2014 (4) TMI 1148

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....he order of the Commissioner of Income Tax (Appeals) in confirming the disallowance under section 14A read with Rule 8D(iii) of the Act and the Revenue filed appeal against the order of the Commissioner of Income Tax (Appeals) in deleting disallowance made under section 14A read with Rule 8D(i) of the Act. 2. The Assessing Officer while completing the assessment disallowed Rs. 5,48,31,629 and Rs. 53,35,450/- under clause 8D(i) as direct expenditure and Rs. 1,12,26,067/- under clause 8D(iii) being 0.5% of average investments as the expenditure incurred for earning dividend income which is exempt from tax applying the provisions of section 14A read with Rule 8D of the Act. On appeal, Commissioner of Income Tax (Appeals) deleted the disallo....

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....he Assessing officer has disallowed Rs. 6,03,70,041/- (Rs.6,03,75,041/- Rs. 5,000) u/s 14A read with Rule 8D. Akin to the claim of its sister concern in I.T.A No.638/Mds/2012 (supra), the present appellant also claims to be in business of investment promotion and that in the course of carrying on said business, the appellant has invested in shares of Shriram Transport Finance Company Limited and Shriram Overseas Finance Limited. Similar to the claim in I.T.A No.638/Mds/2012, it has been claimed that the intention of investment in shares is not to earn dividend but it is as an entrepreneur for obtaining controlling interest. The' appellant's claim is that it is not a passive investor and has not deployed its funds merely to invest....

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....wing the decision of the jurisdictional ITAT in ITA No.638/Mds/2012 (supra) as the said expenditure is incidental to the business of investment promotion." 6. On a reading of the impugned order and the observations thereon, we find that Commissioner of Income Tax (Appeals) applying the decision of the co-ordinate Bench of this Tribunal in the case of Sriram Capital Ltd. (supra), being a company of the assessee's group and since the facts are identical deleted the disallowance made under clause 8D(i) of the Act and therefore we do not find any infirmity in the order of the Commissioner of Income Tax (Appeals). 7. Insofar as disallowance sustained by the Commissioner of Income Tax (Appeals) under clause 8D(iii) is concerned, he observed....

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....ceived by the assessee. That activity itself called for considerable management attention and could not be left to a junior clerk. " In view of the facts of the case that there are considerable investments of Rs. 449,04,26,654/- made during the year and the dividend earned of Rs. 2,17,66,800/- , I am of the considered view that the AO has correctly applied the provisions of Rule 8D(iii) and disallowed Rs. 1,12,26,067/-, which the appellant itself had disallowed in the original return of income, as mandated by the Act as against a meager estimated disallowance of Rs. 5,000/ - made by the appellant in the revised return and that has no basis. These grounds of appeal, therefore, are partly allowed." 8. We find that while considering this....