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TMI Blog2016 (9) TMI 1635X X X X Extracts X X X X X X X X Extracts X X X X ..... 176/Kol/2013. 3. The grounds raised by the assessee per its appeal are as under:- "1. On the facts and circumstances of the case and in law, the CIT erred in confirming the disallowance u/s. 14A r.w.r 8D(iii) of the Act at Rs.1,37,20,788/- 2. On the fact and circumstances of the case and in law, the CIT(A) erred in confirming addition of Rs1,37,20,788/- u/s 14A r.w.r 8D(iii) to the book profit computed u/s. 115JB of the Act. 3. Your appellant craves leave to alter, modify, amend or delete any of the above grounds of appeals, or to add one or more additional ground(s), at or before the hearing of the appeal, as may be necessary." 4. First issue raised by assessee in its appeal is that Ld. CIT(A) erred in confirming the action of Assessing Officer by sustaining the disallowance u/s. 14A r.w.s Rule 8D(iii) of the IT Rules, 1962 ('the Rule' for short) for Rs.1,37,20,788/-. 5. Briefly stated facts in the present case are that assessee is a Limited Company and engaged in the business of consultancy and financial services. The assessee for the year under consideration, filed its return of income at loss of Rs.10,21,13,088/-. Thereafter the case was selected for scrutiny ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee in its subsidiary company which is nothing but the strategic investment therefore no disallowance should be made. On the other hand, Ld. DR submitted that similar disallowance was made in the earlier year under Rule 8D(iii) of the IT Rule by assessee in its own case. However, no such disallowance was made for the year under consideration. Therefore, Ld. DR submitted that the consistency should be maintained for disallowing the aforesaid expenses and he prayed before the Bench to confirm the action of AO. 9. We have heard rival contentions and perused the materials available on record. At the outset we find that this issue is squarely covered in favour of assessee in its own case for A.Y 2009-10 in ITA No.144/Kol/2013. The relevant operative portion of the said order is reproduced below:- "However, we find that the calculation of disallowance under Rule 8D(iii) made by the Assessing Officer and upheld by Ld CIT(A) is not correct In view of the fact that Assessing Officer had included the value of total investments for calculation of disallowance whereas in our opinion the value of those investments should have been included which were made for the purpose of earning exempt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng into consideration the investment which has given rise to this income which does not form part of the total income. (AY.) (I.T.A No.1331/Kol/2011 dated 29.7.2011." In view of the aforesaid facts and respectfully following the various judicial precedents relied upon hereinabove, we find no infirmity in the order passed by Ld. CIT(A) in this regard and accordingly, the ground raised by assessee is allowed and that of Revenue is dismissed. Now coming to the appeal of Revenue in ITA 2199/Kol/2013 10. The grounds of appeal, raised by the Revenue are reproduced as under:- "1. That the Ld. CIT(A) has failed to appreciate: (a) That the shares were acquired in lieu of assets of the assesseecompany transferred to its subsidiary company, (b) That the assessee had loan as on the date of transfer of assets, (c) That therefore, the possibility of interest-bearing loan having been utilized in acquisition of the said assets cannot be ruled out, (d) That as per the ratio laid down by the jurisdictional High Court in the case of Dhanuka & Sons v. Commissioner of Income-tax, (Central) 1[2011] [12 taxmann.com 227 (Cal.) it is for the assessee to sow the source of acquisition of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pvt Ltd vs ACIT reported in 142 IT] 641 (Mum ITAT) Held that the investments are made by the assessee's own funds and have been made in the earlier years, no disallowance u/s 14A is required to be made. The Head Note reads as under:- "Business expenditure - Disallowance under section 14A - Apportionment of expenditure - When investments are made from own funds, merely because the assessee had to subsequently borrow the funds for business use, it cannot be said that the borrowed funds have been used for the purposes of investments." 12. We also hold that the investments made in subsidiary companies are to be treated as strategic investments and hence the disallowance u/s 14A of the Act would not operate at all as the investment made thereon is not with an intention to earn any exempt income in the form of dividend but only for obtaining controlling interest in the said companies and to further the business interests of the assessee in the said company. Reliance in this regard is placed on the decision of the co-ordinate bench of Delhi Tribunal in the case of Inter globe Enterprises Ltd vs DCIT reported in (2014) 40 CCH 0022 Del. Trib in ITA No. 1362 & 1032 /Del/ 2013 , I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e computing the book profit under section 115JB of the Act has added the amount disallowed under section 14A r.w.r. 8D of Income Tax Rules and accordingly charged MAT on the book profit. The act of the AO was also confirmed by the ld. CIT(A). However, on perusing the Explanation-1(f) of Section-115JB(2) of the Act, we do not find merit in the contention of the Ld. CIT (A). The relevant provision of the Act is extracted herein below for reference:- "Section. 115JB Explanation-[1] - For the purposes of this section, "book profit" means the net profit as shown in the profit and loss account for the relevant previous year prepared under sub-section(2), as increased by - (a) To (e) . . . . . . . . . . . . . . . . . . . . . . . . (f) the amount or amounts of expenditure relatable to any income to which [Section-10 (other than the provisions contained in clause (38) thereof] or section 11 or section 12 apply; (g) To (j) . . . . . . . . . . . . . . . . . . . . . . . ." From the above it is apparent that the aforesaid provision of the Act does not refer to any disallowance made U/s. 14A of the Act while arriving at the Book Profit for the purpose of Section-115JB(2) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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