Tax Management India. Com
Law and Practice  :  Digital eBook
Research is most exciting & rewarding
  TMI - Tax Management India. Com
Follow us:
  Facebook   Twitter   Linkedin   Telegram

TMI Blog

Home

2017 (12) TMI 358

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... consequential relief thereof. 2 The Ld CIT(A) has erred in law and on facts in directing the AO to exclude investments in mutual funds which generate exempt income for the purpose of calculating disallowance u/s 14A holding it as temporary phenomena and allowing consequential relief thereof. 3 The Ld CIT(A) has erred in placing reliance on the decision of the Hon'ble High Delhi Court in CIT Vs. Oriental Structural Engineering Pvt. Ltd. as the facts of which case are different from the facts of instant case. 4 The Ld CIT(A) has failed to appreciate the fact that in the case of Oriental Structural Engineering Pvt. Ltd., investments were made in Special Purpose Vehicles whereas in the present assessee investments were made in the subsidiaries that too not on account of commercial expediency but to circumvent the Land Ceiling Act, 1975 of the State of Haryana.5 " 3. The Revenue has raised the following grounds of appeal for Assessment Year 2011-12:- 1. The Ld CIT(A) has erred in law and on facts in deleting the addition of Its.97,84,132/ made by the AO on account of disallowance u/s 14A r.w Rule 8D. 2. The Ld CIT(A) has erred in placing reliance on the decision of th .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... nation of the assessee no satisfaction has been recorded by the ld AO. He further stated that the ld CIT(A) has deleted the addition on the basis of decision of Hon'ble Punjab and Haryana High Court as well as decision of the Hon'ble Allahabad High Court. He further stated that amount of investment made by the assessee is also for strategic control and business expediency on such advance no disallowance can be made. 8. We have carefully considered the rival contentions and also perused various orders of the lower authorities. The ld CIT(A) dealt with this issue at para 21 to 24 as under:- "Decision: I have considered the submission of the appellant and observation of the Assessing Officer in the assessment order. It is seen that Assessing Officer has disallowed expenses of ₹ 1,63 50,876/- u/s 14A read with Rule 8D of the I.T. Rules, 1962 as expenses attributable to earning of exempt income. The appellant company is engaged in the business of development of integrated townships, Malls, development of management services. The area of operation of the appellant company is mainly in the state of Haryana, Gurjarat and Punjab. In the state of Haryana, if a company intend to d .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... mbrose Real Estate Pvt. Ltd. 51.76 Subsidiary 10,000 10,000 100% 1,00,000 Canterbury Real Tech Pvt. Ltd. Subsidiary 10,000 10,000 100% 1,00,000 Stylus Development Pvt. Ltd. 5.54 Subsidiary 10,000 10,000 100% 1,00,000 Venture Real Tech Pvt. Ltd 14.12 Subsidiary 10,000 10,000 100% 1,00,000 Opal Development Pvt. Ltd. 14.83 Subsidiary 10,000 10,000 100% 1,00,000 Alpha G: Corp Management Services Pvt. Ltd. Subsidiary 10,000 10,000 100% 1,00,000 Accord Development Pvt. Ltd. Subsidiary 10,000 10,000 100% Regal Vista Developers Pvt. Ltd. 0.95 Subsidiary 10,000 10,000 100% Ages Education Pvt. Ltd. Subsidiary 10,000 10,000 100% Epitome Real Tech Pvt. Ltd. 17.67 Subsidiary 69,40,000 50,07,215 72% 5,00,72,150 Optima Development Pvt. Ltd. Joint Venture 20,000 10,000 50% 1,00,000 1,66,68,29,250 It is submitted by the appellant that the investments made in the above mentioned companies has been made with the intention to obtain the license and to arrange 50 acres of land with the help of subsidiary companies for developing a township. It is further submitted by the appellant that all these subsidiaries have transfe .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... . Till the money was utilized by the appellant company for making investments in the project, it was invested in the mutual funds. From that investment these dividends were received by the appellant. It was contended by the appellant that for making these investments appellant did not incur any financial cost and administration cost. He has stated that it has deployed the funds in mutual funds and for investment in mutual funds advisor do not charge any fee and whatever fee or other charges are charged they are deducted from the amount of investment itself. Therefore, it was submitted by the appellant that no financial or administration expenses directly or indirectly have been incurred by the appellant for earning the dividend income. It is also submitted by the appellant that the dividend distributed by the mutual funds is after deduction of tax u/s 115R, therefore, these dividends are not tax-free income to the appellant. The Revenue has already collected the tax on the income earned on the investments in terms of the dividend tax, hence, the same cannot be taxed twice. In the assessment order, the Assessing Officer held that dividend earned from such investment is not includ .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... penditure has been incurred on investment made in subsidiary company, the AO has to record his satisfaction for not accepting the claim of the assessee and he has to give his finding that the expenditure has been incurred by the assessee for earning exempt income. It is seen that no such finding has been given by the Assessing Officer in the instant case. In view of the discussion made above, that appellant has made investments in mutual funds and its subsidiary companies for business expediency, therefore, provisions of Section 14A are not applicable as held by various judicial pronouncements cited by the appellant in his submission like Swapna Murarka 58 taxman.com 369 Mumbai ITAT (2015), Fali S. Narivan 56 taxman.com 155 Mumbai Tribunal (2015) and Dy. CIT Circle 10(1), New Delhi Vs. DBH International Pvt. Ltd. 55 taxman.com 424 Delhi Tribunal (2015). The appellant has further relied upon the judgment of Hon'ble Punjab & Haryana High Court and Allahabad High Court in the case of CIT Vs. Lakhani Marketing Incorporation (2014) 111 DTR (P&H) 149 and CIT Vs. Shivam Motors Pvt. Ltd. (2014) 111 DTR (Allahabad) 153 respectively. Therefore, respectfully following the above judgments a .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

 

 

 

 

Quick Updates:Latest Updates