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TMI Blog2018 (4) TMI 738X X X X Extracts X X X X X X X X Extracts X X X X ..... her hand, as explained before, the Appellant’s investments were confined to strategic investments in its subsidiaries only. As assessee has not earned any tax free income and therefore, no expenses can be construed as incurred by the assessee we dismiss appeal of the department and in our opinion ld. CIT(A) has passed detailed and reasoned order. - Decided in favour of assessee - ITA No. 3139/Ahd/2015 - - - Dated:- 4-4-2018 - Shri Mahavir Prasad, Judicial Member And Shri Manish Borad, Accountant Member Appellant by : Shri Mudit Nagpal, Sr. D.R. Respondent by : Shri P. M. Mehta, A.R. ORDER Per Mahavir Prasad, Judicial Member This is an appeal by the revenue against the order of the Commissioner of Income Tax (Appeals)-3, Ahmedabad, vide Appeal No.CIT(A)-3/Cir.1(1)(2)/285/14-15 dated 03/09/2015 for the Assessment Year (AY) 2012-13. 2. The substantive grievance of the Revenue reads as under:- That the ld. CIT(A) has erred in law and on facts in deleting the disallowance of ₹ 36,99,631/- u/s.14A of the Act. 3. The brief facts of the case are that on verification of the balance sheet, it is seen that the assessee company had made investment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 As can be noticed in the table presented above, the investments are made in the group companies and subsidiary companies. These are strategic investments made in the group companies and they do not require constant monitoring and so no efforts of employees are diverted towards monitoring these investments. The assesses company states that there is no increase in investments during the year under consideration. 1.3 As far as interest expenditure is concerned, the assessee company submits that the interest cost amounting to ₹ 3,46,973/- pertains to interest paid on loan taken from HDFC bank. The said expenditure is of revenue nature as per the generally accepted accounting principles. However, in order to avoid litigation, the said expense has been disallowed while computing the business income at the time of filing the return of income. So, it is submitted that no interest expenditure remains which can be disallowed as per the provisions of section 14A r.w. Rule 8D. 1.4 Further, with regards to the administrative expenditure, it is important to note that there is no increase in investments during the year under consideration and so no cost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Directly related to trading of Clothes and Garments the retail stores. Boni Expense 12,047 Directly related to trading of Clothes and Garments the retail stores. Books and Periodicals 730 Directly related to trading of Clothes and Garments the retail stores. Computer Exp 7,750 7750 General Repair Expense Conveyance Expense-Asman 48,749 Directly related to trading of Clothes and Garments the retail stores. Electrical Expense 6,75,739 Directly related to the retail store used for trading of Clothes and Garments Entertainment Exp 72,814 Directly related to trading of Clothes and Garments the retail stores. Filing Fees 5,270 5,270 General ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Clothes and Garments the retail stores. Repairs Air Con 73 559 Directly related to trading of Clothes and Garments the retail stores. Repairs to Building 7,67,021 Directly related to trading of Clothes and Garments the retail stores. Security Charges 3,03,193 Directly related to trading of Clothes and Garments the retail stores. Service Maintenance Exp 29,700 29,700 General Business Expenses Signboard Exp 1,386 Directly related to trading of Clothes and Garments the retail stores. Stamp and Notary Charges 3,930 Directly related to trading of Clothes and Garments the retail stores. Telephone Expense-Asman 23,646 23,646 General Business Expenses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incurred exclusively and specifically for carrying the business of trading of clothes and garments. 1.8 On consideration of the breakup of the above general business expense, it is evident that these expenses are general in nature and has no relation with the investment activity of the assessee company. These general business expenses had to be incurred even if there were no investments made by the assessee company. The quantum and nature of general business expenses remain unchanged and unaffected by the investment activity of the assessee company and so no portion of general administration charges is attributable to the investment activity of the assessee company and so has no relation with the exempt income of the assessee company. Hence, no portion of administrative expenses is attributable to the earning of exempt income and so any disallowance made under the provisions of Section 14A of the Act is not justified. 1.9 Without prejudice to above, as regard the administrative expenditure, it is stated that the assessee company has average investment of ₹ 66,05,28,155/-. Therefore, by applying rule 8D the said disallowance would work out to ₹ 33,02,640/- bein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 (ii) In a case where the assessee has incurred expenditure by way of interest during the previous year which is not directly attributable to any particular income or receipt, an amount computed in accordance with the following formula, namely A X B/C Where (A) amount of expenditure by way of interest other than the amount of interest included in clause (i) incurred during the previous year; 415112 388867 (B) the average of value of investment, income from which does not or shall not form part of the total income, as appearing in the balance-sheet of the assessee, on the first day and the last day of the previous year; P.Y. Invest. 1321041310 C.Y. Invest. 3264110 Total 1324305420 2 662152710 PY+CY ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed any tax free income this year, there is no question for making any disallowance under section 14A. The assessee was holding long term investments of ₹ 32.64 crores as at the beginning of the year and of ₹ 32.64 lacs as at the end of the year; that except for a miniscule investment of ₹ 15,000/- in unquoted Government securities, all the investments as at the beginning of the year were strategic investments in Appellant s subsidiary companies; that all these investments came to be transferred to Arvind Limited with effect from 1st January, 2011 upon the Hon ble Gujarat High Court passing an order dated 29/11/2011 approving demerger of the Appellant s Investments Division which thereupon stood transferred to Arvind Limited. 8. All the investments as at the end of the year viz. ₹ 32.64 lacs had been made by the revenue this year from its own funds in its subsidiary companies only; that thus, these investments too were strategic investments. 9. Assessee was engaged in the business of trading of cloth and readymade garments; that its entire turnover of ₹ 94.85 crore came from this business; that on the other hand, as explained before, the Appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X
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