempt income which is incidental to the investments made out of surplus funds of the appellant company. It was further stated that out of the total interest paid of ₹ 45.32 crores, an amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pt income. On the basis of aforesaid discussion of the facts and taking note of the investment of the legislation as stipulated in Rule 8D(iii) of the IT rules and also after taking note of the decision of Hn ble Jurisdictional High Court. I consider it proper and appropriate to hold that the term investments as per Rule 8D(2)(iii) would include laying out of moneys in shares, securities and mutual funds. Accordingly, the action of the A.O. in making the disallowance under Rule 8D(2)(iii) is held to be correct and justified. However, while computing the above disallowance, the A.O. is directed to exclude the investments in Equity Shares of Reliance Engineering (Middle East) DMCC of ₹ 3.81 crores and Mutal Fund Units Unquoted of ₹ 34.38 crores as on 31.03.2008 and ₹ 37.79 crors as on 31.03.2007 which are not capable of earning the exempt income. Thus, the A.O. is directed to restrict the disallowance u/s. 14A r.w.r. 8D to R.s 26,64,777/- out of interest expenditure and re-compute the disallowance out of administrative expenses @ 0.5% of average value of investments excluding investments in equity shares of Reliance Engineering (Middle East) DMCC of ₹ 3.81 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 349/Mum/2011) and in case of Paresh K. Shah Vs. Dy. CIT (I.T. Act No. 8214/Mum/2011). 8. It was also argued by the Ld. AR that strategic investment is required to be reduced from the investment for working out disallowance in respect of other expenditure under Rule 8D(2)(iii). For this purpose reliance was placed on the following judicial pronouncement. - Garware Wall Ropes Limited Vs. Addl. CIT(ITA No. 5408/Mum/2012) - CIT Vs. Oriental Structural Engineers Pvt. Ltd. (Delhi High Court) - M/s JM Financial Limited Vs. Addl. CIT(ITA No. 4521/Mum/2012) 9. In support of the proposition that only those investments are to be considered for disallowance u/s.14A on which dividend is received during the year, reliance was placed on the following judicial pronouncements. ACB India Ltd., v Asst. CIT (374 ITR 108 (Del) Asst. CIT vs. M. Baskaran (ITA No.1717/Mds/2013) CIT vs. Corrtech Energy (P) Ltd., (272 CTR 262 Guj) CIT vs. Holcim India (P) Ltd., (272 CTR 282 (Del) CIT vs. Lakhani Marketing Incl. (272 CTR 265 (P H) 10. On the other hand Ld. DR relied on the order of the lower authorities. 11. We have considered rival contentions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , strategic investment and investments not yielding dividend income is required to be reduced from the total investment. 14. As per the records, such investment works out as under:- Particulars (Rs.In crores) 31-03-2008 31-03-2007 (i) Total Investments (As per Page 22) 1180.23 1179.85 Less: A. Long Term Strategic Investments (i) Reliance Engineering (Middle East) DMCC 3.81 0.02 (ii) RAL Investment Private Limited 0.02 0.02 (iii) LPG Infrastructure (India) Private Limited 0.02 0.02 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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