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TMI Blog2016 (9) TMI 1635X X X X Extracts X X X X X X X X Extracts X X X X ..... ld not operate at all as the investment made thereon is not with an intention to earn any exempt income in the form of dividend but only for obtaining controlling interest in the said companies and to further the business interests of the assessee in the said company. Thus we hold that no disallowance of interest is required to be made under rule 8D(i) 8D (ii) as no direct or indirect interest expenditure has incurred for making investments. Hence this ground of appeal of the Revenue is dismissed. Addition u/s 14A r.w.r. 8D(iii) to the book profit computed u/ s 115JB of the Act - HELD THAT:- While computing the Book Profit of the company under the provisions of section 115JB of the Act, any disallowance made under the normal provisions of the Act also cannot be given effect to for arriving at the Book Profit for the purpose of Section 115JB of the Act. Accordingly, this ground raised by the assessee is allowed in its favour. - ITA No. 2176/Kol/2013 And ITA No. 2199/Kol/2013 - - - Dated:- 9-9-2016 - Shri Waseem Ahmed, Accountant Member and Shri S.S. Viswanethra Ravi, Judicial Member For the Assessee : Shri K.V. Beswal, FCA. For the Respondent : Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ec. 14A of the Act. Accordingly, AO sought clarification from assessee by issuing notice. In compliance to said notice, assessee submitted that major dividend income was received from M/s Binani Cement Ltd. (BCL for short), subsidiary company of assessee, through ECS. The investment was not made in BCL by way of cash / bank but this investment is the result of hive off the business of cement division towards separate company. All the investments were made in the subsidiary company out of share capital, reserve surplus and internal accruals and promoter s contribution. In none of the case, borrowed fund was used in making such investment. These are very old investment of assessee and no managerial services were involved to maintain such investment. However, the AO disregarded the claim of assessee and invoked the provision of Sec. 14A r.w.s. Rule 8D of the IT Rule, 1962. Accordingly, the following disallowances were made by Assessing Officer:- i) Direct expenditure NIL ii) Disallowance of interest of ₹4,08,49,271/- iii) .5% of average investment of ₹1,37,20,788/- 6. Aggrieved, assessee preferred an appeal before Ld. CIT(A) who deleted the additi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c investment has to be excluded for the purpose of arriving at disallowance under Rule 8D(iii). The Tribunal had relied upon the findings of Kolkata Tribunal in the case of Rei Agro Ltd. v. DCIT in I.T.A No.1331/Del/2011 dated 29.7.2011. The relevant portion of Tribunal findings as contained in the Kolkata Tribunal are reproduced below:- (iii) Further in Rule BD(2)(ii), the words used in numerator B are the average value of the investment, income from which does not form or shall not form part of the total income as appearing in the balance sheet as on the first day and in the last day of the previous year . The Assessing Officer was wrong in taking into consideration the investment of Rs.I03 crores made during the year which has not earned any dividend or exempt income. It is only the average of the value of the investment from which the income has been earned which is not falling within the part of the total income that is to be considered. Thus; It is not the total investment at all beginning of the year and at the end of the year, which is to be considered but it is the average of the value of investments which has given rise to the income which does not form part of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of the case of Dhanuka Sons (supra) 3. That the Ld. CIT(A) has erred in placing reliance on his decision in the case of the assessee itself for the assessment year 2009-10, as the same has been agitated by the Department in appeal before the Hon'ble ITAT (ITA No.144/Kol/2013), 4. That accordingly, the Ld. CIT(A) has erred in law as well as in facts and circumstances of the case in deleting the disallowance of Rs.4,08,49,271/- made u/s. 14A of the Income-tax act, 1961 read with Rule 8D(ii) of the Incometax Rules, 1962; and 5. That the Department craves the right to add, delete, modify or abrogate the grounds of appeal during the course of hearing of the case. The common issue raised by Revenue in this ground of appeal is that ld. CIT(A) erred in deleting the addition made by the AO under section 14A r.w.r. 8D(2)(ii) for Rs. 4,08,49,271.00 on account of interest. The facts as emerging from the order of the lower authorities have already been explained in Para 5 6 of this order. Being aggrieved by the order of the ld. CIT(A), Revenue is in appeal before us. The ld. DR before us vehemently supported the order of the AO and the ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e take up the appeal for assessment year 2008-09. In this year, the assessee had three type of investments one relating to investment in subsidiary companies the amount of which is Rs.101.74 crores. The second category relates to long term unquoted shares the amount of which is Rs.31.53 crores. The third category is of equity shares the value of which is Rs.14.88Iakhs and the last category is investment in units of mutual funds amounting to Rs.10.15 crores. These facts and figures are verifiable from paper book page 204A. As regards the first category of shares in the form of investment into subsidiary companies we find that investment into this category of shares had increased from Rs.78.17Iakhs to Rs.101.74 crores which is due to increase in investment in preference shares and other equity shares. During this period, the interest' bearing funds had decreased from Rs.1.49 crores to Rs.87,30 lakhs as is apparent from paper book page 203 and further most of the interest bearing loans are for vehicle loans as mentioned in paper book page 203. During this year under consideration, the assessee has earned a cash profit of Rs.11 crores. The cash flow statement at paper book page 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 115JB of the Act is also a provision with fiction for payment of tax in respect of deemed income. Therefore while computing the profit for the purpose of Section 115JB of the Act another provision with fiction cannot be superimposed. Hence the question of increasing the 'Book Profit' due to the disallowance U/s. 14A of the Act will not arise. However, in the instant case of the assessee, since we have already deleted the addition made U/s. 14A, the question of increasing the book profit will not arise. Further the decision of Hon'ble Apex Court cited by the assessee in the case Apollo Tyres Ltd. v. CIT [2002] 255 ITR 273/122 Taxman 562 is also squarely applicable to the case of the assessee. The gist of the same is reproduced herein below for reference:- The Assessing Officer, while computing the book profits of a company under section 115J of the Income-tax Act, 1961, has only the power of examining whether the books of account are certified by the authorities under the Companies Act as having been properly maintained in accordance with the Companies Act. The Assessing Officer, thereafter, has the limited power of making increases and reductions as provi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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