M/s. Lucas India Service Ltd., CHENNAI V. ACIT, CHENNAI

ITA 2684/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7443 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 06-03-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 16-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS
• Keywords: Depreciation; Business expenditure; Earning of tax free income; Wholly owned subsidiary
• Section: 143(3); 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , A B ENCH, CHENNAI . , ! . , % !& BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER, AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ./ ITA NOS.2684 TO 2687/MDS/2016 / ASSESSMENT YEARS : 2005-06, 2007-08, 2008-09 & 20 10-11 M/S. LUCAS INDIA SERVICE LIMITED, NO.11, PATTULLOS ROAD, CHENNAI 600 002. V. THE ASSTT. COMMISSIONER OF INCOME TAX, COMPANY CIRCLE II(4), CHENNAI 34. PAN: AAACL1018J ( /APPELLANT) ( /RESPONDENT) /APPELLANT BY : SHRI SP CHIDAMBARAM, ADVOCATE /RESPONDENT BY : SHRI SHIVA SRINIVAS, JCIT /DATE OF HEARING : 08.03.2017 /DATE OF PRONOUNCEMENT : 23.03.2017 / O R D E R PER A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER: THESE APPEALS ARE FILED BY THE ASSESSEE AGGRIEVED B Y THE ORDERS OF THE LD. COMMISSIONER OF INCOME TAX (APPEA LS) ALL DATED 29.03.2016 IN ITA NO. 15/2007-08, 73/2009-10, 46/20 10-11, 21/2013-14 PASSED U/S. 250(6) R.W.S. 143(3) OF THE ACT. . 2 I.T.A. NOS.2684 TO 2687/MDS/2016 2. THERE IS A DELAY OF 74 DAYS IN FILING THE APPEA LS AND THE ASSESSEE COMPANY HAS FILED CONDONATION PETITIONS WH EREIN THE DIRECTOR OF THE COMPANY STATED THAT THE DELAY IN FI LING THE APPEAL HAD OCCURRED DUE TO RENOVATION WORK IN THE OFFICE PREMI SES WHICH HAD DISRUPTED THE FUNCTIONING OF THE OFFICE. HENCE IT WAS PLEADED THAT THE DELAY IN FILING THE APPEAL WAS NOT WILLFUL AND THEREFORE THE SAME MAY BE CONDONED. AFTER HEARING THE LD. AR, THOUGH WE DO NOT APPRECIATE THE REASON CITED BY THE ASSESSEE COMPANY , IN THE INTEREST OF JUSTICE, WE HEREBY CONDONE THE DELAY IN FILING THE APPEAL FOR 74 DAYS AND PROCEED TO HEAR THE APPEAL ON MERIT S. 3. THE ASSESSEE HAS RAISED SEVERAL GROUNDS IN ITS A PPEALS; HOWEVER THE CONCISE GROUNDS FOR ALL THE RELEVANT AS SESSMENT YEARS ARE BRIEFLY STATED HEREIN BELOW FOR ADJUDICATION: I. THE LD. CIT(A) HAS ERRED IN UPHOLDING THE ORDER OF THE LD. AO WHO HAD INVOKED THE PROVISIONS OF SECTION 14A OF THE ACT AND MADE DISALLOWANCE @ 5% OF THE EXEMPT INCOME FOR THE ASSESSMENT YEAR 2005-06 AND APPLIED RULE 8D OF THE RULES FOR COMPUTING THE DISALLOWANCE FOR THE ASSESSMENT YEAR 2007-08, INSTEAD OF APPLYING THE RATIO LAID DOWN BY THE HONBLE JURISDICTIONAL MADRAS HIGH COURT 3 I.T.A. NOS.2684 TO 2687/MDS/2016 WHEREIN IT WAS HELD THAT ESTIMATE OF 2% OF DIVIDEND INCOME (EXEMPT INCOME) WOULD SUFFICE FOR DISALLOWANCE AS EXPENDITURE