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TMI Blog2014 (11) TMI 982X X X X Extracts X X X X X X X X Extracts X X X X ..... estments made in special purpose vehicles plus 2 per cent. of the dividend income earned on the investments other than investments made in special purpose vehicles after verifying the total investments made by the assessee and after providing adequate opportunity of being heard to the assessee. - Decided in favour of assessee for statistical purposes. - ITA.No.2226/Mds/2013 - - - Dated:- 21-11-2014 - SHRI A.MOHAN ALANKAMONY AND SHRI CHALLA NAGENDRA PRASAD, JJ. For the Appellant : Mr. R. Vijayaraghavan, Advocate For the Respondent : Mr. P. Radhakrishnan , JCIT ORDER Challa Nagendra Prasad (Judicial Member).- This appeal is filed by the assessee against the order of the Commissioner of Income-tax (Appeals)-II, Chennai dated August 19, 2013 for the assessment year 2007-08 arising out of assessment order passed under section 143(3) read with section 147 of the Act. The only grievance of the assessee in its appeal is that the Commissioner of Income-tax (Appeals) has failed to appreciate that investments in subsidiaries are out of commercial expediency and hence should not be considered for disallowance under section 14A of the Act. Without prejudice to the abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tments made in SPVs of about ₹ 350.07 crores cannot be considered for the purpose of disallowance under section 14A of the Act. Counsel further places reliance on the decision of the Delhi Bench of this Tribunal in the case of Asst. CIT v. Oriental Structural Engineers P. Ltd. in I. T. A. No. 4245/Del/2011 dated December 2, 2011 and submits that in similar circumstances, the Tribunal affirmed the order of the Commissioner of Income-tax (Appeals) in holding that no expenses and interest attributable to the investments made by the assessee in SPVs can be disallowed under section 14A read with rule 8D because it cannot be termed as expense/interest incurred for earning exempt income. 4. The Departmental representative vehemently supports the orders of lower authorities in invoking section 14A and disallowing proportionate expenses on interest and administrative expenses incurred by the assessee. 5. Heard both sides. Perused orders of the lower authorities and the decision relied on by the assessee. The Assessing Officer while completing the assessment disallowed interest expenditure on investments from which income is not forming part of total income under section 14A(1) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were made out of surplus funds available with the appellant from time to time as per the bank statements produced. Only the interest of ₹ 2,96,731 was paid on funds utilised for making investments on which exempted income was receivable (as admitted by the appellant during the course of appellate proceedings) and hence the same is treated as expense attributable to exempt income. In respect of investments of ₹ 60,77,75,000 made in subsidiary companies as per documents produced before me, they are attributable to commercial expediency, because as per submission made by the appellant, it had to form special purpose vehicles (SPVs) in order to obtain contracts from the National Highway Authority of India and the special purpose vehicles so formed engaged the appellant company as contract to execute the works awarded to them (i.e. SPVs) by the National Highway Authority of India. In its profit and loss account for the year, the appellant has shown the turnover from execution of these contracts and therefore no expense and interest attributable to the investments made by the appellant in the special purpose vehicles can be disallowed under section 14A read with rule 8D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidered the submissions and perused the records. We find that the learned Commissioner of Income-tax (Appeals) has given a finding that only interest of ₹ 2,96,731 was paid on funds utilised for making investments on which exempted income was receivable. Further, the learned Commissioner of Income-tax (Appeals) has observed that in respect of investment of ₹ 60,77,75,000 made in subsidiary companies as per documents produced before him, they are attributable to commercial expediency, because as per submission made by the assessee, it had to form special purpose vehicles (SPVs) in order to obtain contracts from the National Highway Authority of India and the special purpose vehicles so formed engaged the assessee-company as contract to execute the works awarded to them (i.e. SPVs) by the National Highway Autho rity of India. In its profit and loss account for the year, the assessee has shown the turnover from execution of these contracts and therefore no expense and interest attributable to the investments made by the appellant in the special purpose vehicles can be disallowed under section 14A read with rule 8D because it cannot be termed as expense/interest incurred fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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