TaxTMI 
TaxTMI 
2014 (11) TMI 982
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....the Act. The only grievance of the assessee in its appeal is that the Commissioner of Income-tax (Appeals) has failed to appreciate that investments in subsidiaries are out of commercial expediency and hence should not be considered for disallowance under section 14A of the Act. Without prejudice to the above, when the Assessing Officer has adopted rule 8D for disallowance, there is no scope for enhancement by the Commissioner of Income-tax (Appeals) and there is no scope for disallowance. 2. The Assessing Officer while completing the assessment under section 143(3) read with section 147 of the Act disallowed Rs. 1,03,10,547 under section 14A(1) and Rs. 1,92,35,628 under section 14A read with rule 8D(2)(iii) rejecting the submissions of th....
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....the investments in subsidiaries are out of commercial expediency and hence should not be considered under section 14A of the Act since investments were not made for earning any dividend income. Counsel submits that out of total investments of Rs. 441.24 crores, forced investments and investments in subsidiaries are Rs. 350.07 crores and only balance of Rs. 91.17 crores are unforced investments. In other words he submits that investments made in SPVs of about Rs. 350.07 crores cannot be considered for the purpose of disallowance under section 14A of the Act. Counsel further places reliance on the decision of the Delhi Bench of this Tribunal in the case of Asst. CIT v. Oriental Structural Engineers P. Ltd. in I. T. A. No. 4245/Del/2011 dated ....
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....g Officer to disallow common administrative expenses on proportionate basis to income chargeable to tax and exempt income to total income after excluding expenses like cost of services, professional fees which are specific to the project consultancy/advisory services. We have perused the order of the Delhi Bench of this Tribunal relied on by the assessee in the case of Asst. CIT v. Oriental Structural Engineers P. Ltd. (supra). On almost similar circumstances, the Tribunal held that no expenses and interest attributable to investments made by the assessee in the special purpose vehicles can be disallowed under section 14A read with rule 8D since it cannot be termed as expenses/interest incurred for earning exempt income by observing as unde....
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....n respect of investments of Rs. 60,77,75,000 made in subsidiary companies as per documents produced before me, they are attributable to commercial expediency, because as per submission made by the appellant, it had to form special purpose vehicles (SPVs) in order to obtain contracts from the National Highway Authority of India and the special purpose vehicles so formed engaged the appellant company as contract to execute the works awarded to them (i.e. SPVs) by the National Highway Authority of India. In its profit and loss account for the year, the appellant has shown the turnover from execution of these contracts and therefore no expense and interest attributable to the investments made by the appellant in the special purpose vehicles can....
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....ssessee supported the order of the learned Commissioner of Income-tax (Appeals). He placed reliance upon the hon'ble jurisdictional High Court decision in the case of Maxopp Investment Ltd. v. CIT in I. T. A. No. 687 of 2009 [2012] 347 ITR 272 (Delhi) wherein vide order dated November 18, 2011 the hon'ble jurisdictional High Court has expounded that determination of the amount of expenditure in relation to exempt income under rule 8D would only come into play when the Assessing Officer rejects the claim of the assessee in this regard. It is further expounded that con dition precedent for the Assessing Officer to himself determine the amount of expenditure is that he must record his dissatisfaction with the correctness of the claim o....
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....ents made by the appellant in the special purpose vehicles can be disallowed under section 14A read with rule 8D because it cannot be termed as expense/interest incurred for earning exempted income. Under the circumstances, the learned Commissioner of Income-tax (Appeals) is correct in holding that disallowance of a further sum Rs. 40,556 calculated at 2 per cent. of the dividend earned is sufficient. Under the circumstances, we do not find any infirmity in the order of the learned Commissioner of Income-tax (Appeals), hence, we uphold the same." 6. As could be seen from the above the Tribunal affirmed the order of the Commissioner of Income-tax (Appeals) who has excluded the investments made by the assessee in special purpose vehicles for....