JCIT (OSD), CHENNAI V. Chennai Radha engineering Works P Ltd., CHENNAI

ITA 1540/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7942 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 28-11-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 27-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUPRIYO PAL
• Assessee Lawyers: N VIJAYAKUMAR
• Keywords: Earning of tax free income; Wholly owned subsidiary; Onus to prove
• Section: 143(3); 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , B B ENCH, CHENNAI . , ' # . $ , & ' BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICI AL MEMBER I.T.A.NO.1540/MDS/2016 & C.O.NO.105/MDS/2016 ( / ASSESSMENT YEAR: 2011-12) THE JOINT COMMISSIONER OF INCOME TAX (OSD), CORPORATE CIRCLE-I(2), CHENNAI-34. VS M/S. CHENNAI RADHA ENGINEERING WORKS P.LTD., 40, SAPTHAGIRI COLONY, JAFFERKHANPET, CHENNAI-600 083. PAN: AACCC6068R ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. SUPRIYO PAL, JCIT /RESPONDENT BY : MR. N.VIJAYAKUMAR, C.A. /DATE OF HEARING : 28 TH NOVEMBER , 2016 /DATE OF PRONOUNCEMENT : 30 TH NOVEMBER, 2016 / O R D E R PER A. MOHAN ALANKAMONY, AM:- THE APPEAL AND THE CROSS OBJECTION ARE FILED BY TH E REVENUE AND THE ASSESSEE RESPECTIVELY AGGRIEVED BY THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS)- 1, CHENNAI DATED 18.02.2016 IN ITA NO.60/CIT(A)-1/ 2014-15 PASSED UNDER SECTION 143(3) R.W.S 250(6) OF THE ACT . 2. THE REVENUE HAS RAISED SEVERAL GROUNDS IN ITS AP PEAL; HOWEVER THE CRUX OF THE ISSUE IS THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN D IRECTING THE LEARNED ASSESSING OFFICER TO RE-COMPUTE THE DIS ALLOWANCE 2 ITA NO.1540/MDS/2016 & C.O.NO.105/MDS/2016 OF RS.32,72,034/- BY INVOKING THE PROVISIONS OF SE CTION 14A R.W.S. 8D BEING INTEREST EARNED FROM SUBSIDIARY CO MPANIES. 3. THE CRUX OF THE ISSUE RAISED BY THE ASSESSEE IN ITS CROSS OBJECTION IS THAT THE LEARNED ASSESSING OFFIC ER HAS ERRED IN COMPUTING THE AVERAGE VALUE OF TOTAL ASSET S AMOUNTING TO RS.109,75,63,915/- FOR THE PURPOSE OF DISALLOWANCE UNDER RULE 8D(2)(II). 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE MANUFACTURING OF COMPONENTS & SPARES FOR CONVEYOR SYSTEMS AND HAVING LABOUR CONTR ACT OF OPERATION & MAINTENANCE IN THERMAL POWER STATIONS, PORT & GENERATION OF POWER FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2011-12 ON 26.09.2011 ADMITTING TOT AL INCOME OF RS.11,00,55,040/-. THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143(2) WAS