AI Drafter 
TaxTMI 
TaxTMI 
2017 (8) TMI 1499
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.... to the above, the order issued by the AO is bad in law insofar as the fact that the AO did not issue to ABB Global Industries & Services Limited ('the Appellant or 'the Company'), a show cause notice, as per proviso to section 92C(3) of the Income-tax Act, 1961 ['the Act']. (b) The AO has erred in law in making a reference to the Transfer Pricing Officer ['TPO'], inter alia, since he has not recorded an opinion that any of the conditions in section 92C(3) of the Act, were satisfied in the instant case. The AO also erred in not following the provision contained in section 92CA(1) of the Act. 2. The fresh comparable search undertaken by the AO/TPO is bad in law (a) The AO/TPO erred on facts and in law in conducting a fresh benchmarking analysis using non contemporaneous data and substituting the Appellant's analysis with fresh benchmarking analysis on his own conjectures and surmises. (b) On the facts and in the circumstances of the case and in law, the learned AO/TPO erred in not demonstrating that the motive of the Appellant was to shift profits outside of India by manipulating the prices charged in its internatio....
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.... 4. Erroneous data used by the AO/TPO (a) The AO/TPO has erred in law in using data, which was not contemporaneous and which was not available in the public domain at the time of conducting the transfer pricing study by the Appellant. (b) The AO/TPO erred in law in not applying the multiple-year data while computing the margin of alleged comparable companies. 5. Non-allowance of appropriate adjustments to the comparable companies, by the AO/TPO The AO/TPO erred in law and on facts in not allowing appropriate adjustments under Rule 10B to account for, inter alia, differences in (a) accounting practices, (b) marketing expenditure adjustment, (c) research and development expenditure adjustment, (d) risk profile between the Appellant and the comparable companies, (e) capacity adjustment; and (f) depreciation adjustment. 6. Variation of 5% from the arithmetic mean The AO/TPO erred in law in not granting the benefits of proviso to section 92C(2) of the Act available to the Appellant. 7. Grant of lower deduction under section 10A of the Act (a) On the facts and in the circumstances of the case, the learned AO e....
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....isallowance under section 14A of the Act (a) On the facts and in the circumstances of the case, the learned AO has erred in disallowing an amount of Rs. 29,514,479 under section 14A of the Act in relation to investments made in the equity shares of Raman Boards Limited, without considering the fact that: (i) The Appellant has not received any income which does not form part of the total income for the AY 2008-09; and (ii) The Appellant has not incurred any expenses given the fact that the said investment is not made out of borrowed funds. 11. Disallowance of provision created for payment of royalty (a) On the facts and in the circumstances of the case, the learned AO has erred in disallowing an amount of Rs. 4,137,000 representing provision created for payment of royalty, without considering the fact that the said provision was created as per the audited accounts and prescribed accounting policies. (b) On the facts and in the circumstances of the case, the learned AO has erred in not taking cognizance of the decision of the Karnataka High Court in the case of M/s Prakash Leasing Limited [208 Taxman 464] 12. Interest und....
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....g leave to raise the additional ground under Rule 11 of the Income Tax Rules. The learned Authorised Representative of the assessee has submitted that except the companies namely Persistent Systems Ltd., Tata Elxsi Ltd (Seg.), E-Zest Solutions Ltd. and Kals Information System Limited (Seg.), the assessee raised the objections against all other companies selected by the TPO though the grounds of seeking exclusion of these companies from the set of comparables were different from the grounds now raised by the assessee. He has further submitted that when these companies are functionally not comparable to the assessee then the assessee can raise the objections against the functional comparability of these companies even at this stage. He has relied upon the decisions of the Chandigarh Special Bench of this Tribunal in the case of Dy. CIT v. Quark Systems (P.) Ltd. [2010] 38 SOT 207. He has also relied upon the decision of Hon'ble Bombay High Court in the case of CIT v. Tata Power Solar Systems Ltd. [2017] 245 Taxman 93/77 taxmann.com 326 and submitted that the Hon'ble High Court has upheld the order of the Tribunal holding that merely because the assessee has included a company....
