2021 (12) TMI 928

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..... ived by the assessee during the year, the disallowance made by the ld. AO u/s.14A of the Act has been deleted by the ld. CIT(A). The matter ends there. CIT(A) could not have looked into a new source of income i.e. disallowance of interest u/s.36(1)(iii) of the Act. We also find that from the perusal of the entire CIT(A) s order, there is not even a whisper about proposal to enhance the assessment by issuing proper enhancement notice to the assessee in terms of Section 251 of the Act. In any case, the undisputed fact is that the borrowed funds has been utilized by the assessee for making investment in the group company which is made in the ordinary course of business and hence, once the borrowed funds are utilized for the purpose of bu .....

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..... providing HR consulting services, training and development and staffing services as well as in financial activities. The return of income for the A.Y.2014-15 was filed by the assessee company on 30/11/2014 declaring loss of ₹ 1,39,73,198/- under normal provisions of the Act which was duly processed u/s.143(1) of the Act. We find that the ld. AO in the assessment proceedings observed that assessee had made investment in shares to the tune of ₹ 10,35,28,236/- which would fetch exempt income for the assessee. Accordingly, he proceeded to examine the applicability of provisions of Section 14A of the Act r.w.r.8D(2) of the Rules. The assessee pointed out that it has not earned any exempt income during the year under consideration out .....

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..... t. It is not in dispute that the borrowed funds were used by the assessee company for making such strategic investment. The assessee has also pointed out before the ld. AO that this investment made in group company was made on the basis of commercial expediency and as a measure of strategic investment, which has been duly accepted by the ld. AO. The ld. AO had however, applied only the provisions of Section 14A of the Act as according to him, the provisions of 14A of the Act would be applicable even for strategic investment. Hence, the short dispute that ultimately went before the ld. CIT(A) was whether the disallowance u/s.14A of the Act could be made in respect of strategic investments made by the assessee. The ld. CIT(A) is bound to adju .....

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