INCURRED FOR EARNING EXEMPT INCOME. II. THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ORDE R OF THE LD. AO WHO HAD DISALLOWED THE CLAIM OF DEPRECIATION ON BUILDING FOR RS.17,33,102/- BY HOLDING THAT THE BUI LDING WAS NOT PUT TO USE DURING THE RELEVANT ASSESSMENT YEAR 2007- 08. III. THE LD. CIT(A) HAS ERRED IN INVOKING THE PROVI SIONS OF SECTION 14A AND RULE 8D OF THE ACT, TOWARDS THE INVESTMENT MADE IN SUBSIDIARY COMPANIES FOR STATIST ICAL REASONS, WHEN THE MADRAS BENCHES OF THE TRIBUNAL HA S HELD OTHERWISE (FOR THE ASSESSMENT YEARS 2008-09 AN D 2010-11). 4. GROUND NO. I :- PERCENTILE OF EXEMPT INCOME TO BE DISALLOWED FOR THE PURPOSE OF SECTION 14A OF THE AC T FOR THE ASSESSMENT YEAR 2005-06 AND APPLICABILITY OF RULE 8 D OF THE RULES FOR THE ASSESSMENT YEAR 2007-08 . FOR THE ASSESSMENT YEARS 2005-06 & 2007-08, THE L D. AO INVOKED THE PROVISIONS OF SECTION 14A AND COMPUTED THE 4 I.T.A. NOS.2684 TO 2687/MDS/2016 DISALLOWANCE OF EXPENDITURE INCURRED FOR EXEMPT INC OME IN THE FOLLOWING MANNER: A) AY 2005-06 : 5% OF THE EXEMPT INCOME RS.3,92,4 0,057/- WAS DISALLOWED, WHICH AMOUNTS TO RS.19,62,003/- B) AY2007-08 : THE LD.AO WORKED OUT THE DISALLOWANC E INVOKING SECTION 14A OF THE ACT, IN ACCORDANCE WITH RULE 8D. 4.1 THE LD. AR SUBMITTED BEFORE US THAT FOR BOTH TH E ASSESSMENT YEARS 2005-06 AND 2007-08, RULE 8D CANNOT BE INVOKE D BECAUSE IT IS APPLICABLE WITH EFFECT FROM 24.03.2008 I.E., FOR THE ASSESSMENT YEAR 2008-09 ONWARDS. FURTHER THE LD. AR ARGUED BY STATING THAT ON SIMILAR INSTANCE THE HONBLE JURISDICTIONAL MADR AS HIGH COURT IN THE CASE INDIA NIPPON ELECTRICALS LIMITED VS. DCIT, COMPANY CIRCLE II(3) HAS HELD THAT 2% OF EXEMPTS INCOME CAN BE ESTIMATED AS THE EXPENSES THAT WOULD HAVE INCURRED FOR THE PU RPOSE OF EARNING EXEMPT INCOME. THEREFORE, IT WAS PLEADED T HAT THE SAME DECISION MAY BE FOLLOWED IN THE CASE OF ASSESSEE FO R BOTH THE ASSESSMENT YEARS. 5 I.T.A. NOS.2684 TO 2687/MDS/2016 4.2 THOUGH THE LD. DR VEHEMENTLY ARGUED IN SUPPORT OF THE ORDERS OF THE REVENUE, HE COULD NOT SUCCESSFULLY CO NTROVERT TO THE SUBMISSION OF THE LD. AR. 4.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFU LLY PERUSED THE MATERIALS FROM RECORD. WE FIND MERITS IN THE SUBMISSION OF LD. AR. AS POINTED OUT BY HIM, RULE 8D HAS COME INTO EFFECT ONLY FROM 24.03.2008. THEREFORE, IN TH E CASE OF THE ASSESSEE FOR ASSESSMENT YEAR 2007-08, RULE 8D CANNO T BE APPLIED. FURTHER IN THE CASE INDIA NIPPON ELECTRIC ALS LTD CITED BY THE LD. AR, THE HONBLE JURISDICTIONAL MADRAS HIGH COURT HAS HELD THAT 2% OF THE EXEMPT INCOME WOULD SUFFICE FOR DISA LLOWANCE UNDER SECTION 14A OF THE ACT. THEREFORE BY RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT S UPRA, WE HEREBY DIRECT THE LD. AO TO DISALLOW 2% OF THE EXEMPT INCO ME AS THE EXPENDITURE INCURRED FOR EARNING EXEMPT INCOME. 