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.... not final. It is for the TPO to examine and find out the companies listed as comparables which are, in fact comparable. The impugned order has on FAR analysis found that M/s. Indowind Energy Ltd. and B. F. Utilities Ltd. are not comparable. They are in a different area i.e. wind energy while the Respondent-Assessee is in the field of solar energy." Accordingly in view of the decision of Quark Systems (P.) Ltd. (supra) as well as the decision of Hon'ble Bombay High Court in the case of Tata Power Solar System Ltd. (supra), we admit the additional grounds raised by the assessee for adjudication on merits. 6. Ground Nos.1 to 6 including additional grounds are regarding the TP Adjustment consequent to determination of Arm"s Length Price (ALP) on the basis of the set of comparables selected by the TPO. 7. The assessee is a subsidiary of ABB Holdings (South Asia) Limited and a group company of ABB Boveri Group Company where 99.9% of equity share capital is held by ABB Holdings (South Asia) Limited. The assessee is engaged in providing software development services to its Associated Enterprises (AEs). The dispute before us is only in respect of the software development servi....
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....ctional comparability of all these 12 companies have been examined by the co-ordinate bench of this Tribunal in the case of Triology E-Business Software India (P.) Ltd. v. Dy. CIT [2016] 70 taxmann.com 378. Thus he has submitted that all these 12 companies should be excluded from the set of comparables. 9. On the other hand, the learned Departmental Representative has submitted that out of these 12 companies one company viz. Softsol India Limited is not challenged on functional comparability but the assessee is seeking exclusion on the ground that the RPT in the case of this company is more than 15% whereas the TPO has applied the filter of RPT of 25% which has been upheld by the various decisions of this Tribunal. He has relied upon the decision dt.28.03.2013 of the co- ordinate bench of this Tribunal in the case of ITO v. Supportsoft India (P.) Ltd. in IT(TP)A No.1372/Bang/2011 and the decision dt.6.8.2014 in the case of Asstt. CIT v. Zee Entertainment Enterprises Ltd. [2014] 51 taxmann.com 231 (Mum. - Trib.). The learned Departmental Representative has also relied upon the decision of Delhi Bench of the Tribunal dt.12.10.2012 in the case of Actis Advisers (P.) Ltd. v. DCIT [I....
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....erance range of RPT is proper and reasonable in the case of the assessee. Though this is not a standard parameter as we have discussed in the foregoing part of this order and it depends on the facts of the case and availability of the comparable companies to apply the tolerance range from 5% to 25%. Therefore 15% is otherwise the medium of the two extremes of 5% to 25% and hence in normal circumstances it has to be taken as a proper tolerance range. This issue is decided in favour of the assessee. 12. At the outset, we note that an identical set of 20 comparable companies was selected by the TPO in the case of Triology E-Business Software India (P.) Ltd. (supra) for the same Assessment Year 2008-09 and this Tribunal while passing the order in the said case has considered functional comparability of these 12 companies in para 10.5 as under : ' 10.5 We have considered the rival submissions as well as relevant material on record. It is pertinent to note that the TPO in the case of Kodiak Network (India) Pvt. Ltd. (supra) has selected an identical set of 21 companies as selected in the case of the assessee. Therefore, it is clear that while selecting the comparable comp....
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....round that this comparable company has categorized itself as a pure software developer, just like the assessee, and hence selected this company as a comparable. For this purpose, the TPO had relied on information submitted by this company in response to enquiries carried out under section 133(6) of the Act for collecting information about the company directly. 7.2 Before us, the learned Authorised Representative reiterated the assessee's objections for the inclusion of this company from the list of comparable companies on the ground that this company is not functionally comparable to the assessee as it is into software products. It is also submitted that the segmental details of this company are not available and the Annual Report available in the public domain is not complete. It was further contended that the information obtained by the TPO under section 133(6) of the Act, on the basis of which the TPO included this company in the final list of comparable companies, has not been shared with the assessee. In support of this contention, the learned Authorised Representative placed reliance on the following judicial decisions: (i) Trilogy E-Business Software In....
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....le. (ii) After demonstrating the similarity and the comparability between the assessee and the Triology case, the assessee also needs to demonstrate that the facts applicable to the Assessment Year 2007- 08, the year for which the decision in case of Triology E-Business Software India Pvt. Ltd. (supra) was rendered are also applicable to the year under consideration i.e. Assessment Year 2008-09. 9.5.3 It is a well settled principle that the assessee is required to perform FAR analysis for each year and it is quite possible that the FAR analysis can be different for each of the years. That being so, the principle applicable to one particular year cannot be extrapolated automatically and made applicable to subsequent years. To do that, it is necessary to first establish that the facts and attendant factors have remained the same so that the factors of comparability are the same. Viewed in that context, the assessee has not discharged the onus upon it to establish that the decision rendered in the case of Triology E-Business Software India Pvt. Ltd. (supra) can be applied to the facts of the case and that too of an earlier year i.e. Assessment Year 2007-08. The assessee, in o....
