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TMI Blog2016 (1) TMI 415X X X X Extracts X X X X X X X X Extracts X X X X ..... anies have become the sister concerns of the assessee company by virtue of such investments, and further such investments were made from the non-interest bearing fund of the assessee company, and if found so, grant relief to the assessee in the light of the decision of the Chennai Bench of the Tribunal in the case of M/s Agile Electric Sub Assembly Pvt. Ltd.[2016 (1) TMI 322 - ITAT CHENNAI] - Decided in favour of assessee for statistical purposes - ITA No. 961/Mds./2015 - - - Dated:- 22-12-2015 - N. R. S. Ganesan, JM And A. Mohan Alankamony, AM For the Appellant : Mr R Venkatesan, Adv For the Respondent : Mr Milind Madhukar Bhusari, CIT, DR ORDER Per A. Mohan Alankamony, Accountant Member This appeal is filed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .) As on 31.03.2010(Rs.) Increase/ decrease over F.Y.2010-11 1 Investments 54,06,227 38,54,31,227 38,00,25,000 2 Finance Charges 4,10,696 6,15,020 2,04,324 2.2. The above table indicates that against a substantial increase in investments, there is a corresponding increase in finance charges also. This clearly indicates that there is a direct nexus between the increase in investments and borrowed capital, with interest relating such investments being charged to P L a/c. 2.3. Here, section 14A pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, the recent clarification regarding disallowance u/s 14A byCBDT vide circular No. 5 of 2014 dated 11- 02-2014 has clarified that even when there is no exempt income earned during the year, section 14A can be invoked. Hence, invoking Sec.14A(3) read with Sub-rule 8D(2), the disallowance u/s 14A is quantified as under:- i) the amount of expenditure directly relating to income which does not form part of total income. Nil ii) A. amount of expenditure by way of interest other than the amount of interest included in clause (i) incurred during the previous year 7,02,070 B. The average value of inves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of the section 14A of the Act where the Company has not earned any income during the year which would be exempt under the provisions of the Act . ii. The AO has erred in law and facts in making a disallowance of ₹ 11,79,079 as expenses attributable towards earning exempt income by applying section 14A of the Act. iii. The A() has erred in facts by not considering the Assessee s claim that no expenditure had been incurred for the purpose of earning exempt income, if any. iv. The AO has erred in law by not considering that Rule 8D read with section 14A(2) can be invoked only if the Assessing Officer having regard to the accounts of the assessee is not satisfied with the correctness of the claim of the assessee in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o taken into consideration what Assessing Officer has observed in draft order while invoking Rule-8D in this case. The Assessing Officer find that there is an increase in investment of more than 38 crores as on 31.03.2010 as compared to investment as on 31.03.2009, the Assessing Officer finds that there is corresponding the increase in financial charges. This clearly indicates there is a direct nexus in increase in investment and borrowed capital and interest on borrowed capital charges to P L A/c. Therefore, this panel does not find any flaw in the action of the Assessing Officer and therefore all objections raised by the assessee are hereby rejected. Accordingly, the final assessment order U/s.143(3) r.w.s 92CA(4) and 144C(1) was comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ility of Section 14A of the Act read with Rule 8D also; the above view will be applicable. Moreover in the case EIH Associated Hotels Ltd v. DCIT reported in 2013 (9) TMI 604 in ITA No.1503, 1624/Mds/2012 dated 17th July, 2013, it has been held by the Chennai Bench of the Tribunal as follows:- Disallowance U/s. 14A rw Rule 8D CIT upheld disallowance Held that investments made by the assessee in the subsidiary company are not on account of investment for earning capital gains or dividend income. Such investments have been made by the assessee to promote subsidiary company into the hotel industry. A perusal of the order of the CIT(Appeals) shows that out of total investment of ₹ 64,18,19,775/-, ₹ 63,31,25,715/- is inve ..... X X X X Extracts X X X X X X X X Extracts X X X X
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