TaxTMI 
TaxTMI 
TaxTMI 
2017 (8) TMI 1128
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....n the return of income. He asked the assessee to show cause as to why disallowance u/s 14A of the Act read with Rule 8D Income Tax Rules, 1962 may not be made. The reply of the assessee has been incorporated by the AO in para 4.2 of the assessment order dated 22.03.2013, for the cost of repetition, the same is not reproduced herein. The AO was not satisfied from the reply of the assessee and made the disallowance of Rs. 490.88 Lacs which was added to the income of the assessee by observing as under: "(4.3) I have gone through the reply submitted by the assessee and the contentions raised by him on the issue of disallowance u/s I4A of the Act. I am not satisfied with the reply of the assessee; the assessee has incurred indirect expenses to earn the dividend income which are not allowable as per the provisions of the Act. In view of the reasons mentioned below, the reply of the assessee is not acceptable: i) The assessee has made investment in purchase of equity funds during the year under consideration. First of all, the assessee must have taken decision to invest in equities for which board resolution in this regard would have been passed. Further to maintain, switching in and o....
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....om which does not form part of total income on the first & last day of the previous year- Applicable Accordingly, the disallowance upto 0.5% of the average of the value of investments u/s 14A read with Rule 8D is calculated as under: Average Investment 92152.40+85409.47 = 88,780.94 Average Total Assets 1628377.81+1367041.68 = 1,497,709.75 Amount of Interest 792.52 Disallowance Direct Expenses Out of Interest NIL 792.52 X 88780.93 /1497712.24 46.98 0.5% of Average Investment Disallowance u/s Rule 8D 443.90 490.88 Lac Accordingly, an amount of Rs. 490.88 Lac is hereby disallowed in view of the provision of section 14A of the IT Act, 1961 and is added back to the income of the assessee." 4. Being aggrieved the assessee carried the matter to the ld. CIT(A) and submitted that the AO misapplied the provisions of Section 14A of the Act while computing the disallowance as per Rule 8D of the Income Tax Rules, 1962. It was further stated that the investment made by the assessee in various companies/entities was fulfilling its business objectives, in which the provisions of Section 14A of the Act were not applicable. It was also stated tha....
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.... at the outset that the Assessing Officer has made an incorrect observation that the appellant was in receipt of exempt dividend of 142.50 crores whereas it was not in receipt of any exempt dividend during the year under appeal. The appellant has also submitted before me that it was in receipt of Rs. 940.97 crores from various joint venture companies as its share of business income and that the investment made in joint venture companies was a business decision. It has also submitted that the investment had been made in accordance with the policy laid down by the Civil Aviation Ministry on the issue in fulfillment of its objectives and that there was no question of invoking provision of section 14A to the facts of the case. 5.2.3 The Learned AR has pointed out before me that a sum of Rs. 350.81 lacs reflected as non-trade investment in schedule G of its audited balance sheet was the amount deposited under the investment deposit scheme formulated by the Income Tax Department for claiming deduction of investment allowance in earlier years. The appellant has submitted that the investment of 350.81 lacs yielded taxable interest income of Rs. 12.28 lacs which had been included in its i....
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....unning and maintenance of various airports) to earn dividend but the investment was made to earn taxable business income. 5.3 I find that the submission of the appellant that it was not in receipt of any exempt dividend of Rs. 142.5 crores as mentioned by the Assessing Officer in his order is correct. The appellant has cited before me a number of judgments including the judgment of jurisdictional Delhi High Court in the case of CIT Vs. Oriental Structural ITA 605/2012 wherein the Delhi Hiah Court held that the provisions of section 14A were not applicable in a case where investment is made by a company in a Special Purpose Vehicle to undertake the defined business activity. The appellant had invested in joint venture companies which were Special Purpose Vehicles to run the various Airports using the infrastructure owned by the Airports Authority of India. The investment in the Special Purpose Vehicles (joint venture companies) had been made by the appellant in terms of Operation Management Development Agreements (OMDA) which was a commercial arrangement and was to earn business income. 5.3.1 It has been pointed out to me by the Ld. AR that the appellant was in receipt of taxabl....
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....he same. The reliance was placed on the following case laws: CIT Vs Holcim India (P.) Ltd. (2014) 272 CTR 282 (Del.) Cheminvest Ltd. Vs CIT (2015) 378 ITR 33 (Del.) Rapid Estates Pvt. Ltd. Vs DCIT in ITA No. 4137/Del/2013 dated 30.05.2016 Sh. Suresh Verma Vs ACIT in ITA No. 1152/Del/2013 dated 14.06.2016 Kortek Electronics (India) Ltd. Vs Addl. CIT in ITA No. 1886/Del/2013 dated 18.05.2016 KLJ Town Planners (P) ltd. Vs ACIT, CC-04, New Delhi (2016) (2) TMI 789 - ITA Del. 8. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is noticed that the AO wrongly mentioned the figure of Rs. 142.50 Crores as dividend received by the assessee, the said amount related to the proposed dividend by the assessee and not the dividend received which is evident from page no. 27 of the assessee's paper book i.e. the copy of profit and loss appropriation account for the year ended 31.03.2010 which revealed that proposed dividend was Rs. 142.50 Crores. The ld. CIT(A) also in para 5.3 of the impugned order categorically stated that the assessee was not in receipt of any exempt dividend of Rs. 142.50 ....