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TMI Blog2016 (8) TMI 807X X X X Extracts X X X X X X X X Extracts X X X X ..... ment by way of business necessity in associated and subsidiary companies, we agree with him that same should not be part of the investment for the purpose of disallowance, because the said investment cannot be said to be made for the purpose of earning the exempt income but for business and strategic compulsions which falls within the realm of ‘business purpose’ and this view has been upheld by the Tribunal in various decisions including that of Hon’ble Delhi High Court in the case of Cheminvest Ltd. Vs. CIT (2015 (9) TMI 238 - DELHI HIGH COURT ). Thus, we direct the AO to also exclude the strategic investment made in subsidiary companies for the purpose of working the disallowance of value of the investment. However, so far as other con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , ITA No. : 3486/Mum/2013 - - - Dated:- 20-7-2016 - SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER For The Appellant : Shri Bhupendra Karkhanis For The Respondent : Ms Meena Jain ORDER PER AMIT SHUKLA, JM: The aforesaid appeals have been filed by the assessee against separate impugned orders passed by Ld. CIT (Appeals)-39, Mumbai for the quantum of assessment passed under section 143(3) for the assessment years 2008-09, 2009-10 and 2010-11. Since the facts and issues involved in all the appeals are common, therefore, same were heard together and are being disposed off by way of this consolidated order. 2. To understand the facts and implication thereof on the issue involved, we are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome of ₹ 41,48,878/- which was in the form of an dividend. The AO noted that the assessee had both exempt income yielding investments as well as business assets in the Balance-sheet. For both the purposes the assessee has maintained consolidated accounts, that is, both the activities have not been segregated. Accordingly, the AO required the assessee has to why disallowance under section 14A read with Rule 8D should not be made. The assessee s submission before the AO in response to the show cause notice was as under:- (a) The total investments as on 31.03.08 amounted to ₹ 11.56 crores whereas the share capital and reserves as on that date amounted to ₹ 125.92 crores. Meaning thereby, that the investment has been made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ained consolidated accounts which preclude the possibilities of establishing one to one nexus between the expenses and the exempt income yielding investments. Accordingly, he observed that, he is satisfied that assessee is unable to establish the correctness of its claim. He also noted that, assessee has itself offered ₹ 1,22,223/- towards disallowance of administrative expenses . However, the AO rejected the assessee s claim and computed the disallowance u/s 14A at ₹ 14,48,428/- which included disallowance of interest under section 8D(2) (ii) of ₹ 8,33,101/- ;and disallowance of ₹ 6,15,327/- towards indirect expenses, computed on the basis of 0.5% of the average investment in accordance with Rule 8D(2)(iii). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ree income during the year should also be removed from the working which were to the tune of ₹ 1,34,50,000/-. He, thus, submitted the disallowance if at all should be restricted to ₹ 1,11,702/- which will work out to under rule 8D(2)(iii) after removing those investments. 7. So far as the Ld. Counsel s plea that, investment which have yielded taxable income should be excluded from the working of the average value, we agree with such a contention because these investments have yielded taxable income, therefore, they are outside the purview Rule 8D(2)(iii) and cannot be part of average value of investments. Further so far as contention of the ld. Counsel that, assessee has made strategic investment by way of business necessity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sertion or intention, that is, not earned income in future . Hence in our opinion, the phrase shall not covers a situation where income earned in future or whenever it is earned, then it shall not form part of the total income at any time. Thus, this contention of the assessee prima facie does not appears to be in correct interpretation or in line with the Rule 8D(2)(iii). Thus, we direct the AO only to remove the investments which are giving taxable income and also the strategic investment from the working of average value of investments and from the balance, he should compute the disallowance as per Rule 8D (2)(iii). With these observation, grounds raised by the assessee are party allowed. 10. In the result, appeal of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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