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.....1 We have heard both parties and perused and carefully considered the material on record. It is seen from the record that the TPO has included this company in the final set of comparables only on the basis of information obtained under section 133(6) of the Act. In these circumstances, it was the duty of the TPO to have necessarily furnished the information so gathered to the assessee and taken its submissions thereon into consideration before deciding to include this company in its final list of comparables. Nonfurnishing the information obtained under section 133(6) of the Act to the assessee has vitiated the selection of this company as a comparable. 7.6.2 We also find substantial merit in the contention of the learned Authorised Representative that this company has been selected by the TPO as an additional comparable only on the ground that this company was selected in the earlier year. Even in the earlier year, it is seen that this company was not selected IT(TP)A 1380/Bang/2012 Page 7 of 34 on the basis on any search process carried out by the TPO but only on the basis of information collected under section 133(6) of the Act. Apart from placing reliance on the judic....
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....the list of comparable companies. The learned Departmental Representative contended that since the assessee had accepted the TPO's proposal for inclusion of this company in the set of comparables and had not objected to its inclusion even before the DRP, the objections raised by the assessee in this regard, at this stage, ought to be rejected. 8.4.1 We have heard both parties and perused and carefully considered the material on record. Admittedly, there is no disputing the fact that the assessee had never objected to the inclusion of this company in the set of comparbales in earlier proceedings before the TPO and the DRP. It is also seen that even in the grounds of appeal raised before us, the assessee has not raised any grounds challenging the inclusion of this company in the list of comparbales. In fact in the assessee's own case for Assessment Year 2007-08, this company was selected as a comparable by the assessee itself. We, therefore, find no merit in the contentions raised by the learned Authorised Representative of the assessee in respect of this company at this stage of proceedings. 8.4.2 It is also seen from the submissions made before us that the....
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....omparability can be eliminated. By not resorting to such a process of making adjustments, the TPO has rendered this company as not qualifying for comparability. We therefore accept the plea of the assessee in this regard." (iv) The rejection / exclusion of this company as a comparable for Assessment Year 2007-08 for software service providers has been upheld by the co- ordinate benches of this Tribunal in the cases of LG Soft India Pvt. Ltd. in ITA No.112/Bang/2011, CSR India Pvt. Ltd. in IT (TP) A No.1119/Bang/2011 and by the ITAT, Delhi Bench in the case of Transwitch India Pvt. Ltd. in ITA No.6083/Del/2010. (v) The facts pertaining to this company has not changed from Assessment Year 2007- 08 to Assessment Year 2008-09 and therefore this company cannot be considered for the purpose of comparability in the instant case and hence ought to be rejected. In support of this contention, the assessee has also referred to and quoted from various parts of the Annual Report of the company. 9.3 Per contra, the learned Departmental Representative supported the inclusion of this company in the list of comparable companies. The learned Departmental Representative sub....
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....of comparables. The A.O./TPO are accordingly directed. 10. KALS Information Systems Ltd. 10.1 This is a comparable selected by the TPO. Before the TPO, the assessee had objected to the inclusion of this company in the set of comparables on grounds of functional differences and that the segmental details have not been provided in the Annual Report of the company with respect to software services revenue and software products revenue. The TPO, however, rejected the objections of the assessee observing that the software products and training constitutes only 4.24% of total revenues and the revenue from software development services constitutes more than 75% of the total operating revenues for the F.Y. 2007-08 and qualifies as a comparable by the service income filter. 10.2 Before us, the learned Authorised Representative contended that this company is not functionally comparable to the assessee and ought to be rejected /excluded from the list of comparables for the following reasons:- (i) This company is functionally different from the software activity of the assessee as it is into software products. (ii) This company has been held to be f....
