TaxTMI 
TaxTMI 
2024 (10) TMI 1707
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....sioner") for the A.Y. 2021-22. 2. The sole addition u/s 14A of the Act read with rule 8D of the Income Tax Rules, 1962 (in short 'the Rules') is in controversy before us and the relevant facts for adjudication of the same are that the Assessee being engaged primarily in the franchise business of KFC and Pizza Hut restaurants in India had declared its income at a loss of Rs.59,13,62,620/- by filing its return of income on 08.02.2022. The Assessee during the assessment year under consideration also made a total investment of Rs.4,25,35,023/- in the equity shares of its subsidiary company i.e. Gamma Pizzakraft (Overseas) Private Limited. The Assessee claimed that the said investment was made out of sufficient non-interest-bearing funds or i....
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....nterest bearing funds exceeds investment in the tax free securities then no disallowance u/s 14A of the Act can be made qua interest paid on borrowing. Further, if there are funds available both interest free and overdraft and/or loans taken then presumption would arise that investment would be out of interest sufficient to meet the investment". 5. The Ld. Addl./Joint Commissioner though considered the claim/contention of the Assessee, however, mainly relying on the amendment made to section 14A by way of Finance Act, 2022 which was amended to give effect to the CBDT circular No.5/2014 dated 11.02.2014, to overturn the observations made by various Hon'ble Courts, towards impermissibility of disallowance of any expenditure in the absence ....
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....rivate Limited to the tune of Rs.88,92,24,951/- out of its own non-interest-bearing funds and thereafter the Assessee continuously made the investment in the said company in every subsequent assessment year as detailed below: AY Investments in Gamma Pizzakraft Rs. Year to date Investments in Gamma Pizzakraft. Rs. AY 2016-17 889,224,951 889,224,951 AY 2017-18 7,313,842 896,538,793 AY 2018-19 7,352,209 903,891,002 AY 2019-20 88,438,034 992,329,036 AY 2020-21 571,083,109 1,563,412,145 AY 2021-22 42,535,023 1,605,947,168 AY 2022-23 75,501,171 1,681,448,339 AY 2023 -24 109,999,914 1,791,448,253 6.1 The Assessee further reiterated that during the assessment year u....
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....ng to A.Y. 2021-22 in view of the amended provisions of section 14A as amended vide Finance Act 2022". 8.1 In the instant case, the Assessee has claimed that it has made investment in its subsidiary company i.e. Gamma Pizzakraft (Overseas) Private Limited from its own non-interest-bearing funds, which were more than the invested amount of Rs.4,25,35,023/-. We further observe that the Hon'ble Jurisdictional High Court in the case of Commissioner of Income Tax Vs. Reliance Utilities & Power Ltd. 313 ITR 340 (Bombay) has also dealt with the identical issue wherein the Assessee had also having interest free funds available more than the investment made by the Assessee and therefore the Hon'ble Jurisdictional High Court affirmed the decision ....
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....ve decision of the Hon'ble Jurisdictional High Court in Reliance Utilities & Power Ltd (supra) also stands affirmed by the Hon'ble Apex High Court in CIT vs. Reliance Industries Ltd. (2010) 10 taxman.com 52/261 taxman.com 165/410 ITR 466. 8.4 We further observe that Hon'ble Delhi High Court in the case of Cheminvest Ltd. vs. CIT (14) 378 ITR 33 (Delhi) has held that section 14A will not apply, if no exempt income is received or receivable during the relevant previous year. 8.5 We also observe that the Hon'ble Delhi High Court in the case of PCIT vs. Era Infrastructure (India) Ltd. (2022) 448 ITR 674 (Delhi) by considering the amendment brought in section 14A of the Act, vide Finance Act 2022 has held the amendment as brought in sectio....