2016 (8) TMI 807

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.... the facts and issues involved in all the appeals are common, therefore, same were heard together and are being disposed off by way of this consolidated order. 2. To understand the facts and implication thereof on the issue involved, we are taking-up the appeal for the assessment year 2008-09, wherein following grounds have been raised:- "1(a) On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming disallowance u/s 14A read with rule 8D of Rs. 6,15,327/- towards administrative expenses calculated at 0.5% of average investments as against Rs. 1,22,223/- disallowed by the appellant on suo motto basis and the reasons assigned for doing so are wrong and contrary to the facts of the case, the pr....

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.... (a) The total investments as on 31.03.08 amounted to Rs. 11.56 crores whereas the share capital and reserves as on that date amounted to Rs. 125.92 crores. Meaning thereby, that the investment has been made from assessee's own funds and not from borrowings. The assessee also submitted a statement showing the investments made out of Share Capital and Reserves for the period from FY 1989-90 to FY 2007-08. Reliance in this regard is placed by assessee on the decision of the Hon'ble Bombay High Court in the case of CIT V Reliance Utilities and Power Ltd, 313 ITR 340 (Bom). (b) Out of total exempt income (dividend) of Rs. 41,48,378/-, dividend of Rs. 35,86,886/- was received form Canara Rebeco Mutual Fund. The investment in the said mutual f....

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.... Rs. 8,33,101/- ;and disallowance of Rs. 6,15,327/- towards indirect expenses, computed on the basis of 0.5% of the average investment in accordance with Rule 8D(2)(iii). 5. Before the Ld. CIT(A) detailed submissions were made by the assessee which has been incorporated by the CIT(A) in para 5.2 from pages 10 to 17 of the appellate order. However, the Ld. CIT(A) considering the fact that there was decrease in the tax free investments; reduction in loan amount; and assessee had sufficient interest free/surplus funds to make the investments, accordingly, he directed the AO to delete the disallowance of interest of Rs. 8,32,101/- u/r 8D(2)(ii). However, so far as disallowance of indirect expenditure of Rs. 6,15,327/-, is concerned he confir....

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.... value of investments. Further so far as contention of the ld. Counsel that, assessee has made strategic investment by way of business necessity in associated and subsidiary companies, we agree with him that same should not be part of the investment for the purpose of disallowance, because the said investment cannot be said to be made for the purpose of earning the exempt income but for business and strategic compulsions which falls within the realm of 'business purpose' and this view has been upheld by the Tribunal in various decisions including that of Hon'ble Delhi High Court in the case of Cheminvest Ltd. Vs. CIT (ITA NO. 749/2014 dated 2.09.2015). Thus, we direct the AO to also exclude the strategic investment made in subsidiary compan....