2016 (12) TMI 1544

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....ders passed under section 143(3) of the Act. 2. The only issue in both these appeals of the assessee is that the Ld. CIT(A) erred in upholding the disallowance of Rs. 2,95,53,327/- and Rs. 3,20,53,826/- out of interest under rule 8D(2)(ii) and Rs. 47,22,550/- and Rs. 47,22,550/- out of expenses under rule 8D(2)(iii) for the assessment years 2008-09 & 2009-10 respectively. The Ld. Counsel for the assessee at the outset submits that the assessee has not received any dividend income during these two assessment years. Therefore, he submits that in the absence of exempt income received no disallowance under section 14A can be made in these two assessment years. For this proposition, he places reliance on the following decisions: 1. Cheminvest ....

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....de from out of own funds and not from the borrowed funds. For this proposition he places reliance on the following decisions: 1) CIT v Reliance Utilities and Power Ltd [313 ITR 340 (Bom)] 2) CIT v HDFC 383 ITR 529 (Bom) 3) Fiduciary Euromax Global Markets Ltd v. DCIT (ITA No.1349/Mum/2012) 5. The Ld. Counsel for the assessee further submits that for the purpose of disallowance under section 14A only those investments are to be considered from which exempt income has been received during the year. For this proposition he places reliance on the following propositions: 1) ACB India v ACIT [374 ITR 108 (Del)] 2) M/s Slyvex Cable Co. Pvt. Ltd. v Dy.CIT being ITA No.8581/Mum/2011 for A.Y. 2008-09 dated 24.02.2016 3) Dy.CIT v. REI Agro Ltd ....

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....e total income. Therefore, the provisions of section 14A of the Act will not apply when no exempt income is received or receivable by the assessee during the relevant previous year. This proposition has been upheld by the Hon'ble Delhi High Court in the case of Cheminvest Ltd. vs. CIT (2015) 278 ITR 33 (Del) vide order dated 02.09.2015 wherein at para 23 thereof their Lordships have held as under: - "23. In the context of the facts enumerated hereinbefore the court answers the question framed by holding that the expression "does not form part of the total income" in section 14A of the Act envisages that there should be an actual receipt of income, which is not includible in the total income, during the relevant previous year for the p....

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....ecision of the authorities below and direct the AO to delete the disallowance of expenditure amounting to Rs. 74,31,010/- under section 14A of the Act." 9. The co-ordinate bench further held that if the investment was made as a strategic investment in group companies for controlling interest no disallowance is attracted under section 14A of the Act observing as under: 3.5.1 Further the learned A.R. for the assessee has submitted that, even otherwise, the said disallowance under section 14A w.r. Rule 8D ought not to have been made as the entire investment in shares made by the assessee of Rs. 52,15,95,000/- was strategic investment in group companies for control over these companies and not for investment purpose with the intention of earn....