TaxTMI 
TaxTMI 
2019 (5) TMI 992
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....i erred:- 1.1 in confirming an addition u/s 14A of Rs. 34,93,693/-. 1.1.1 in holding that the method adopted by the Appellant to estimate expenses incurred, defied logic and in therefore confirming the applicability of Rule 8D. 1.1.2 in holding that there were no details available with him as to whether or not investments were strategic in nature, and merely on that reason not allowing the claim of the Appellant, instead of confronting the Appellant to file evidence related to the same. 1.1.3 in not holding that every such investment on which no income is earned must be excluded while applying Rule 8D since no income has been earned on the said investments (except on one investment). The above grounds are without prejudice to each other. The Appellant craves leave to add, alter or amend the grounds as may be advised from time to time." 3. The brief facts of the case are that the assessee is engaged in manufacturing and sale of frozen foodstuffs products, provision of cold storage facilities for frozen foodstuffs and processing of polymer granules. The assessee has received dividend income of Rs. 4,01,399/- which was claimed as an exempt income u/s 10 of the 1961 Act. T....
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.... which more than of Rs. 68.10 crore have been invested in units and shares which generate tax free income. The AO observed that the assessee has received dividend income of Rs. 4,01,399/- during the year which was claimed as an exempt income , while the assessee had admitted that the direct expenses being demat charges of Rs. 1,324/- relatable to the earning of the dividend income were incurred and also further expenses of Rs. 2393 were incurred based on the ratio of dividend income to sales and other income multiplied by head office administrative expenses. Thus as per AO, Rule 8D(2) of the Income-tax Rules, 1962 was applicable and expenditure incurred relatable to earning of an exempt income is to be disallowed u/s 14A of the 1961 Act. The AO invoked provisions of Section 14A of the 1961 Act read with Rule 8D(2) of the 1962 Rules and disallowance were made by the AO to the tune of Rs. 34,93,693/-, vide assessment order dated 05.03.2013 passed by the AO u/s 143(3) of the 1961 Act, by making disallowance as detailed under:- 4. Aggrieved by the assessment order dated 05.03.2013 passed by the AO u/s 143(3) of the 1961 Act, the assessee filed first appeal with learned CIT(A) who was ....
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....f Hon'ble ITAT in the assessee's own case for A.Y.2009-10 would not have, binding precedence for the year under consideration. 6.4 The assessee, on a without prejudice basis, has contended that following the ratio of Hon'ble ITAT, Mumbai in Garware Wallropes Ltd. (65 SOT 86), strategic investments or the investments made in the associate concerns for long term investment should be excluded together with investments where no dividends have been earned following the ratio of the decision in the case of Shivam Motors (supra). In respect of the strategic investments, it is mentioned that the assessee alongwith its submission has filed Schedule-4 which indicates the investments in quoted and unquoted shares, preference shares and investments in the Capital/Current Account of Partnership Firm. Nowhere in the submission, the assessee has detailed as to which of these investments are strategic in nature and why are they so. The only thing seen in the schedule is that these investments are continuing from the previous year i.e.F.Y.2008-09 with some variations in the investment in the Capital/Current Account of partnership firm. The remaining investments have been reflected at ....
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....sessee which was claimed as an exempt income u/s. 10 of the Act. The assessee relied upon the Delhi ITAT Special Bench , decision in the case of ACIT v. Vireet Investments Private Limited ((2017) 165 ITD 27(Del. SB-trib.)) , and decision of Mumbai-tribunal in assessee's own case for AY 2009-10 in ITA No. 1441/Mum/2013 , orders dated 16.12.2015, decision of Mumbai-tribunal in assessee's own case in ITA No. 520/Mum/2017 vide orders dated 29.06.2018 for AY 2012-13 and decision of Mumbai-tribunal in the case of Allana Cold Storage Private Limited v. Addl. CIT in ITA 2366 & 2367/Mum/2015 for AY 2011-12 and 2010-11 respectively vide common orders dated 20.12.2017. The Ld. DR on the other hand relied on the appellate order passed by Ld. CIT(A) . 6. We have considered rival contentions and perused the material on record including cited case laws. We have observed that the assessee is engaged in manufacturing and sale of frozen foodstuffs products, provision of cold storage facilities for frozen foodstuffs and processing of polymer granules. The assessee has received dividend income of Rs. 4,01,399/- which was claimed as an exempt income u/s 10 of the 1961 Act. The assessee had invested in....
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....tention of the assessee that it has made investments in subsidiary companies/strategic investments and hence section 14A of the 1961 Act will not be applicable , lacks merit keeping in view decision of Hon'ble Supreme Court in the case of Maxopp Investments Limited v. CIT (2018) 402 ITR 640(SC) and hence this contention of the assessee stood rejected. We have also observed that in the case of Allana Cold Storage Private Limited v. Addl. CIT in ITA no. 2366 & 2367/Mum/2015 for AY 2011-12 and AY 2010-11 , tribunal vide common order dated 20.12.2017 has held that disallowance of expenditure be made u/s 14A read with Rule 8D of the 1962 Rules, after keeping in view decision of Special Bench of ITAT, Delhi in the case of Vireet Investment(supra), by holding as under: "4.We have heard the rival submissions, perused the orders of the authorities below and the decision of the Delhi Special Bench in the case of ACIT v. Vireet Investments Private Limited (supra). We observe that the Special Bench of the Delhi Tribunal held that only those investments are to be considered for computing average value of investments which yielded exempt income during the year. Therefore, respectfully followin....