ISSUED TO THE ASSESSEE ON 13.09.2012. SUBSEQUENTLY, THE LEARNED ASSESSING OFFICER HAS COMPLETED THE ASSESSMENT UNDE R SECTION 143(3) OF THE ACT ON 13.03.2014, WHEREIN HE MADE 3 ITA NO.1540/MDS/2016 & C.O.NO.105/MDS/2016 CERTAIN ADDITIONS/DISALLOWANCES AMONGST WHICH ONE O F THE DISALLOWANCE IS MADE UNDER SECTION 14A OF THE ACT. WHILE DOING SO, THE LEARNED ASSESSING OFFICER OBSERVED AS UNDER:- 5.4.5.LT IS CLEAR FROM THE ABOVE THAT, THE ONUS TO PROVE THAT, INVESTMENTS WERE NOT MADE OUT OF INTEREST BEA RING FUNDS SQUARELY LIES ON THE ASSESSEE. HENCE, IN THIS CASE, THE ASSESSEE FAILED TO ESTABLISH WITH EVIDENC E THAT, INVESTMENTS MADE BY THE ASSESSEE COMPANY ARE NOT OU T OF INTEREST BEARING FUNDS. EVEN IF THE ASSESSEE COM PANY HAS INTEREST FREE FUNDS AND INTEREST BEARING FUNDS, IT CANNOT BE PRESUMED THAT INVESTMENTS WERE MADE OUT O F INTEREST FREE FUNDS ONLY OR THAT INVESTMENTS WERE M ADE OUT OF INTEREST BEARING FUNDS ONLY. SINCE THERE ARE MIXED FUNDS (INTEREST BEARING AND INTEREST FREE) AND HENC E, PROPORTIONATE DISALLOWANCE OF INTEREST IS ENVISAGED . THIS ANALOGY ITSELF IS ENSHRINED IN RULE 80(II) OF INCOM E-TAX RULES. IT IS EMPHASIZED THAT, THE ENTIRE INTEREST EXPENDITURE HAS NOT BEEN DISALLOWED AS ENVISAGED IN SEC.36(1 )(III) OF INCOME-TAX ACT, BUT THE DISALLOW ANCE IS ON PROPORTIONATE BASIS. 5. ON APPEAL, THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS) REMITTED BACK THE MATTER TO THE FILE OF T HE LEARNED ASSESSING OFFICER TO PASS APPROPRIATE ORDERS IN THE LIGHT OF THE DECISIONS RENDERED BY THE CHENNAI BENCH OF THE TRIBUNAL. THE RELEVANT PORTION OF THE ORDER IS REPRODUCED HER EIN BELOW FOR REFERENCE:- 10. I HAVE CAREFULLY CONSIDERED THE FACTS IN ISSU E, THE VIEW TAKEN BY THE AO, THE ARGUMENTS ADVANCED BY THE APPELLANT AND MATERIAL ON RECORD. IN EIH HOTELS LTD V. DCIT, ITA NO. 1503 & 1624/MDS/2012 DATED 17.7.2013 4 ITA NO.1540/MDS/2016 & C.O.NO.105/MDS/2016 (CHENNAI TRIBUNAL) IT WAS HELD BY THE ITAT THAT WHE RE INVESTMENTS WERE MADE BY THE ASSESSEE IN THE SUBSID IARY COMPANY THE SAME ARE NOT TO EARN CAPITAL GAINS OR DIVIDEND INCOME. THEY WERE MADE TO PROMOTE THE SUBSIDIARY COMPANY. THE ASSESSEE NOT BEING IN THE BUSINESS OF INVESTMENT, SUCH INVESTMENTS WERE MADE ON ACCOUNT OF BUSINESS EXPEDIENCY. THE DIVIDEND EARNED BY THE ASSESSEE FROM INVESTMENT IN SUBSIDIARY COMPANY IS PURELY INCIDENTAL. THEREFORE THE INVESTMENT MADE BY THE ASSESSEE IN ITS SUBSIDIARY ARE NOT TO BE RECKONED