TMI Blog2017 (4) TMI 238X X X X Extracts X X X X X X X X Extracts X X X X ..... with Rule 8D will be applicable since the assessee would incur some expenditure at least for the decision making process as to in which mutual fund the investment has to be made and at what point of time exit from such funds. It is ordered accordingly. - ITA No. 3114/Mds/2016 - - - Dated:- 23-3-2017 - SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER, AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER Appellant by : Shri K. Raghu, CA Respondent by : Shri Shiva Srinivas, JCIT ORDER Per A. Mohan Alankamony, Accountant Member This appeal is filed by the assessee aggrieved by the order of the Ld. Commissioner of Income Tax (Appeals), Coimbatore in Appeal No.16/14-15 dated 22.07.2016 passed u/s. 250(6) r.w.s. 143(3) of the Act. 2. There is delay of 7 days in filing the appeal and the Director of the company has filed condonation petition dated 16.12.2016, wherein he has stated that the delay had occurred due to the mistake on the part of the staff of the appellant in understanding the order of the Ld. CIT(A) with respect to the issue of disallowance u/s.14A of the Act read with 8D of the Rules. It was therefore pleaded that the delay of 7 days in filing the appeal may be con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ature and the turnover of the business, we are of the considered view that the amount spent by the assessee as pooja expenditure is quite meager and reasonable. Therefore, we hereby direct the Ld. AO to delete the addition of ₹ 21.594/- made towards pooja expenditure. 6. Ground ii: Invoking of Section 14A and Rule 8D of the Rules:- The assessee had invested ₹ 18.01 crores which would yield exempt income. Therefore the Ld. AO invoked the provisions of Section 14A and Rule 8D of the Rules and made addition which was subsequently confirmed by the Ld. CIT(A). At the outset, the Ld. AR submitted before us that, the entire investments, for strategically reasons, was made in subsidiary companies and it was sourced from interest free funds. The Ld. AR further argued that on several occasions, the Chennai bench of the Tribunal has held that if such investments are made in sister /subsidiary companies, the provisions of Section 14A cannot be invoked. He therefore pleaded that the addition made by invoking the provisions of Section 14A of the Act, may be deleted. The Ld. DR though opposed to the submission of the Ld. AR could not successfully controvert to the submissions. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... follows:- No disallowance 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- ITAT-MUM held as follows: the department has not disputed this fact out of the total investment about 98% of the investment are in subsidiary companies of the assessee and, therefore, the purpose of investment is not for earning the dividend income but having control and business purpose and consideration. The assessee has brought out a case to show that no expenditure has been incurred for maintaining the 98% of the investment made in the subsidiary companies, therefore, in the absence of any finding that any expenditure has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Agile Electric Sub Assembly Pvt. Ltd. cited supra wherein it was held as follows:- 7.2 In regard to applicability of Section 14A of the Act read with Rule 8D also; the above view will be applicable. Moreover in the case EIH Associated Hotels Ltd v. DCIT reported in 2013 (9) TMI 604 in ITA No.1503, 1624/Mds/2012 dated 17th July, 2013, it has been held by the Chennai Bench of the Tribunal as follows:- Disallowance U/s. 14A rw Rule 8D CIT upheld disallowance Held that 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. A perusal of the order of the CIT(Appeals) shows that out of total investment of ₹ 64,18,19,775/-, ₹ 63,31,25,715/- is invested in wholly owned subsidiary. This fact supports the case of the assessee that 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 investm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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