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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 ..... . 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 investment in unquoted equity shares of subsidiary company of the assessee. The AO disallowed interest amount of Rs. 12,24,308/- under section 36(1)(iii) of the Act. The assessee preferred appeal before the Ld. CIT(A) against the said order. 3. The Ld. CIT(A), however, directed the AO to compute disallowance under rule 8D for the purpose of disallowance under section 14A instead of that under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pose 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 expenditure under section 14A of the Act. The AO further observed that the interest payment was also not allowable under section 36(1)(iii) of the Act as it was apparent that the assessee had taken interest bearing loan from directors and the same had been used for making investment in unquoted equity shares of subsidiary company and hence the said funds were used for non business purposes. He accordingly hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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. The borrowed capital was used for acquiring the equity shares of the subsidiary to have controlling interest. The proposition of law laid down by the Hon'ble Bombay High Court in the case of "Phil Corpn. Ltd." (supra) is squarely applicable to the case of the assessee. We, further find that recently the Hon'ble Delhi High Court in the case of "Eicher Goodearth Ltd. vs. CIT" (2015) 60 taxman.com 268 (Del.) has held t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 that the section 14A will not apply if no exempt income is received or receivable during the relevant previous year. Identical view has been taken by the Hon'ble Allahabad High Court in the case of "CIT Kanpur vs. M/s. Shivam Motors Pvt. Ltd." in ITA No.88 of 2014 vide order dated 05.05.2014; by the Hon'ble Gujarat High Court in the case of "CIT vs. Corrtecth Energy Pvt. Ltd." in ITA No.239 of 2014 vide order dated 24.03.2014 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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