2019 (12) TMI 748

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....t of assessment completed u/s 143(3) r.w.s 254 of the Income Tax Act 1961, (the 'Act'). Facts being identical, we begin with the AY 2008-09. 2. The grounds of appeal filed by the assessee read as under : 1. The CIT(A) erred in confirming the addition made by the Assessing Officer at Rs. 1,00,21,250 u/s, 14A by invoking and applying the provisions of Rule 8D summarily and mechanically. 2. He erred in disregarding the accounts of the Appellant and ignoring the detailed submissions made regarding the correctness of the Appellant's claim. 3. He further erred in confirming the invocation of section 14A and Rule 8D by AO without being recording any satisfaction regarding incorrectness of the Appellant's claim....

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....e Appellant prays that the AO be directed to restrict the disallowance, if any, made under section 14A to Rs. 89,000/- as submitted by the appellant in the 143(3) assessment proceedings. 7. Without Prejudice to the above, the Appellant prays that the AO be directed to restrict the disallowance made under section 14A to Rs. 8,88,900 being 10% of expenditure of Investment Division. 3. During the course of hearing, the Ld. counsel for the assessee submits that he would not like to press the 3rd ground of appeal. Having considered the submission, the 3rd ground of appeal is dismissed as not pressed. 4. In the instant case, the appeal has been filed by the assessee against the order of the Ld. CIT(A) dated 02.05.2018 and it arises....

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.... Rule 8D(2)(iii) by following the decision in Maxopp Investment Ltd. v. CIT (2018) 91 taxmann.com 154 (SC). However, he directed the AO to recompute the disallowance under Rule 8D(2)(iii) by excluding the investments made in its foreign subsidiary companies as the dividend income earned therefrom would be taxable. 6. Before us, the Ld. counsel for the assessee submits that only those investments are to be considered for computing average value of investment which yielded exempt income during the year, as per the order of the Special Bench of the Tribunal in ACIT v. Vireet Investment (P.) Ltd. (2017) 82taxmann.com 415 (Delhi-Trib) (SB). The Ld. counsel further submits that as laid down in Pr. CIT v. HSBC Investment Direct (India) Ltd. ....

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.... in the Memorandum explaining the provisions of the Finance Bill, 2001. We, thus, agree with the view taken by the Delhi High Court, and are not inclined to accept the opinion of Punjab & Haryana High Court which went by dominant purpose theory. The aforesaid reasoning would be applicable in cases where shares are held as investment in the investee company, may be for the purpose of having controlling interest therein. On that reasoning, appeals of Maxopp Investment Limited as well as similar cases where shares were purchased by the assessees to have controlling interest in the investee companies have to fail and are, therefore, dismissed." 8.1 In view of the above decision of the Hon'ble Supreme Court, the Ld. CIT(A) has rightly sustain....