F OR DISALLOWANCE U/S 14A R.W. RULE 80. IN OCIT V.AMALGAMATIONS LTD IN ITA NO.811 & 1712/MDS/2015 ORDER DT. 16.9.2015 AND 29.9.2015 IT WAS HELD SIMIL ARLY RELIANCE BEING PLACED IN THE RATIO IN EIH ASSOCIATE S HOTELS V. CIT. 11. IN ACIT V. M. BASKARAN IN ITA NO. 1717/MDS/2013 ORDER DT. 31 ST OF JULY, 2014 THE FACTS RELATED TO THE ASSESSEE WHICH HAD NOT RECEIVED ANY EXEMPT INCOME. THE ITAT HELD THEREIN THAT DISALLOWANCE U/S 14A COULD N OT BE SUSTAINED IN SUCH CIRCUMSTANCES. IN CHEMINVEST LTD V. CIT 3781TR 33 ORDER DATED 2.9.2015 IN ITA NO.749/2014 T HE HON'BLE DELHI HIGH COURT HELD THAT DISALLOWANCE U/S 14A ENVISAGES THAT THERE SHOULD BE A ACTUAL RECEIPT OF INCOME, WHICH IS NOT INCLUDIBLE IN THE TOTAL INCOME, DURING THE RELEVANT PREVIOUS YEAR FOR THE PURPOSE OF DISALLOWI NG ANY EXPENDITURE INCURRED IN RELATION TO THE SAID INCOME . IN OTHER WORDS, S.14A WILL NOT APPLY IF NO EXEMPT INCO ME IS RECEIVED OR RECEIVABLE DURING THE RELEVANT PREVIOUS YEAR. 12. IN THE CASE OF ACIT V. FARIDA SHOES PVT LTD THE HON'BLE ITAT CHENNAI BENCH IN ITA NOS.2102 & 2103/MDS/2015 FOR A.YS 2011-12 & 2012-13, BY REFERRING TO THE DECISION IN THE CASE OF ACIT V. MIS BEST & CROMPTON ENGINEERING LTD IN ITA NO.1603/MDS/2012 DATED 16.7.2013 WHEREIN IT WAS OBSERVED THAT INTEREST ON BORROWINGS USED FOR THE BUSINESS CANNOT BE CONSIDER ED FOR THE PURPOSE OF COMPUTING DISALLOWANCE U/S 14A R.W. RULE 80(2)(II), DISMISSED THE APPEAL OF THE REVENUE. 13. TAKING THE SUM TOTALITY OF THE RATIOS IN THE FO REGOING INTO ACCOUNT, I AM OF THE CONSIDERED VIEW THAT THE CASE OF THE APPELLANT HAS TO BE CONSIDERED IN THE LIGHT OF THE SAID RATIOS. THE INVESTMENTS ADMITTEDLY OUT OF BORR OWED 5 ITA NO.1540/MDS/2016 & C.O.NO.105/MDS/2016 FUNDS WERE FOR STRATEGIC INVESTMENTS IN- SUBSIDIARY COMPANIES. THEREFORE, THE INTEREST ATTRIBUTABLE TO THE BORROWING HAS TO KEPT OUT WHILE WORKING OUT THE DISALLOWANCE UNDER RULE 80. ALSO THE INVESTMENTS MA DE FOR SPECIFIC PURPOSE HAVE ALSO TO BE KEPT ASIDE FOR CALCULATING DISALLOWANCE U/S 14A R.W. RULE 80 IN TE RMS OF THE RATIO IN FARIDA SHOES (SUPRA). SIMILARLY, AS TH E APPELLANT HAS NOT EARNED ANY INCOME FROM DIVIDEND F ROM ITS INVESTMENTS MADE DURING THE YEAR, NO DISALLOWAN CE CAN BE COMPUTED UNDER RULE 80. RESPECTFULLY FOLLOWING T HE RATIOS ABOVE AND OTHER CASE-LAWS RELIED UPON BY THE APPELLANT, THE AO IS DIRECTED TO RECOMPUTE THE DISALLOWANCE IN THE LIGHT OF THE ABOVE OBSERVATIONS . THIS GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSE S. 6. BEFORE US, THE LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED THAT THE ASSESSEE HAS GENERAL RESERVE & S URPLUS AND ITS OWN CAPITAL MUCH BEYOND THE INVESTMENT MADE IN THE EQUITY SHARES OF ITS SISTER CONCERNS. THEREFORE, THE ASSESSEE HAD NOT INCURRED ANY EXPENDITURE FOR EARNING EXEMPT INCOME. MOREOVER, THE INVESTMENTS WERE MADE IN SISTER CONCE RNS FOR STRATEGIC REASONS OUT OF ITS OWN INTEREST FREE FUND S. IT WAS THEREFORE PLEADED THAT THE DISALLOWANCE MADE BY THE LEARNED ASSESSING OFFICER INVOKING THE PROVISIONS OF SECTIO N 14A MAY BE DELETED. 7. THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE O THER HAND, ARGUED IN SUPPORT OF THE ORDER OF THE LEARNED ASSESSING 6 ITA NO.1540/MDS/2016 & C.O.NO.105/MDS/2016 OFFICER AND PLEADED THAT THE ORDER OF THE LEARNED A SSESSING OFFICER MAY BE REINSTATED. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE MATERIALS ON RECORD. ON VERIFYING THE B ALANCE SHEET SUBMITTED BY THE ASSESSEE WE FIND THAT THE GE NERAL RESOURCE AND SURPLUS OF THE ASSESSEE COMPANY IS RS.24,24,09,811/- WHICH IS MUCH MORE THAN THE INVES TMENT MADE BY THE ASSESSEE IN ITS SISTER CONCERNS OF RS.11,24,53,000/-. THIS BENCH OF THE TRIBUNAL ON TH E EARLIER OCCASION IN THE CASE OF RANE HOLDINGS LTD. VS. ACIT IN ITA NO.115/MDS/2015 VIDE ORDER DATED 06.01.2016 HAD HEL D THAT WHERE INVESTMENTS ARE MADE IN SISTER CONCERNS FOR S TRATEGIC REASONS, NO EXPENSES CAN BE INFERRED TO HAVE BEEN I NCURRED IF SUCH INVESTMENTS ARE MADE OUT OF NON-INTEREST BE ARING FUNDS OF THE ASSESSEE. THE GIST OF THE RELEVANT ORD ER IS REPRODUCED HEREIN BELOW FOR REFERENCE:- 5. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY PE RUSED THE MATERIALS AVAILABLE ON RECORD. ON THE IDENTICAL ISSUE AS POIN TED OUT BY THE LD. A.R. THE CHENNAI BENCH OF THE TRIBUNAL IN ITA NO.156/MDS /2013 VIDE ORDER DATED 20/08/13 FOR THE ASSESSMENT YEAR 2009-10 HAS REMITTED BACK THE MATTER TO THE LD. ASSESSING OFFICER TO DECIDE THE M ATTER ONCE AGAIN AFRESH BASED ON THE FINDINGS WHETHER THE ASSESSEE H AD ACTUALLY INCURRED 7 ITA NO.1540/MDS/2016 & C.O.NO.105/MDS/2016 ANY EXPENDITURE IN EARNING THE DIVIDEND INCOME. THE RELEVANT PORTION OF THE ORDER IS EXTRACTED HEREIN BELOW FOR REFERENCE:- FURTHER, ON THE IDENTICAL ISSUE VARIOUS BENCHES OF THE TRIBUNAL AND THE HONBLE BOMBAY HIGH COURT HAVE HELD AS FOLLOWS:- I) GARWARE WALL ROPES LTD., VS. ACIT REPORTED IN (2 014) 65 SOT 086 (MUM.) HELD AS