2019 (1) TMI 1853

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....und raised in the appeal of the assessee is that the ld. CIT(A) has erred in confirming the disallowance of Rs..17,02,500/- made under section 14A of the Income Tax Act, 1961 ["Act" in short]. I.T.2 A. No.2721/Chny/18 2. Brief facts of the case are that the assessee that the assessee filed its return of income for the assessment year 2014-15 on 25.09.2014 declaring an amount of Rs..8,10,00,146/-. The case was selected for scuritny under CASS and a notice under section 143(2) of the Act dated 03.09.2015 was served on the assessee and further a notice under section 142(1) of the Act was also issued. From the details furnished by the assessee, the Assessing Officer noticed that in the investment portfolio of the assessee as on 31.03.2014 st....

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....cord. In this case, admittedly, the assessee has made investment in subsidiary and as per private public partnership agreement, the strategic investment cannot yield any dividend income. However, the assessee has not quantified the expenditure required for monitoring the huge volume of investment portfolio. Accordingly, the Assessing Officer determined the expenditure and disallowed the same. By following the decision of the Hon'ble Supreme Court in the case of Maxopp Investment Ltd. v. CIT (supra), the ld. CIT(A) confirmed the disallowance. We have also perused the decision in the case of Maxopp Investment Ltd. v. CIT (supra), wherein, the Hon'ble Supreme Court has observed and held as under: "31) We have given our thoughtful cons....

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.... the dominant purpose for subscribing in those shares of the investee company was not to earn dividend. We have two scenarios in these sets of appeals. In one group of cases the main purpose for investing in shares was to gain control over the investee company. Other cases are those where the shares of investee company were held by the assessees as stock-in-trade (i.e. as a business activity) and not as investment to earn dividends. In this context, it is to be examined as to whether the expenditure was incurred, in respective scenarios, in relation to the dividend income or not. 34) Having clarified the aforesaid position, the first and foremost issue that falls for consideration is as to whether the dominant purpose test, which i....

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.... then the related expenditure is outside the ambit of the applicability of section 14A. The theory of apportionment of expenditure between taxable and non-taxable has, in principle, been now widened under section 14 A." 35) The Delhi High Court, therefore, correctly observed that prior to introduction of Section 14A of the Act, the law was that when an assessee had a composite and indivisible business which had elements of both taxable and non-taxable income, the entire expenditure in respect of said business was deductible and, in such a case, the principle of apportionment of the expenditure relating to the non-taxable income did not apply. The principle of apportionment was made available only where the business was div....