5. GROUND II: DEPRECIATION ON BUILDING RS.17,33,102 /- FOR THE ASSESSMENT YEAR 2007-08. DURING THE RELEVANT ASSESSMENT YEAR, THE ASSESSEE HAD PURCHASED A BUILDING AT GUINDY FOR RS.3,46,62,044/- ON 6 I.T.A. NOS.2684 TO 2687/MDS/2016 31.03.2007. FOR THE RELEVANT ASSESSMENT YEAR THE A SSESSEE CLAIMED DEPRECIATION ON THE BUILDING AT THE RATE OF 5% WHICH WORKS OUT TO RS.17,33,102/-. ON QUERY THE ASSESSEES REP RESENTATIVE THOUGH PRODUCED DOCUMENTS TO PROVE THAT THE ASSESSE E HAD PURCHASED THE PROPERTY ON 31.03.2007 COULD NOT ESTA BLISH THAT THE POSSESSION WAS TAKEN OVER ON THE VERY SAME DAY AND THE ASSET WAS PUT TO USE FROM THAT DAY. THEREFORE THE LD. AO DISALLOWED THE CLAIM OF DEPRECIATION ON THE GROUND THAT THE ASSESS EE HAD NOT PUT TO USE THE ASSET DURING THE RELEVANT ASSESSMENT YEA R. ON APPEAL, THE LD. CIT(A) UPHELD THE ORDER OF THE LD.AO BECAUS E BEFORE HIM ALSO THE ASSESSEE COULD NOT ESTABLISH THAT EITHER T HE BUILDING WAS KEPT READY FOR OCCUPATION OR PUT TO USE ON 31.03.20 07. 5.1 BEFORE US THE LD. AR SUBMITTED THAT THE MATTER MAY BE REMITTED BACK TO THE FILE OF LD.AO FOR FRESH CONSID ERATION BECAUSE THE ASSESSEE WAS IN POSSESSION OF REQUISITE DOCUMEN TS TO ESTABLISH THAT IT HAD UTILIZED THE BUILDING FOR ITS BUSINESS PURPOSES DURING THE RELEVANT ASSESSMENT YEAR. 5.2 THE LD. DR OPPOSED TO THE SUBMISSION OF THE LD . AR AND ARGUED IN SUPPORT OF THE ORDER OF THE REVENUE AUTHO RITIES. 7 I.T.A. NOS.2684 TO 2687/MDS/2016 5.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFU LLY PERUSED THE MATERIALS ON RECORD. FROM THE FACTS OF THE CAS E IT IS APPARENT THAT THE ASSESSEE HAD PURCHASED THE BUILDING ON 31. 03.2007. THE PROPERTY WAS REGISTERED ON THE VERY SAME DAY. THER EFORE, THOUGH THE ASSESSEE MIGHT HAVE TAKEN POSSESSION OF THE PRO PERTY ON 31.03.2007, THERE WAS NO POSSIBILITY FOR THE BUILDI NG TO BE PUT TO USE ON THE SAME DAY. IT IS OBVIOUS THAT AFTER PURC HASE OF THE BUILDING SOME BASIC MAINTENANCE WORK WOULD HAVE BEE N REQUIRED BEFORE PUTTING THE ASSET TO USE. THEREFORE WE DO N OT FIND ANY MERIT IN THE ARGUMENTS ADVANCED BY THE LD. AR. ACCORDING LY THIS GROUND IS DECIDED AGAINST THE ASSESSEE AND THE ORDERS OF T HE REVENUE AUTHORITIES ARE UPHELD ON THIS ISSUE. 6. GROUND III: APPLICABILITY OF THE PROVISIONS OF THE SECTION 14A WITH RESPECT TO SUBSIDIARY COMPANIES (FOR THE A SSESSMENT YEARS 2008-09 & 2010-11). FOR THE ASSESSMENT YEARS 2008-09 AND 2010-11, THE LD. AO INVOKED THE PROVISIONS OF SECTION 14A OF THE ACT AN D COMPUTED THE DISALLOWANCE IN ACCORDANCE WITH RULE 8D OF THE RULE S WHICH WAS CONFIRMED BY THE LD. CIT(A). 