FOLLOWS:- II) WHEN ASSESSEE HAS PRIMA FACIE BROUGHT OUT CASE THA T NO EXPENDITURE HAS BEEN INCURRED FOR EARNING INCOME, W HICH DOES NOT FORM PART OF TOTAL INCOME, THEN IN ABSENCE OF A NY FINDING THAT EXPENDITURE HAS BEEN INCURRED FOR EARNING EXEMPT IN COME PROVISIONS 14A CANNOT BE APPLIED.. III) INTEGLOBE ENTERPRISES LTD., VS. DCIT REPORTED IN (2014) 40 CCH 0022(DEL. TRIB.) HELD AS FOLLOWS:- NO DISALLOWANCE OF INTEREST IS REQUIRED TO BE MADE UNDER RULE 8D(I) & 8D(II) WHERE NO DIRECT OR INDIRECT INT EREST EXPENDITURE WAS INCURRED FOR MAKING INVESTMENTS.WHE RE THE ASSESSEE HAD UTILIZED INTEREST FREE FUNDS FOR M AKING FRESH INVESTMENTS AND THAT TOO INTO ITS SUBSIDIARIE S, WHICH WAS NOT FOR THE PURPOSE OF EARNING EXEMPT INCOME AN D WHICH WAS FOR STRATEGIC PURPOSES ONLY, NO DISALLOWA NCE OF INTEREST WAS REQUIRED TO BE MADE UNDER RULE 8D(I) & 8D(II) AND STRATEGIC INVESTMENT HAS TO BE EXCLUDED FOR PUR POSE OF ARRIVING AT DISALLOWANCE UNDER RULE 8D(III). IV) M/S.JM FINANCIAL LTD., VS. ACIT REPORTED IN 2 014- TIOL-202-ITAT-MUM HELD AS FOLLOWS: THE DEPARTMENT HAS NOT DISPUTED THIS FACT OUT OF THE TOTAL INVESTMENT ABOUT 98% OF THE INVESTMENT ARE IN SUBSI DIARY COMPANIES OF THE ASSESSEE AND, THEREFORE, THE PURPO SE OF INVESTMENT IS NOT FOR EARNING THE DIVIDEND INCOME B UT HAVING CONTROL AND BUSINESS PURPOSE AND CONSIDERATION. THE ASSESSEE HAS BROUGHT OUT A CASE TO SHOW THAT NO EXPENDITURE HAS BEEN INCURRED FOR MAINTAINING THE 98% OF THE INVESTMENT MADE IN T HE SUBSIDIARY COMPANIES, THEREFORE, IN THE ABSENCE OF ANY FINDING THAT ANY EXPENDITURE HAS BEEN INCURRED FOR EARNING THE EXEMP T INCOME, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS NOT J USTIFIED, ACCORDINGLY THE SAME IS DELETED. (V) CIT VS. BHARTI TELEVENTURE LTD. REPORTED IN (20 11) 331 ITR 0502. WHERE THE ASSESSEE WAS FOUND TO BE HAVING ADEQUATE NON- INTEREST BEARING FUND BY WAY OF SHARE CAPITAL AND R ESERVES AND THERE WAS NO NEXUS BETWEEN THE BORROWALS OF ASSESSE E AND THE ADVANCES GIVEN, NO DISALLOWANCE FOR INTEREST WAS CA LLED FOR . 8 ITA NO.1540/MDS/2016 & C.O.NO.105/MDS/2016 (VI) CIT VS. RELIANCE UTILITIES & POWER LTD., REPOR TED IN (2009) 313 ITR 0340(BOM.) HAS HELD AS FOLLOWS:- TRIBUNAL HAVING RECORDED A CLEAR FINDING THAT THE ASSESSEE POSSESSED SUFFICIENT INTEREST-FREE FUNDS OF ITS OWN WHICH WERE GENERATED IN THE COURSE OF THE RELEVANT FINANCIAL Y EAR, APART FROM SUBSTANTIAL SHAREHOLDERS FUND, PRESUMPTION STANDS E STABLISHED THAT THE