TaxTMI 
TaxTMI 
2017 (12) TMI 358
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....ng disallowance u/s 14A holding it as temporary phenomena and allowing consequential relief thereof. 3 The Ld CIT(A) has erred in placing reliance on the decision of the Hon'ble High Delhi Court in CIT Vs. Oriental Structural Engineering Pvt. Ltd. as the facts of which case are different from the facts of instant case. 4 The Ld CIT(A) has failed to appreciate the fact that in the case of Oriental Structural Engineering Pvt. Ltd., investments were made in Special Purpose Vehicles whereas in the present assessee investments were made in the subsidiaries that too not on account of commercial expediency but to circumvent the Land Ceiling Act, 1975 of the State of Haryana.5 " 3. The Revenue has raised the following grounds of appeal for Assessment Year 2011-12:- 1. The Ld CIT(A) has erred in law and on facts in deleting the addition of Its.97,84,132/ made by the AO on account of disallowance u/s 14A r.w Rule 8D. 2. The Ld CIT(A) has erred in placing reliance on the decision of the Hon'ble High Delhi Court in CIT Vs. Oriental Structural Engineering Pvt. Ltd. as the facts of which case are different from the facts of instant case. 3.....
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....Hon'ble Punjab and Haryana High Court as well as decision of the Hon'ble Allahabad High Court. He further stated that amount of investment made by the assessee is also for strategic control and business expediency on such advance no disallowance can be made. 8. We have carefully considered the rival contentions and also perused various orders of the lower authorities. The ld CIT(A) dealt with this issue at para 21 to 24 as under:- "Decision: I have considered the submission of the appellant and observation of the Assessing Officer in the assessment order. It is seen that Assessing Officer has disallowed expenses of Rs. 1,63 50,876/- u/s 14A read with Rule 8D of the I.T. Rules, 1962 as expenses attributable to earning of exempt income. The appellant company is engaged in the business of development of integrated townships, Malls, development of management services. The area of operation of the appellant company is mainly in the state of Haryana, Gurjarat and Punjab. In the state of Haryana, if a company intend to develop a township, the minimum area required is 50 acres, however, as per section 4 of Haryana Urban Land Ceiling Act 1975, holding of Haryana Urban L....
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....iary 10,000 10,000 100% 1,00,000 Esprit Development Pvt. Ltd. 19.13 Subsidiary 10,000 10,000 100% 1,00,000 Ambrose Real Estate Pvt. Ltd. 51.76 Subsidiary 10,000 10,000 100% 1,00,000 Canterbury Real Tech Pvt. Ltd. Subsidiary 10,000 10,000 100% 1,00,000 Stylus Development Pvt. Ltd. 5.54 Subsidiary 10,000 10,000 100% 1,00,000 Venture Real Tech Pvt. Ltd 14.12 Subsidiary 10,000 10,000 100% 1,00,000 Opal Development Pvt. Ltd. 14.83 Subsidiary 10,000 10,000 100% 1,00,000 Alpha G: Corp Management Services Pvt. Ltd. Subsidiary 10,000 10,000 100% 1,00,000 Accord Development Pvt. Ltd. Subsidiary 10,000 10,000 100% Regal Vista Developers Pvt. Ltd. 0.95 Subsidiary 10,000 10,000 100% Ages Education Pvt. Ltd. Subsidiary 10,000 10,000 100% Epitome Real Tech Pvt. Ltd. 17.67 Subsidiary 69,40,000 50,07,215 72% 5,00,72,150 Optima Development Pvt. Ltd. ....
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.... the Balance Sheet of the company, it is seen that appellant has received exempt income of Rs. 11,54,07,071/- from the non-trade investments made in the mutual funds. It is explained by the appellant that during the financial year 2006-07 appellant company has received investment from SSIII Investments One Limited under the Foreign Direct Investment of Rs. 287 crores and in the financial year 2007-08, an investment of Rs. 344 crores from Wyndford Investments Ltd. This money was received by way of share capital and share premium account. Till the money was utilized by the appellant company for making investments in the project, it was invested in the mutual funds. From that investment these dividends were received by the appellant. It was contended by the appellant that for making these investments appellant did not incur any financial cost and administration cost. He has stated that it has deployed the funds in mutual funds and for investment in mutual funds advisor do not charge any fee and whatever fee or other charges are charged they are deducted from the amount of investment itself. Therefore, it was submitted by the appellant that no financial or administration expenses direc....
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....ranted u/s 14A of the I.T. Act. The appellant has submitted that in the number of judicial pronouncement it has been held that provisions of Section 14A are not applicable when investment is made in a group company for strategic control and for business expediency. The Hon'ble Mumbai ITAT in the case of J.M. Financial Ltd. Vs. ACIT, ITA No.4521/Mum/2012 has held that no disallowance could be made u/s 14A for investment made in a subsidiary company for business expediency. The Tribunal also held that where assessee brings on record that no expenditure has been incurred on investment made in subsidiary company, the AO has to record his satisfaction for not accepting the claim of the assessee and he has to give his finding that the expenditure has been incurred by the assessee for earning exempt income. It is seen that no such finding has been given by the Assessing Officer in the instant case. In view of the discussion made above, that appellant has made investments in mutual funds and its subsidiary companies for business expediency, therefore, provisions of Section 14A are not applicable as held by various judicial pronouncements cited by the appellant in his submission like Swapna....