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TMI Blog2016 (6) TMI 1077X X X X Extracts X X X X X X X X Extracts X X X X ..... ing from the assessment order dated 18-01-2013 passed by the learned Assessing Officer (hereinafter called "the AO") u/s 143(3) of the Income Tax Act,1961 (Hereinafter called "the Act"). 2. The grounds of appeal raised by the assessee company in the memo of appeal filed with the Income Tax Appellate Tribunal, Mumbai (hereinafter called "the Tribunal") read as under:- "1. The learned Commissioner of Income Tax (Appeals) erred in confirming the addition of Rs. 80,10,897/- by way of disallowance u/s 14A of the Income Tax Act, 1961. 2. The learned Commissioner of Income Tax (Appeals) failed to appreciate that the disallowance is arbitrary & illegal. 3. The learned Commissioner of Income Tax (Appeals) failed to appreciate that the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany cannot earn dividend without its existence and management and the investment decisions are very complex in nature. He held that the investment decisions require substantial market research, day-to-day analysis of market trends and decisions with regard to acquisition, retention and sale of shares at the most appropriate time and hence the assessee company was not correct to say that dividend income could be earned by incurring nominal expenditure. The A.O. held that the assessee company's contention that a company can earn substantial dividend income without incurring any expenses in the absence of management or administrative expenses is not possible as the decisions are generally taken in the Board of Directors meeting. Thus, the A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowing his predecessor's decision for the immediately preceding assessment year 2009- 10 and dismissed the appeal of the assessee company vide appellate orders dated 31/07/2013 passed by the learned CIT(A). The decision of the learned CIT(A) is reproduced below:- "3.1 I find that this issue came up before the undersigned for AY 2008-09. In that year, vide my order dated 02-11-2011, I have held as under: "I have examined the issue and position of law. As far as the decision of Siva Industry & Holdings Pvt. Ltd., cited supra, is concerned, I find that in that case the Chennai Tribunal has held that the provisions of section 14A would not be applicable where there is no income which does not form part of the total income under the Act. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bench is per in curium. The decisions relied upon by the Chennai bench are not directly on this issue and are distinguishable on facts. In the circumstances, relying upon the decision of the Special Bench in the case of M/s Cheminvest Ltd. no relief can be given to the appellant. This ground of appeal is, therefore, dismissed. 1.32. Following the above decision of my Ld. Predecessor, the ground of appeal is therefore dismissed. 2. In the result, the appeal is dismissed" 6. Aggrieved by the appellate orders dated 31/07/2013 of the learned CIT(A), the assessee company is in appeal before the Tribunal. 7. The ld. Counsel for the assessee company submitted that the assessee company had invested Rs. 55,12,50,000/- in its subsidiary compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We have observed that the assessee company has made investment of Rs. 55,12,50,000/- in its 100% subsidiary company M/s Marino Shelters Pvt. Ltd. which is also in the field of business of construction and real investment development business. The assessee company has not earned any exempt income or any dividend income during the previous year relevant to the assessment year on these investments made by the assessee company. We find that the Hon'ble Delhi High Court in the case of Cheminvest Limited (supra) has overruled the decision of ITAT Special Bench in the case of Cheminvest Limited(supra) hence, this issue is squarely covered by the decision of Hon'ble Delhi High Court decisions in the case of Cheminvest Limited (supra) . As cited by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e relevant observation and the finding by the Hon'ble High Court after considering the decision of the Hon'ble Supreme Court in the case of CIT v. Rajendra Prasad Moody ., reported in (1978) 115 ITR 519 is as under:- "The plain and natural construction of the language of Sec. 57(iii) of the Income Tax Act 1961 irresistibly leads to the conclusion that to bring a case within the section, it is not necessary that any income should in fact have been earned as a result of the expenditure. What Sec. 57(iii) requires is that the expenditure must be laid out or expended wholly and exclusively for the purpose of making or earning income. It is the purpose of the expenditure that is relevant in determining the applicability of Sec. 57(iii) and th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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