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....rties and perused and carefully considered the material on record. We find from the record that the TPO has drawn conclusions as to the comparability of this company to the assessee based on information obtained u/s.133(6) of the Act. This information which was not in the public domain ought not to have been used by the TPO, more so when the same is contrary to the Annual Report of the company, as pointed out by the learned Authorised Representative. We also find that the co-ordinate benches of this Tribunal in the assessee's own case for Assessment Year 2007-08 (supra) and in the case of Triology E-Business Software India Pvt. Ltd. (supra) have held that this company was developing software products and was not purely or mainly a software service provider. Apart from relying of the above cited decisions of coordinate benches of the Tribunal (supra), the assessee has also brought on record evidence from various portions of the company's Annual Report to establish that this company is IT(TP)A 1380/Bang/2012 Page 9 of 34 functionally dis-similar and different form the assessee and that since the findings rendered in the decisions of the coordinate benches of the Tribunal for ....
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....mpany has generated several inventions and filed for many patents in India and USA ; (iv) the company has substantial revenues from software products and the break up of such revenues is not available ; (v) the company has incurred huge expenditure for research and development; (vi) the company has made arrangements towards acquisition of IPRs in 'AUTOLAY', a commercial application product used in designing high performance structural systems. In view of the above reasons, the learned Authorised Representative pleaded that, this company i.e. Infosys Technologies Ltd., be excluded form the list of comparable companies. 11.3 Per contra, opposing the contentions of the assessee, the learned Departmental Representative submitted that comparability cannot be decided merely on the basis of scale of operations and the brand attributable profit margins of this company have not been extraordinary. In view of this, the learned Departmental Representative supported the decision of the TPO to include this company in the list of comparable companies. 11.4 We have heard the rival submissions and perused and carefully considered the ma....
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....ast two years. (v) Wipro Ltd. is engaged in both software development and product development services. No information is available on the segmental bifurcation of revenue from sale of products and software services. (vi) the TPO has adopted consolidated financial statements for comparability purposes and for computing the margins, which is in contradiction to the TPO's own filter of rejecting companies with consolidated financial statements. 12.3 Per contra, the learned Departmental Representative supported the action of the TPO in including this company in the list of comparables. 12.4.1 We have heard both parties and carefully perused and considered the material on record. We find merit in the contentions of the assessee for exclusion of this company from the set of comparables. It is seen that this company is engaged both in software development and product development services. There is no information on the segmental bifurcation of revenue from sale of product and software services. The TPO appears to have adopted this company as a comparable without demonstrating how the company satisfies the software development sales 75% of the total....
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....i.e. Assessment Year 2008-09 and therefore this company cannot be considered as a comparable to the assessee in the case on hand. (iii) Tata Elxsi Ltd. is predominantly engaged in product designing services and is not purely a software development service provider. In the Annual Report of this company the description of the segment 'software development services' relates to design services and are not to software services provided by the assessee. (iv) Tata Elxsi Ltd. invests substantial funds in research and development activities which has resulted in the 'Embedded Product Design Services Segment' of the company to create a portfolio of reusable software components, ready to deploy frameworks, licensable IPs and products. The learned Authorised Representative pleads that in view of the above reasons, Tata Elxsi Ltd. is clearly functionally different/dis-similar from the assessee and therefore ought to be omitted form the list of comparables. 13.3 Per contra, the learned Departmental Representative supported the stand of the TPO in including this company in the list of comparables. 13.4 We have heard both parties and carefully pe....
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....ed Representative contended that this company ought to be excluded from the list of comparables on the ground that it is functionally different to the assessee. It is submitted by the learned Authorised Representative that this company is engaged in 'e-Business Consulting Services', consisting of Web Strategy Services, I T design services and in Technology Consulting Services including product development consulting services. These services, the learned Authorised Representative contends, are high end ITES normally categorised as knowledge process Outsourcing ('KPO') services. It is further submitted that this company has not provided segmental data in its Annual Report. The learned Authorised Representative submits that since the Annual Report of the company does not contain detailed descriptive information on the business of the company, the assessee places reliance on the details available on the company's website which should be considered while evaluating the company's functional profile. It is also submitted by the learned Authorised Representative that KPO services are not comparable to software development services and therefore companies rendering K....
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....software and giving licenses for use of software. In this regard, the learned Authorised Representative submitted that :- (i) This company is engaged in product development and earns revenue from sale of licences and subscription. It has been pointed out from the Annual Report that the company has not provided any separate segmental profit and loss account for software development services and product development services. (ii) In the case of E-Gain Communications (P.) Ltd. v. ITO [2009] 118 ITD 243/[2008] 23 SOT 385 (Pune), the Tribunal has directed that this company be omitted as a comparable for software service providers, as its income includes income from sale of licences which has increased the margins of the company. The learned A.R. prayed that in the light of the above facts and in view of the afore cited decision of the Tribunal (supra), this company ought to be omitted from the list of comparables. 15.2 Per contra, the learned Departmental Representative supported the action of the TPO in including this company in the list of comparables. 15.3 We have heard the rival submissions and perused and carefully considered the materia....
