TMI Blog2016 (7) TMI 1567X X X X Extracts X X X X X X X X Extracts X X X X ..... i). Respectfully following the ratio of INTERGLOBE ENTERPRISES LTD. [2014 (4) TMI 269 - ITAT DELHI] set aside the order of CIT(A) and direct the AO to verify the strategic investment and recalculate the disallowance accordingly by not considering the investments made in subsidiary companies/sister concern. - Appeal of the assessee stands allowed for statistical purposes. - I.T.A. No.1818/Mum/2013 - - - Dated:- 26-7-2016 - SHRI JOGINDER SINGH (JM), AND RAJESH KUMAR,(AM) For The Appellant : Shri Sunil Nahata For The Respondent : Shri H M Wanare ORDER Per RAJESH KUMAR, Accountant Member : This is an appeal filed by the assessee and is directed against the order of the Ld. CIT(A)-4, Mumbai dt.18.12.2012 pertaining ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submissions dated 29.6.2011 and 30.11.2012 by submitting that no interest expenses were incurred as investments were made out of own funds and not made out of loan fund. The substantial part of investments ₹ 16.61 crores out of the total ₹ 20.34 crores were invested in the sister concerns/subsidiaries and were of strategic nature and not made with the profit motive. Ultimately the ld AR submitted that no expenses were incurred for earning the above said exempt income. The assessee itself on its own disallowed the expenditure of ₹ 14.70 lakhs. 4. The AO after considering the submissions of the assessee came to the conclusion that the assessee has incurred ₹ 13.17 lakhs as salaries and allowances, ₹ 14.70 lakh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, the disallowance is confirmed. 4.1 The A.O. has also added the disallowance u/s. 14A read with Rule 8D to the book-profit under section 115JB, whereas, assessee has claimed long term capital gain exempt u/s. 10(38) ₹ 13,96,588/-, which are credited to the profit and loss Alc. and the same are not reduced while computing the book-profit u/s. 115JB because it is specifically prohibited by sub-clause-ii below clause-I of Explanation 1 to section 115JB(2) of IT. Act. Therefore, no expenditure which is disallowed under the normal provisions of law for computing the taxable income of the assessee, needs to be again added back to book-profit, which relates to the long term capital gain. Similarly expenses relating to dividen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterprises Ltd V/s DCIT in ITA No.1362 and 1032/Del/2013 (AY-2008-09 and 2009-10) dated 4.4.2014. 6. On the other hand, the ld.DR heavily relied on the orders of authorities below. 7. We have considered the rival contentions of the parties and perused the material placed before us. We shall first decide the issue raised in the ground No.2 of appeal that investments made by assessee were of strategic nature as these were not made with the purpose of earning any dividend on the investments but were prompted by strategic considerations in order to gain control over these subsidiaries/sister concern and thus should not be considered for the purpose of calculating the disallowance u/s 8D(2)(iii).The case of the assessee is also fortified b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he previous year . The Assessing Officer was wrong in taking into consideration the investment of ₹ 103 crores made during the year which has not earned any dividend or exempt income. It is only the average of the value of the investment from which the income has been earned which is not falling within the part of the total income that is to be considered. Thus,. It is not the total investment at all beginning of the year and at the end of the year, which is to be considered but it is the average of the value of investments which has given rise to the income which does not form part of the total income which is to be considered. The term average of the value of investment is used to take care of cases where there is the issue of div ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts of the case before us in the light of the decision of the tribunal (supra) and find that the assessee has made investments in the subsidiary companies to the tune of ₹ 16.61 crores which in our opinion should not be considered for the purpose of working out the disallowance under section 14A read with rule 8D (2)(iii) of the Act. The facts of the assessee are fully covered in its favour by the above said decision. We, therefore, respectfully following the ratio laid down in the above case, set aside the order of ld. CIT(A) and direct the AO to verify the strategic investment and recalculate the disallowance accordingly by not considering the investments made in subsidiary companies/sister concern. 8. In the result, the appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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