8 I.T.A. NOS.2684 TO 2687/MDS/2016 6.1 THE ARGUMENT OF THE LD. AR BEFORE US IS THAT TH E ASSESSEE HAD MADE INVESTMENTS OUT OF ITS INTEREST FREE FUNDS IN EQUITY SHARES OF ITS SUBSIDIARY COMPANY FOR STRATEGICAL PURPOSES; THEREFORE THE PROVISIONS OF SECTION 14A CANNOT BE INVOKED. WE FI ND MERIT IN THE CONTENTION OF THE LD. AR. ON SEVERAL EARLIER OCCAS IONS FOR INSTANCE IN THE CASE OF M/S. DATA SOFTWARE RESEARCH COMPANY (INTERNATIONAL) PVT. LTD. V. ACIT, ITA NOS.2169 & 2 170/MDS/2015 AND ACIT V. M/S. DATA SOFTWARE RESEARCH COMPANY (IN TERNATIONAL) PVT. LTD., ITA NOS. 2171& 2172/MDS/2015 VIDE ORDER DATED 03.02.2016, THIS BENCH OF THE TRIBUNAL HAS HELD AS FOLLOWS: 7. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY PE RUSED THE MATERIALS AVAILABLE ON RECORD. IT IS A NORMAL P RACTICE TO MAKE INVESTMENT IN SISTER COMPANIES DUE TO COMME RCIAL EXIGENCIES. WHILE DOING SO, NO EXPENSE CAN BE ATTRIBUTABLE OTHER THAN INTEREST EXPENSE FOR MAKING SUCH INVESTMENTS BECAUSE ALL MANAGEMENT COSTS WILL BE ABSORBED FOR STRATEGIC DECISION MAKING PROCESS WHIC H IS ALLOWABLE AS BUSINESS EXPENDITURE. IN THE CASE OF THE ASSESSEE IT IS SUBMITTED THAT NO INTEREST COST WAS INCURRED AS THE ENTIRE INVESTMENTS WERE MADE OUT OF OWN FUND S. FURTHER IN THE DECISION OF THE TRIBUNAL IN ITA NO.115/MDS/2015 DATED 06.01.2016, EXTRACTED HEREIN BELOW, IT HAS BEEN HELD THAT SECTION 14A OF THE ACT WILL NOT BE APPLICABLE WHEN INVESTMENTS ARE MADE IN SISTER COMPANIES. 5. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY PERUSED THE MATERIALS AVAILABLE ON RECORD. ON THE IDENTICA L ISSUE AS POINTED OUT BY THE LD. A.R. THE CHENNAI BENCH OF TH E TRIBUNAL IN 9 I.T.A. NOS.2684 TO 2687/MDS/2016 ITA NO.156/MDS/2013 VIDE ORDER DATED 20/08/13 FOR T HE ASSESSMENT YEAR 2009-10 HAS REMITTED BACK THE MATTE R TO THE LD. ASSESSING OFFICER TO DECIDE THE MATTER ONCE AGA IN AFRESH BASED ON THE FINDINGS WHETHER THE ASSESSEE HAD ACTU ALLY INCURRED ANY EXPENDITURE IN EARNING THE DIVIDEND IN COME. THE RELEVANT PORTION OF THE ORDER IS EXTRACTED HEREIN B ELOW FOR REFERENCE:- FURTHER, ON THE IDENTICAL ISSUE VARIOUS BENCHES OF THE TRIBUNAL AND THE HONBLE BOMBAY HIGH COURT HAVE HELD AS FOLL OWS:- I) GARWARE WALL ROPES LTD., VS. ACIT REPORTED IN (2014) 65 SOT 086 (MUM.) HELD AS FOLLOWS:- 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 ANY F INDING THAT EXPENDITURE HAS BEEN INCURRED FOR EARNING EXEMPT IN COME PROVISIONS 14A CANNOT BE APPLIED.. II) INTEGLOBE ENTERPRIESES LTD., VS. DCIT REPOTED 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 INTEREST EXPENDI TURE WAS INCURRED FOR MAKING INVESTMENTS. WHERE THE ASSESSEE HAD UTILIZED INTEREST FREE FUNDS FOR MAKING FRESH INVESTMENTS AND THAT TOO INTO ITS SUBSIDIARIES, WHI CH WAS NOT FOR THE PURPOSE OF EARNING EXEMPT INCOME AND WHICH WAS FOR STRATEGIC PURPOSES ONLY, NO DISALLOWANCE OF INTEREST WAS REQU IRED TO BE MADE UNDER RULE 8D(I) & 8D(II) AND STRATEGIC INVESTMENT HAS TO BE