INVESTMENTS IN SISTER CONCERNS WERE MADE B Y THE ASSESSEE OUT OF INTEREST FREE FUNDS AND THEREFORE NO PART OF INTEREST ON BORROWINGS CAN BE DISALLOWED ON THE BASIS THAT THE INVESTMENTS WERE MADE OUT OF INTEREST BEARING FUNDS. (VII) EIH ASSOCIATED HOTELS LTD VS. DCIT REPORTED I N 2013- TIOL-796-ITAT-MAD . THE INVESTMENTS MADE BY THE ASSESSEE IN THE SUB SIDIARY COMPANY ARE NOT ON ACCOUNT OF INVESTMENT FOR EARNIN G CAPITAL GAINS OR DIVIDEND INCOME. SUCH INVESTMENTS HAVE BEE N MADE BY THE ASSESSEE TO PROMOTE SUBSIDIARY COMPANY INTO THE HOTEL INDUSTRY. THE ASSESSEE IS NOT INTOTHE BUSINESS OF I NVESTMENT AND THE INVESTMENTS MADE BY THE ASSESSEE ARE ON ACCOUNT OF BUSINESS EXPEDIENCY. ANY DIVIDEND EARNED BY THE ASSESSEE FRO M INVESTMENT IN SUBSIDIARY COMPANY IS PURELY INCIDENTAL. THEREFO RE THE INVESTMENT MADE BY THE ASSESSEE IN ITS SUBSIDIARY I S NOT TO BE RECKONED FOR DISALLOWANCE U/S.14A R.W.R.8D. THE ASS ESSING OFFICER IS DIRECTED TO RE-COMPUTE THE AVERAGE VALUE OF INVESTMENT UNDER THE PROVISIONS OF RULE 8D AFTER DELETING INVE STMENTS MADE BY THE ASSESSEE IN SUBSIDIARY COMPANY. TAKING NOTE OF THE ABOVE DECISIONS AND THE DECISION OF THE CHENNAI BENCH OF THE TRIBUNAL IN ITA NO.156/MDS/13 CITED SUPRA, WE HEREBY REMIT THE MATTER BACK TO THE FILE OF LD. ASSESSING OFFICER TO EXAMINE THE ISSUE INVOLVED IN THIS CASE AFRESH AND PASS APPROPRIATE ORDER AS PER LAW AND ME RITS AND IN THE LIGHT OF THE DECISIONS CITED HEREIN ABOV E. WHILE DOING SO, WE ALSO DIRECT THE LD. ASSESSING OFFICER TO CONSIDER THE DECISION OF THE TRIBUNAL IN THE CASE M /S AGILE ELECTRIC SUB ASSEMBLY PVT. LTD. CITED SUPRA WHEREIN IT WAS HELD AS FOLLOWS:- 7.2 IN REGARD TO APPLICABILITY OF SECTION 14A OF THE ACT READ WITH RULE 8D ALSO; THE ABOVE VIEW WILL BE APPLICABL E. MOREOVER IN THE CASE EIH ASSOCIATED HOTELS LTD V. D CIT REPORTED IN 2013 (9) TMI 604 IN ITA NO.1503, 1624/MDS/2012 DATED 17 TH JULY, 2013, IT HAS BEEN HELD BY THE CHENNAI BENCH OF THE TRIBUNAL AS FOLLOWS:- DISALLOWANCE U/S. 14A RW RULE 8D CIT UPHELD DISAL LOWANCE HELD THAT INVESTMENTS MADE BY THE ASSESSEE IN T HE SUBSIDIARY COMPANY ARE NOT ON ACCOUNT OF INVESTMENT FOR EARNING CAPITAL GAINS OR DIVIDEND INCOME. SUCH INVE STMENTS 9 ITA NO.1540/MDS/2016 & C.O.NO.105/MDS/2016 HAVE BEEN MADE BY THE ASSESSEE TO PROMOTE SUBSIDIAR Y COMPANY INTO THE HOTEL INDUSTRY. A PERUSAL OF THE ORDER OF THE CIT(APPEALS) SHOWS THAT OUT OF TOTAL INVESTMENT OF RS.64,18,19,775/-, RS.63,31,25,715/- IS INVESTED