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TMI Blog2015 (10) TMI 1890X X X X Extracts X X X X X X X X Extracts X X X X ..... its income tax return declaring loss of Rs. -(1563256), was transmitted electronically by the assessee vide acknowledgement number 96585351300909 on 30.9.2009. A revised return was thereafter transmitted electronically vide acknowledgement no. 101420671171109 dated 17.11.2009 again declaring loss of (-) Rs. 1563256. The return was processed u/s. 143(1) of the Income Tax Act, 1961 on 30.12.2010. the case was selected for scrutiny and notice u/s. 143(2), dated 23.8.2010, was issued and served upon the assessee. The assessee company is a 100% subsidiary of AvH NV, Belgium established with an objective of establishing Joint Ventures in cement, mining, building materials, renewable energy and other infrastructure sectors. The AO has completed the assessment at an income of Rs. 41,90,586/- against the returned loss of Rs. 15,63,256/- after making the following additions / disallowances, vide assessment order dated 02.2.2012 passed u/s. 143(3) of the I.T. Act, 1961. (a) Difference on a/c of arms length price : 20,41,412/- (b) U/s 14A : 37,12,429/- 3. Assessee aggrieved with the assessment order dated 02.2.2012 passed by the AO, assessee preferred an appeal before the Ld. First Appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich needs to be sustained and accordingly the ground no. 2 raised by the Revenue may be allowed. 6. On the contrary, Ld. Counsel of the assessee relied upon the order passed by the Ld. CIT(A). Ld. Counsel of the assesee filed a Paper Book containing pages 1 to 58 containing the Copy of Computation of Income for AY 2009-10; copy of Audited Balance Sheet and P&L a/c for AY 2009-10; Copy of Service Agreement between AVH Belgium and the assessee dated 30.4.2008; copy of statement of Facts and submissions made before the Ld. CIT(A) for AY 2009-10. However, the page no. 56 to 58 which is the copy of the Memorandum of Understanding with M/s Alps Industries Ltd have not been enclosed with the Paper Book. 7. We have heard both the parties and perused the records available with us, especially the orders of the revenue authorities and the Paper Book filed by the assessee containing pages no. 1 to 58. But we find that the pages no. 56 to 58 which is the copy of the MOU with M/s Alps Industries Ltd. were not found on record, hence, we have not considered it. We find that Assessee filed its income tax return declaring loss of Rs. -(1563256) on 30.9.2009 and subsequently a revised return was t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in which it has been clearly noted that in addition to the services being given to the parent company the appellant will do other activity also. For ready reference we are reproducing the main objects of the company as under:- "To carry on in India, or elsewhere, directly or through subsidiaries or through strategic partnerships and investment alliances or through joint ventures or through acquisition, the business of manufacturing, treating, processing, preparing, refining, importing, exporting, purchasing, selling in all types and kinds of cement or its by-products as also other cement products of all descriptions, such as RMC, pipes, poles, slabs, asbestos sheets, blocks, tiles, garden wares, Plaster of Paris, lime pipes, building materials used in infrastructural work and civil construction and otherwise articles, things, compounds and preparations connected with the aforesaid products. To purchase, acquire, hold, take on lease, manage and operate, mines, quarries, mining licenses, mining rights, mining claims, metalliferous land relating to saline or chemical substances, mineral & metals such as coal, lignite, rockphosphate, brimstone, brine, bauxite, rare earths, which ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20,41,412/- on this account. Therefore, we are of the view that no interference is called for in the well reasoned order passed by the Ld. CIT(A), hence, we uphold the impugned order on this issue and reject the ground no. 1 raised by the Revenue in its Appeal. 8. Apropos ground no. 2 in restricting disallowance u/s. 14A to Rs. 1,21,752/- that was in accordance to the provisions of Rule 8D which otherwise should have been restricted to the amount of dividend receipts is concerned, we find that Rule 8D is applicable from the AY 2008-09 (Godrej and Boyce Manufacturing Company Ltd Vs DCIT 328 ITR 81(Bombay) and Max Opp Investment Ltd. vs. CIT 203 Taxman 364 (Del) . In the appeal under consideration the assessment year involved is 2009-10, therefore Rule 8D is applicable in case the necessary conditions are fulfilled. We find that the Hon'ble Supreme Court in the case of CIT vs. Walfort Share and Stock Brokers Pvt. Ltd. [2010] 326 ITR 1 , had examined the provisions of section 14A and had held that mandate of section 14A is to prevent claims for deduction of expenditure in relation to income which does not form part of the total income. It was also further held that the basi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction of the AO in rejecting the assessee's claim arrived at after objective analysis of facts. 'Satisfaction' is subjective, therefore the 'standard of normal prudence' in similar facts and circumstances has to be applied. From a perusal of the asst. order-page-7, it has been seen that the AO is not satisfied with the version of the assessee and has given the reason as 'the manner of deployment of funds mostly in the form of investments are with an intention to earn dividend income which is exempt u/s 10(34) or long term capital gain u/s 10(38) from the shares of Sagar Investments.' But the AO has disallowed expenditure of Rs. 37,12,429/- which is more than the dividend income of Rs. 20,32,762/-; and has taken the same expenditure twice, once for working out the arms length price as discussed above and again for working out disallowance u/s 14A, which is an absurdity and a contradictory stand. It is also seen that an amount of Rs. 32,69,372/- has been spent in managing the consultancy services to the holding company AVH Belgium and an amount of Rs. 18,90,192/- has been submitted to be incurred for setting up of business in India. The later expenditure w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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