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....) The relevant portion of the Annual Report of this company evidences that it is in the business of product development. The learned Authorised Representative prays that in view of the factual position as laid out above and the decisions of the co-ordinate benches of the Tribunal in the assessee's own case for Assessment Year 2007-08 and other cases cited above, it is clear that this company being into product development cannot be considered as a comparable to the assessee in the case on hand who is a software service provider and therefore this company i.e. Lucid software Ltd., ought to be omitted from the list of comparables. 16.2 per contra, the learned Departmental Representative supported the action and finding of the TPO in including this company in the list of comparables. 16.3 We have heard the rival submissions and perused and carefully considered the material on record. It is seen from the details on record that the company i.e. Lucid software Ltd., is engaged in the development of software products whereas the assessee, in the case on hand, is in the business of providing software development services. We also find that, co-ordinate benche....
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.... analytic services and therefore it is not purely a software development service provider as is the assessee in the case on hand. (ii) Page 60 of the Annual Report of the company for F.Y. 2007-08 indicates that this company, is predominantly engaged in 'Outsourced software Product Development Services' for independent software vendors and enterprises. (iii) Website extracts indicate that this company is in the business of product design services. (iv) The ITAT, Mumbai Bench in the case of Telcordia Technologies India (P.) Ltd. (supra) while discussing the comparability of another company, namely Lucid Software Ltd. had rendered a finding that in the absence of segmental information, a company be taken into account for comparability analysis. This principle is squarely applicable to the company presently under consideration, which is into product development and product design services and for which the segmental data is not available. The learned Authorised Representative prays that in view of the above, this company i.e. Persistent Systems Ltd. be omitted from the list of comparables. 17.2 Per contra, the learned Departmental Re....
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....stom IT Solution (such as development, testing, maintenance, SAP, product engineering and infrastructure management services), proprietary software products and consultancy services in IT on various platforms and technologies." (iii) This company is also engaged in research and development activities which resulted in the creation of Intellectual Proprietary Rights (IPRs) as can be evidenced from the statements made in the Annual Report of the company for the period under consideration, which is as under : "Quintegra has taken various measures to preserve its intelectual property. Accordingly, some of the products developed by the company .......... have been covered by the patent rights. The company has also applied for trade mark registration for one of its products, viz. Investor Protection Index Fund (IPIF). These measures will help the company enhance its products value and also mitigate risks." (iv) The TPO has applied the filter of excluding companies having peculiar economic circumstances. Quintegra fails the TPO's own filter since there have been acquisitions in this case, as is evidenced from the company's Annual Report for F.Y. 2007- 08....
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....dia Ltd. 19.1 This company was selected by the TPO as a comparable. The assessee objected to the inclusion of this company as a comparable on the grounds that this company is functionally different and dis-similar from it. The TPO rejected the assessee's objections on the ground that as per the company's reply to the notice under section 133(6) of the Act, the company has categorized itself as a pure software developer and therefore included this company as a comparable as the assessee was also a provider of software development services. Before us, in addition to the plea that the company was functionally different, the assessee submitted that this company was excluded from the list of comparables by the order of the co-ordinate bench of this Tribunal in the assessee's own case for Assessment Year 2007-08 (ITA No. 845/Bang./2011) on the ground that the 'Related Party Transactions ('RPT') is in excess of 15%. The learned Authorised Representative submitted that for the current period under consideration, the RPT is 18.3% and therefore this company requires to be omitted from the list of comparables. 19.2 Per contra, the learned Departmental....
