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TMI Blog2015 (6) TMI 1207X X X X Extracts X X X X X X X X Extracts X X X X ..... f promotion of business more specifically to retain control or as part of the strategic investment of the assessee company, such expenses by way of interest out go would have to be treated as allowable under section 36(1)(iii) . The above decision of the Hon ble Delhi High Court is also squarely applicable to the facts of the case of the assessee. Since the interest expenditure incurred by the assessee is allowable under section 36(1)(iii) as business expenses, there is no question of disallowance of the same u/s 14A of the Act on account of investments made in relation to earning of exempt income. The facts on the file clearly reveal that the investment in the shares of the subsidiary company was not made for the purpose of earning of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by: Shri Neil Philip, D.R. ORDER Sanjay Garg, The present appeal has been preferred by the assessee against the order dated 23.08.2012 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2004-05. 2. The assessee, through its grounds of appeal, has contested the disallowance of interest expenditure of ₹ 12,24,308/-. This is the second round of appeal before us. The original return of the assessee was processed under section 143(1) of the Act. Thereafter, the case was reopened under section 147 of the Act. The Assessing Officer (hereinafter referred to as the AO) noted that the assessee had taken interest bearing loans and the same were utilized for making ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove contention of the assessee. He, relying upon the decision of the special bench of the Tribunal in the case of Chem Investments (supra) held that even if there was no exempt income during the year still, the provisions of section 14A were applicable. He further observed that the assessee had used interest bearing borrowings for investment in subsidiary company and the same were not used for business purpose of the assessee. He thereafter concluded that since the assessee had utilized the interest bearing borrowed funds for making investment in the shares of the subsidiary company, hence the interest expenditure was incurred in relation to income which does not form part of the total income. He, therefore, disallowed the said interest e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubsidiary but later on it acquired the full interest in the said company. The Ld. A.R. of the assessee has brought our attention to the decision of the Hon ble Bombay High Court in the case of CIT, Panaji, Goa vs. Phil Corpn. Ltd. (2011) 202 Taxman 368 wherein the Hon ble Bombay High Court has held that where the investment in shares of sister/subsidiary company is made to have control over that company and further that such an investment was accordingly part of the business activity of the assessee, in that event, the assessee is entitled to deduction of interest paid on the borrowed amount under section 36(1)(iii) of the Act. In this case also the assessee company is engaged in the business of finance and investment in equity shares. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh Court in the case of CIT, Panaji, Goa vs. Phil Corpn. Ltd. (supra) and Hon ble Delhi High Court in the case of Eicher Goodearth Ltd. vs. CIT (supra) is held to be for the purpose of promotion of the business of the assessee. Even it is also an admitted fact that the assessee during the year had not earned any exempt income. The AO had made the disallowance under section 14A relying upon the decision of the special bench of the Tribunal in the case of Chem. Investments vs. ITO (supra). However, we find that the said special bench decision of the Tribunal has been overruled by the Hon ble Delhi High Court in the case of Chem. Investments vs. CIT styled as (2015) 61 taxman.com 118 wherein the Hon ble Delhi High Court has held tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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