TaxTMI 
TaxTMI 
TaxTMI 
2023 (1) TMI 713
X X X X Extracts X X X X
X X X X Extracts X X X X
....63/- under section 14A of the Act. The assessee's working of disallowance under section 14A was not acceptable to the Ld. AO. After requiring the assessee to show cause why provisions of section 14A r.w. Rule 8D be not applied and considering the response of the assessee, the Ld. AO computed the expenses attributable to exempt income as per Rule 8D of the Income Tax Rules, 1962 at Rs. 7,76,51,949/- as under:- Working of expenses attributable to exempt income as per Rule 8D of the Income-tax Rules 1962: 1 Expenses directly attributable to exempt income Rs. Nil II. Formula : A X B / C A: Expenses not directly related to exempt income (interest) i.e. 12423330 B- Average value of investment on the opening and closing day of the previous year i.e. (23766908240 + 5732145000)/2 = 14749526620 C- Average value of assets on the opening and closing day of the previous year i.e. (39407391512 + 54457057230 )/2 = 46932224371 12423330 X 14749526620 46932224371 = 3904316 Rs.39,04,316 III 0.5% of average value of investment on the opening and closing day of the previous year i.e. 0.5% of B = 73747633 Rs.7,37,47,633 Aggregate of I + II + III Rs.7,76,5....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 2,375,000 Already disallowed 889,763 Balance to be disallowed 1,485,237 3.1 Accepting the above revised working of disallowance under section 14A r.w. Rule 8D filed by the assessee, the Ld. CIT(A) directed the Ld. AO to make disallowance of Rs. 14,85,237/- which is the remainder of Rs. 23,75,000/- minus Rs. 8,89,763/- original suo-moto disallowance made by the assessee with the following observations:- "6. I have carefully considered the facts of the case and the submissions made by the counsel of the appellant, it emerges that the appellant of its own made the disallowance of administrative expenses of Rs. 8,89,763/- u/s 14A in the computation of income. It is evident from the submissions filed by the appellant that the investments have been made in the subsidiary companies which are in the nature of strategic investments. The Hon'ble jurisdictional High Court in the case of M/s Cheminvest Limited vs. CIT held as under: "15. Turning to the central question that arises for consideration, the Court finds that the complete answer is provided by the decision of this Court in CIT v. Holcim India (P) Ltd. (decision dated 5th September 2014 in ITA ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....a shareholder has no control and cannot insist on payment of dividend. When declared, it is subjected to dividend distribution tax." On facts, it was noticed in CIT v. Holcim India (P) Ltd. (supra) that the Revenue had accepted the genuineness of the expenditure incurred by the appellant in that case and that the expenditure had been incurred to protect investment made. In the present case, the factual position that has not been disputed is that investment by the Assessee in the shares of Max India Ltd. is in the form of a strategic investment. Since the business of the Assessee is of holding investments, the interest expenditure must be held to have been incurred for holding and maintaining such investment. The interest expenditure incurred by the appellant is in relation to such investments which give rise to income not forming part of total income. In light of the clear exposition of the law in Holcim India (P) Ltd. supra) and in view of the admitted factual position in this case that the appellant has made strategic investment in shares of Max India Ltd, that no exempted income was earned by the appellant, in the relevant AY and also that the genuineness of the expenditure i....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... section 14A r.w. Rule 8D. Moreover, in earlier two years, the assessee did not have any borrowings and the borrowings made of Rs. 572.24 crores in the year of account have been used for assessee's business purposes in Amravati Power Plant - Phase 1 which fact finds mention in Notes to Accounts on page 26 of the audited financial statement. The Ld. AR also submitted that the issue is covered by the decision of the Tribunal in its own case for AY 2010-11. He emphasized that only such investments that yielded exempt income during the year have to be considered for computing the disallowance under clause(ii) and clause (iii) of Rule 8D of the Income Tax Rules, 1962 which has been upheld by the Hon'ble Delhi High Court in ACB India Ltd. vs. ACIT (2015) 374 ITR 108 (Delhi). 7. We have given our careful thought to the submission of the parties and perused the material available in the records. The Ld. AO in his order dated 25.03.2014 computed disallowance of Rs. 7,76,51,949/- and after considering suo-moto disallowance of Rs. 8,89,763/- made disallowance of Rs. 7,67,62,186/- under section 14A which was reduced to Rs. 2,23,87,932/- in rectificatory order under section 154 of the Act pass....
X X X X Extracts X X X X
X X X X Extracts X X X X
....wn funds available with the assessee were primarily used for the purpose of investments. The contention of the assessee was acceptable to the Ld. CIT(A) who recorded the finding that business of the assessee is of holding investments, hence the interest expenditure must be held to have been incurred for holding and maintaining such investments. The Ld. CIT(A) further held that the interest expenditure incurred by the assessee was in relation to such investments which gave rise to income not forming part of total income. No material has been brought on record by the Revenue to refute the above findings of the Ld. CIT(A) with which we are inclined to agree. 10. The assessee has placed on record decision dated 17.11.2021 of the Delhi "E" Bench of the Tribunal in assessee's own case in ITA No. 3295/Del/2015 for AY 2010-11. In that year also interest of Rs. 24,657,534/- was disallowed under Rule 8D(2)(i) which has been deleted by the Tribunal by observing as under:- "9. Now we come to the disallowance u/r 8D(2)(i). This sub rule provides that the amount of any expenditure directly relating to income, which does not form part of total income, is required to be disallowed. On careful a....