TMI Blog2023 (1) TMI 713X X X X Extracts X X X X X X X X Extracts X X X X ..... SUPREME COURT] relied upon by the Tribunal in the preceding year and the decisions in M/s. Cheminvest Ltd. [ 2009 (8) TMI 126 - ITAT DELHI-B] AND Holcim India (P) Ltd. [ 2014 (9) TMI 434 - DELHI HIGH COURT] followed by the Ld. CIT(A), we do not find any infirmity in the order of the Ld. CIT(A) which we uphold. Consequently, we reject the appeal of the Revenue. - ITA No. 2013/Del/2017 - - - Dated:- 5-1-2023 - SHRI ANIL CHATURVEDI , ACCOUNTANT MEMBER AND MS. ASTHA CHANDRA , JUDICIAL MEMBER For the Assessee : Shri Ajay Wadhwa , Advocate Ms. Ragini Handa , CA For the Department : Shri Anuj Garg , Sr. DR Shri Abhishek Kumar , Sr. DR ORDER PER ASTHA CHANDRA , JM The appeal by the Revenue is directed against the order dated 20.01.2017 of the Ld. Commissioner of Income Tax (Appeals) 4, New Delhi ( CIT(A) ) pertaining to assessment year ( AY ) 2011-12. 2. The assessee is a company engaged in the business of establishing, commissioning, setting up, operating and maintaining power generating stations. For AY 2011-12, the assessee e-filed its return on 30.09.2011 declaring income at Rs. 2,36,13,611/-. The Ld. Assessing Officer ( AO ) found that the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le to exempt income Rs. Nil II. Formula : A X B / C A: Expenses not directly related to exempt income (interest) i.e. 12423330 B- Average value of investment on the opening and closing day of the previous year i.e. (3110775000 + 5732145000)/2 = 4421460000 C- Average value of assets on the opening and closing day of the previous year i.e. (39407391512 + 54457057230)/2 = 46932224371 12423330 X 4421460000 46932224371 = 1170395 Rs.11,70,410 III 0 5% of average value of investment on the opening and closing day of the previous year i.e. 0.5% of B = 22107300 Rs.2,21,07,300 Aggregate of I + II + III Rs.2,32,77,695 Less: Suo-Moto Disallowance Rs. 8,89,763 Total Disallowance Rs. 2,23,87,932 *Investments exclude foreign investments mutual funds which do not generate dividend income. 3. Aggrieved, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n made in the subsidiary companies which are in the nature of strategic investments. The Hon'ble jurisdictional High Court in the case of M/s Cheminvest Limited vs. CIT held as under: 15. Turning to the central question that arises for consideration, the Court finds that the complete answer is provided by the decision of this Court in CIT v. Holcim India (P) Ltd. (decision dated 5th September 2014 in ITA No. 486/2014). In that case a similar question arose, viz., whether the ITAT was justified in deleting the disallowance under Section 14A of the Act when no dividend income had been earned by the Assessee in the relevant AY? The Court referred to the decision of this Court in Maxopp Investment Ltd. (supra) and to the decision of the Special Bench of the ITAT in this very case i.e. Cheminvest Ltd. v. CIT (2009) 317 ITR 86. The Court also referred to three decisions of different High Courts which have decided the issue against Revenue. The first was the decision in Commissioner of Income Tax, Faridabad v. M/s. Lakhani Marketing Ind. (decision dated 2nd April 2014 of the High Court of Punjab and Haryana in ITA No. 970/2008) which in turn referred to two earlier decisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is in relation to such investments which give rise to income not forming part of total income. In light of the clear exposition of the law in Holcim India (P) Ltd. supra) and in view of the admitted factual position in this case that the appellant has made strategic investment in shares of Max India Ltd, that no exempted income was earned by the appellant, in the relevant AY and also that the genuineness of the expenditure incurred by the appellant is not in doubt, I am inclined to agree with the appellant. The appellant has made investment m subsidiary companies for strategic purpose and not received any dividend income in this assessment year. Based on revised working of disallowance u/s 14A read with Rule 8D filed by the assessee, I restrict the disallowance u/s 14A read with Rule 8D to Rs. 23,75,000/- out of which an amount of Rs. 8,89,763/- has been already disallowed by the assessee, hence I direct to Assessing Officer to make the disallowance of Rs. 14,85,237/-. 4. The Revenue is aggrieved and is before the Tribunal with the following ground of appeal:- The Ld. CIT(A) has erred in restricting the disallowance under section 14A read with Rule 8D from Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5) 374 ITR 108 (Delhi). 7. We have given our careful thought to the submission of the parties and perused the material available in the records. The Ld. AO in his order dated 25.03.2014 computed disallowance of Rs. 7,76,51,949/- and after considering suo-moto disallowance of Rs. 8,89,763/- made disallowance of Rs. 7,67,62,186/- under section 14A which was reduced to Rs. 2,23,87,932/- in rectificatory order under section 154 of the Act passed on 13.06.2014. Before the Ld. CIT(A), the assessee submitted working of disallowance on taxable investment computing disallowance of Rs. 23,75,000/- and considering the suo-moto disallowance of Rs. 8,89,763/- arrived at the figure of Rs. 14,85,237/- to be disallowed under section 14A of the Act. Accordingly, the Ld. CIT(A) for the reasons recorded by him, restricted the disallowance to Rs. 23,75,000/- as against disallowance computed by the Ld. AO at Rs. 2,23,87,932/-. The Revenue is aggrieved. 8. It is observed that the Ld. AO found that the assessee received dividend on units of mutual funds/share of Rs. 7,62,44,036/- which it claimed as exempt under section 10 of the Act. On examining the suo-moto disallowance made by the assessee at R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nch of the Tribunal in assessee s own case in ITA No. 3295/Del/2015 for AY 2010-11. In that year also interest of Rs. 24,657,534/- was disallowed under Rule 8D(2)(i) which has been deleted by the Tribunal by observing as under:- 9. Now we come to the disallowance u/r 8D(2)(i). This sub rule provides that the amount of any expenditure directly relating to income, which does not form part of total income, is required to be disallowed. On careful analysis of the facts stated before us, we find that assessee has interest free owned funds of Rs. 3920 crores as on 31st of March 2010. The total investment made by the assessee in which tax-free income could have been earned is Rs. 1343 crores as on that date. Further, that investment from which exempt income has been actually earned during the year is only Rs. 605 crores. Furthermore, the investment made by the assessee is out of the mixed funds, as it did not maintain the books of account of the earning exempt income as well as taxable income separately. The honourable Supreme Court in case of Commissioner of Income tax versus Reliance Industries Ltd. [2019] 102 taxmann.com 52 (SC)[2019]261 Taxman 165(SC) has held as under:- 7. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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