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TMI Blog2013 (2) TMI 728X X X X Extracts X X X X X X X X Extracts X X X X ..... borrowings as relating to interest free advances - Held that:- Funds are utilized for the assessee’s own business - These are reflected in the books of account of the assessee - Decided in favor of assessee Applicability os Sec 14A - Payment of intrest - Held that:- When the shares are sold, the assessee will be liable for capital gains taxation and, therefore, the expenditure incurred in respect of borrowings cannot be classified purely in relation to income which does not form part of the total income - expenditure was incurred essentially for the purpose of the business - Decided in favor of assessee Disallowance of interest payment on loans utilized for acquiring shares of the assesse’s subsidiary - Held that:- As discussed above disallowance is not justified - Decided in favor of assessee Disallowance of general and administrative expenses pertaining to dividend income - Held that:-As per the reasons stated in order in ITA No.638/Mds/2012 the disallowance and is confirmed Addition in the computation of income under sec.115JB Held that:- The disallowance cannot change the frame of profit and loss account prepared by the assessee under the provisions of the Companie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of Incometax( Appeals) has erred in not allowing the interest on capital borrowed for investments, as investments were made out of own funds. Considering the question of making investments as business proposition and the dividend income being exempted from taxation, the Tribunal held that the investments made on the ground of commercial expediency has to be treated as a business investment irrespective of the fact that the income arising out of such investment will be exempted from taxation. The Tribunal relied on the judgment of the Hon ble Supreme Court in the case of SA Builders Ltd. vs. CIT and another reported in 288 ITR 1. 2.4. We find that this issue of disallowance of interest to the extent of ₹ 1,72,02,624/- is covered by the above said order of the Tribunal passed in assessee s own case. It is to be seen that the business of the assessee is investment in shares. It is in the course of carrying on of the said business that the assessee has invested in shares of Shriram Investments Limited and Shriram Transport Finance Company Limited. Whether the dividends arising out of those shares will be exempted from taxation or not, is entirely a different question. The fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dividend of ₹ 11,49,37,339/- earned by the assessee. It is the case of the assessee that it has not incurred any expenditure on this income, as it was received by cheques and no other work was necessary for obtaining the said income. 2.8. We considered this issue. We are not on the question whether the income was earned without incurring any mechanical expenditure like clearance charges, collection charges etc. or not. We are concerned about the expenditure by way of remuneration paid to top management and executives. The top management and executives of the assessee company would be required to decide about the investments, whether to continue or liquidate etc. Investment is a very important part of the assets of the assessee company. Therefore, even though there is no direct mechanical expenditure in realizing the dividend income, definitely some management expenditure has to be attributed towards earning of tax-free dividend income. 2.9. But in the present case, the investments were so old and those investments have been held by the assessee company in a consistent manner and as such, the scope of indirect expenditure also would be little lessor. Taking into consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble in respect of that expenditure. 4.3. The assessee also argues that the reliance placed by the Commissioner of Income-tax(Appeals) on the Special Bench decision of the Tribunal in the case of Chem Invest Limited vs. ITO (121 ITD 318) has not considered the applicability of sec.14A in a situation where the expenditure is in respect of an item which can give rise to both exempt and non exempt income. 4.4. The very same issue is considered and discussed by us in detail while dealing with the appeal filed by the assessee for the assessment year 2005-06 in ITA No.638/Mds/2012. It is to be seen that the business of the assessee is investment in shares. It is in the course of carrying on of the said business that the assessee has invested in shares in its subsidiary company. It is for that investment that the assessee has paid interest to Standard Chartered Investments and Loans (India) Ltd. and the facilitation fee paid to Standard Chartered Bank. Therefore, the expenditure was incurred essentially for the purpose of the business carried on by the assessee. It is in this context that the principle commercial expediency comes into play. The issue is considered in ITA No.638/Mds ..... X X X X Extracts X X X X X X X X Extracts X X X X
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