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TMI Blog2017 (4) TMI 1278X X X X Extracts X X X X X X X X Extracts X X X X ..... /2016 ,Assessment Year : 2010-11 - - - Dated:- 13-4-2017 - A. MOHAN ALANKAMONY, AND G. PAVAN KUMAR For the Appellant by: Shri A.V. Sreekanth, JCIT For the Respondent by: Shri Bavya Rangarajan Advocate Subbaraya Aiyar 13-04-2017 ORDER PER G. PAVAN KUMAR, JUDICIAL MEMBER: The Revenue has filed an appeal against the order of Commissioner of Income Tax (Appeals)-15, Chennai in ITA No. 452/CIT(A)-15/13-14 dated 06.07.2016 for the assessment year 2010-11 passed u/s. 143(3) and 250 of the Income Tax Act. 2. At the time of hearing, the Ld. DR submitted that there is a delay of 16 days in filing the appeal by the Revenue and the Ld. DR has filed an affidavit explaining the reasons for delay and the Ld. AR has no serious objections and we are satisfied with the sufficient and reasonable cause explained for filing the appeal belatedly and admit the appeal. 3. The Revenue has raised the following grounds: 3.1 The Ld. CIT(A) erred in directing the AO to exclude the investments made in subsidiaries while calculating disallowance u/s. 14A and to restrict the disallowance to the amount of dividend received. 3.2 The Ld CIT(A) ought to have noted that investment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee appeared from time to time and submitted the information and case was discussed. The Assessing Officer on perusal of the financial statements, Tax audit report and Form 3CD, found that the assessee company has not paid employee's contribution of ESI and PF within the due dates specified under the respective Act. The Ld. AR explained that the assessee company could not make the payment for various reasons within the due date but paid the entire contribution before due date of Return of income u/s. 139(1) of the Act and relied on the provisions of the Act and judicial decisions. Whereas, the Assessing Officer over looked the facts and details and the judicial decisions and made an addition of delayed payment of employee contribution on PF and ESI u/s. 2(24)(X) of the Act ₹ 26,37,965/-and further, the Ld. AO found that the assessee has earned dividend income of ₹ 15,53,306/- in the financial year2009-10 and claimed exemption. The Ld. AR submitted the letter dated 13.03.2013 explaining that the amount of ₹ 3,00,282/- was disallowed as expenditure for earning dividend income in respect of Establishment and Administration expenditure. But the Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions and prayed for allowing the Revenue appeal. Contra, the Ld. AR relied on the orders of the CIT(A) and supported with judicial decisions. 7. We heard the rival submissions, perused the materials on record and judicial decisions. The Ld. DR s contention that the Ld.CIT(A) was not correct in directing the Ld. AO to delete the investment in the subsidiary companies and sister concerns, while calculating disallowance U/s. 14A of the Act under Rule 8D(iii) of Income Tax Rules and restricting such disallowance to the extent of exempted income. We found these investments are made by the assessee company for the purpose of yielding business income though they are termed as strategic investments. The investments are made for Business participation and with profit motive. But not for earning dividend income. The fact remains these investments are to be made out of its own funds and not interest bearing borrowed funds. The Ld. AR submitted that the assessee company has adequate own funds represented by share capital, Reserves and surplus over a period of time. Whereas, the Ld. DR submitted that the investments are made to obtain controlling interest in the company. We find si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of both sides are kept open for admissible deduction under Sec.14A. When such a discretion is exercised and the rights of the appellant-assessee is also kept open to satisfy the Assessing Officer, it cannot be said that any substantial questions of law would arise for consideration, as sought to be canvassed. In our view, at the stage of enquiry under Sec.14A, it is open to the Assessing Officer to independently consider the matter for admissibility of the interest on borrowings and if yes to what extent. Hence, when the question at large is further to be considered by the Assessing Officer, we do not find that any further observations are required to be made in this regard. In any case, the question of law as sought to be canvassed would not arise for consideration at this stage on the said aspects as sought to be canvassed. We rely on the judicial decision and In the interest of justice, we remit the disputed issue to the file of the Ld. AO for verification of investments of the assessee in subsidiary companies/sister concern with own funds or borrowed funds for the purpose of disallowance U/s.14A of the Act and the assessee should be provided adequate opportunity of hearing ..... X X X X Extracts X X X X X X X X Extracts X X X X
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