2017 (4) TMI 239

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....iate the reason cited by the assessee company, in the interest of justice, we hereby condone the delay in filing the appeal for 74 days and proceed to hear the appeal on merits. 3. The assessee has raised several grounds in its appeals; however the concise grounds for all the relevant assessment years are briefly stated herein below for adjudication: i. The Ld. CIT(A) has erred in upholding the order of the Ld. AO who had invoked the provisions of Section 14A of the Act and made disallowance @ 5% of the exempt income for the assessment year 2005-06 and applied Rule 8D of the rules for computing the disallowance for the assessment year 2007-08, instead of applying the ratio laid down by the Hon'ble jurisdictional Madras High Court wherein it was held that estimate of 2% of dividend income (exempt income) would suffice for disallowance as expenditure incurred for earning exempt income. ii. The Ld. CIT(A) has erred in confirming the order of the Ld. AO who had disallowed the claim of depreciation on building for Rs. 17,33,102/- by holding that the building was not put to use during the relevant assessment year 2007- 08. iii. The Ld. CIT(A) has erred in in....

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....ure incurred for earning exempt income. 5. Ground ii: Depreciation on building Rs. 17,33,102/- for the assessment year 2007-08. During the relevant assessment year, the assessee had purchased a building at Guindy for Rs. 3,46,62,044/- on 31.03.2007. For the relevant assessment year the assessee claimed depreciation on the building at the rate of 5% which works out to Rs. 17,33,102/-. On query the assessee's representative though produced documents to prove that the assessee had purchased the property on 31.03.2007 could not establish that the possession was taken over on the very same day and the asset was put to use from that day. Therefore the Ld. AO disallowed the claim of depreciation on the ground that the assessee had not put to use the asset during the relevant assessment year. On appeal, the Ld. CIT(A) upheld the order of the Ld.AO because before him also the assessee could not establish that either the building was kept ready for occupation or put to use on 31.03.2007. 5.1 Before us the Ld. AR submitted that the matter may be remitted back to the file of Ld.AO for fresh consideration because the assessee was in possession of requisite documents to establish that i....

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.... assessee it is submitted that no interest cost was incurred as the entire investments were made out of own funds. Further in the decision of the Tribunal in ITA No.115/Mds/2015 dated 06.01.2016, extracted herein below, it has been held that section 14A of the Act will not be applicable when investments are made in sister companies. "5. We have heard both the parties and carefully perused the materials available on record. On the identical issue as pointed out by the Ld. A.R. the Chennai bench of the Tribunal in ITA No.156/Mds/2013 vide order dated 20/08/13 for the assessment year 2009-10 has remitted back the matter to the Ld. Assessing Officer to decide the matter once again afresh based on the findings whether the assessee had actually incurred any expenditure in earning the dividend income. The relevant portion of the order is extracted herein below for reference:- Further, on the identical issue various Benches of the Tribunal and the Hon'ble Bombay High Court have held as follows:- i) Garware wall Ropes Ltd., Vs. ACIT reported in (2014) 65 SOT 086 (Mum.) held as follows:- "When assessee has prima facie brought out case that no expenditure h....

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....rns were made by the assessee out of interest free funds and therefore no part of interest on borrowings can be disallowed on the basis that the investments were made out of interest bearing funds." (vi) EIH Associated Hotels Ltd Vs. DCIT reported in 2013-TIOL- 796-ITAT-MAD ".... The investments made by the assessee in the subsidiary company are not on account of investment for earning capital gains or dividend income. Such investments have been made by the assessee to promote subsidiary company into the hotel industry. The assessee is not into the business of investment and the investments made by the assessee are on account of business expediency. Any dividend earned by the assessee from investment in subsidiary company is purely incidental. Therefore the investment made by the assessee in its subsidiary is not to be reckoned for disallowance U/s.14A r.w.r.8D. The Assessing Officer is directed to re-compute the average value of investment under the provisions of Rule 8D after deleting investments made by the assessee in subsidiary company." Taking note of the above decisions and the decision of the Chennai bench of the Tribunal in ITA No.156/Mds/13 cite....