IN WHOLLY OWNED SUBSIDIARY. THIS FACT SUPPORTS THE CASE OF TH E ASSESSEE THAT THE ASSESSEE IS NOT INTO THE BUSINESS OF INVES TMENT AND THE INVESTMENTS MADE BY THE ASSESSEE ARE ON ACCOUNT OF BUSINESS EXPEDIENCY. ANY DIVIDEND EARNED BY THE ASSESSEE FRO M INVESTMENT IN SUBSIDIARY COMPANY IS PURELY INCIDENT AL. THEREFORE, THE INVESTMENTS MADE BY THE ASSESSEE IN ITS SUBSIDIARY ARE NOT TO BE RECKONED FOR DISALLOWANCE U/S. 14A R.W.R. 8D. THE ASSESSING OFFICER IS DIRECTED TO RE- COMPUTE THE AVERAGE VALUE OF INVESTMENT UNDER THE PROVISIONS OF RULE 8D AFTER DELETING INVESTMENTS MADE BY THE ASSESSEE IN SUBSIDIARY COMPANY DECIDED IN FAVOUR OF ASSESSEE. FOR THE ABOVE SAID REASONS, WE HEREBY HOLD THAT IN THE CASE OF THE ASSESSEE THE PROVISIONS OF SECTION 14A READ WITH RU LE 8D WILL NOT BE APPLICABLE IN REGARD TO INVESTMENTS MADE FOR ACQUIR ING THE SHARES OF THE ASSESSEES SISTER CONCERNS. ACCORDINGLY WE REST RAIN OURSELVES FROM INTERFERING WITH THE ORDER OF THE LD.CIT(A) ON THIS REGARD. 9. FURTHER, THE CHENNAI BENCH OF THE TRIBUNAL IN TH E CASE MACMILLAN PUBLISHERS INDIA P.LTD. VS. ACIT IN ITA NO.388/MDS/2016 VIDE ITS ORDER DATED 12.05.2016 ON IDENTICAL FACTS FOLLOWING THE ABOVE SAID DECISION H ELD AS UNDER:- THEREFORE, FOLLOWING THE AFORESAID DECISION OF T HE TRIBUNAL, WE HEREBY DIRECT THE LEARNED ASSESSING OF FICER TO DELETE THE ADDITION MADE BY INVOKING THE PROVISI ONS OF SECTION 14A R.W. RULE 8D OF THE ACT, SUBJECT TO VERIFICATION THAT INVESTMENTS ARE MADE BY THE ASSES SEE IN ITS SISTER CONCERNS ONLY AND FROM ITS INTEREST F REE FUNDS. 10. ACCORDINGLY, WE HEREBY REMIT THIS CASE BACK TO THE FILE OF THE LEARNED ASSESSING OFFICER TO VERIFY WHETHER THE INTEREST 10 ITA NO.1540/MDS/2016 & C.O.NO.105/MDS/2016 FREE FUNDS OF THE ASSESSEE AS DISCUSSED BY US HEREI N ABOVE ARE INVESTED IN THE SISTER CONCERNS OF THE ASSESSEE AND THEREAFTER PASS APPROPRIATE ORDER IN THE LIGHT OF T HE DECISION OF THE CHENNAI BENCH OF THE TRIBUNAL CITED HEREIN ABOV E. IT IS ORDERED ACCORDINGLY. 11. IN THE RESULT, THE CROSS OBJECTION OF THE ASSES SEE IS ALLOWED FOR STATISTICAL PURPOSES AS INDICATED HEREI NABOVE AND THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 30 TH NOVEMBER , 2016 SD/- SD/- ( ' # . $ ) ( . ) ( DUVVURU RL REDDY ) ( A. MOHAN ALANKAMONY ) ! # / JUDICIAL MEMBER # / ACCOUNTANT MEMBER ! /CHENNAI, & /DATED 30 TH NOVEMBER, 2016 SOMU *+ ,+ /COPY TO: 1. APPELLANT 2. RESPONDENT 3. - () /CIT(A) 4. - /CIT 5. + 1 /DR 6. /GF