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....rom the set of comparables and recomputed the ALP after considering the claim of risk adjustment as well as working capital adjustment: S. No. Name of the Company 1 Avani Cimcon Technologies Ltd 2 Celestial Biolabs Ltd 3 E-Zest Solutions Ltd 4 Infosys Technologies Ltd 5 KALS Information Systems Ltd (Seg.) 6 Lucid Software Ltd 7 Persistent Systems Ltd 8 Quintegra Solutions Ltd 9 Softsole India Ltd 10 Tata Elxsi Ltd (Seg.) 11 Thirdware Solutions Ltd (Seg) 12 Wipro Ltd (Seg.)" Thus it is clear from the decision of co-ordinate bench of this Tribunal in the case of Kodiak Network (India) Pvt. Ltd. (supra) that out of 13 comparables sought to be excluded from the set of comparables the Tribunal found that 12 comparables as listed above are not functionally not comparable with software development service provider. Accordingly, following the order of this Tribunal in the case of Kodiak Network (India) Pvt. Ltd. (supra), we direct the A.O./TPO to exclude 12 comparable companies from the set of comparables.' Accordingly, following the earlier orders of this Tribunal, we direct the TPO/A.O. to exclu....
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....ing to domestic sales would have to enter into the computation under the head "profits and gains from business" in Chapter IV and denied the benefit of deduction. The provisions of Sub-section 6 of Section 10A, as amended by the Finance Act of 2003, granting the benefit of adjustment of losses and unabsorbed depreciation etc. commencing from the year 2001-02 on completion of the period of tax holiday also virtually works as a deduction which has to be worked out at a future point of time, namely, after the expiry of period of tax holiday. The absence of any reference to deduction under Section 10A in Chapter VI of the Act can be understand by acknowledging that any such reference or mention would have been a repetition of what has already been provided in Section 10A. The provisions of Sections 80HHC and 80HHE of the Act providing for somewhat similar deductions would be wholly irrelevant and redundant if deductions under Section 10A were to be made at the stage of operation of Chapter VI of the Act. The retention of the said provisions of the Act i.e. Section 80HHC and 80HHE, despite the amendment of Section 10A, in our view, indicates that some additional benefits to eligible Sec....
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....ed by the provisions of Section 10A the aforesaid discord can be reconciled by understanding the expression "total income of the assessee" in Section 10A as 'total income of the undertaking'." Following the decision of Hon'ble jurisdictional High Court as well as Hon'ble Supreme Court (supra), we decide this issue in favour of the assessee and direct the Assessing Officer to allow the deduction under Section 10A of the Act prior to setting off of losses pertaining to non-STPI units against the profits of STPI units. 16. Ground No.9 is regarding the disallowance of computer software expenses by treating as capital in nature. At the time of hearing, the learned Authorised Representative of the assessee has stated at Bar that the assessee does not press this ground and the same may be dismissed as not pressed. The learned Departmental Representative has raised no objection if this ground is dismissed as not pressed. Accordingly, this ground is dismissed being not pressed. 17. Ground No.10 is regarding disallowance under Section 14A of the Act. 18. The Assessing Officer noted that the assessee has investment in the form of shares in the companies amounting t....
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....ssessee has not used any borrowed fund for the purpose of investment of Rs. 103,43,87,000 we find that this aspect of the matter has not been properly examined by the authorities below therefore, in the absence of proper examination of the fact of availability of the non-interest bearing fund with the assessee, no concluding finding can be given at this stage. 22. The second contention of the learned Authorised Representative is that since the assessee has not earned any exempt income during the year under consideration therefore the provisions of Section 14A cannot be applied. Though the language of Section 14A does not contemplate actual earning of income and expenditure incurred for earning of the income but it provides that no deduction can be allowed in respect of the expenditure incurred by the assessee in relation to income which does not form part of total income. On principle, we do agree with the contention of the CIT (DR) that income includes positive as well as negative income and therefore even in case there is loss it will be considered as income for the purpose of IT Act. However, while interpreting the provisions of Section 14A, Hon'ble Delhi High Court in th....
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....asad Moody's case (supra) cannot be used in the reverse to contend that even if no income has been received, the expenditure incurred can be disallowed under Section 14A of the Act. 22. In the impugned order, the ITAT has referred to the decision in Maxopp Investment Ltd's. case (supra) and remanded the matter to the AO for reconsideration of the issue afresh. The issue in Maxopp Investment Ltd's. case (supra) was whether the expenditure (including interest on borrowed funds) in respect of investment in shares of operating companies for acquiring and retaining a controlling interest therein was disallowable under Section 14A of the Act. In the said case admittedly there was dividend earned on such investment. In other words, it was not a case, as the present, where no exempt income was earned in the year in question. Consequently, the said decision was not relevant and did not apply in the context of the issue projected in the present case. 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 envisages that ther....