EXCLUDED FOR PURPOSE OF ARRIVING AT DISALLOWANCE UNDER RULE 8D(III). III) 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 SUBSIDIARY COMPA NIES OF THE ASSESSEE AND, THEREFORE, THE PURPOSE OF INVESTMENT IS NOT FOR EARNING THE DIVIDEND INCOME BUT 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 9 8% OF THE INVESTMENT MADE IN THE SUBSIDIARY COMPANIES, THEREF ORE, IN THE ABSENCE OF ANY FINDING THAT ANY EXPENDITURE HAS BEE N INCURRED FOR EARNING THE EXEMPT INCOME, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS NOT JUSTIFIED, ACCORDINGLY THE SAME IS D ELETED. (IV) CIT VS. BHARTI TELEVENTURE LTD. REPORTED IN (2 011) 331 ITR 0502. 10 I.T.A. NOS.2684 TO 2687/MDS/2016 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 ASSESSEE AND THE ADVANCES GIVEN, NO DISALLOWANCE FOR INTEREST WAS CALLED FOR . (V) 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 WER E GENERATED IN THE COURSE OF THE RELEVANT FINANCIAL YEAR, APART FROM S UBSTANTIAL SHAREHOLDERS FUND, PRESUMPTION STANDS ESTABLISHED T HAT THE INVESTMENTS IN SISTER CONCERNS WERE MADE BY THE ASS ESSEE OUT OF INTEREST FREE FUNDS AND THEREFORE NO PART OF INTERE ST ON BORROWINGS CAN BE DISALLOWED ON THE BASIS THAT THE INVESTMENTS WER E MADE OUT OF INTEREST BEARING FUNDS. (VI) EIH ASSOCIATED HOTELS LTD VS. DCIT REPORTED I N 2013-TIOL- 796-ITAT-MAD . THE INVESTMENTS MADE BY THE ASSESSEE IN THE SU BSIDIARY COMPANY ARE NOT ON ACCOUNT OF INVESTMENT FOR EARNIN G CAPITAL GAINS OR DIVIDEND INCOME. SUCH INVESTMENTS HAVE BEEN MADE BY THE ASSESSEE TO PROMOTE SUBSIDIARY COMPANY INTO THE HOTEL INDUST RY. THE ASSESSEE IS NOT INTO THE BUSINESS OF INVESTMENT AND THE INVE STMENTS MADE BY THE ASSESSEE ARE ON ACCOUNT OF BUSINESS EXPEDIENCY. ANY DIVIDEND EARNED BY THE ASSESSEE FROM INVESTMENT IN SUBSIDIAR Y COMPANY IS PURELY INCIDENTAL. THEREFORE THE INVESTMENT MADE BY THE ASSESSEE IN ITS SUBSIDIARY IS NOT TO BE RECKONED FOR DISALLOWAN CE 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 DE LETING INVESTMENTS MADE BY THE ASSESSEE IN SUBSIDIARY COMPANY. TAKING NOTE OF THE ABOVE DECISIONS AND THE DECISI ON 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 ABOVE. WHIL E DOING SO, WE ALSO DIRECT THE LD. ASSESSING OFFICER TO CONSIDER T HE DECISION OF THE TRIBUNAL IN THE CASE M/S AGILE ELECTRIC SUB ASS EMBLY 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 APPLICABLE. M OREOVER IN THE CASE EIH ASSOCIATED HOTELS LTD V. DCIT 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 THE SUBS IDIARY COMPANY ARE NOT ON ACCOUNT OF INVESTMENT FOR EARNING CAPITA L GAINS OR DIVIDEND 11 I.T.A. NOS.2684 TO 2687/MDS/2016 INCOME. SUCH INVESTMENTS HAVE BEEN MADE BY THE ASS ESSEE TO PROMOTE SUBSIDIARY COMPANY INTO THE HOTEL INDUSTRY. A PERUSAL OF THE ORDER OF THE CIT(APPEALS) SHOWS THAT OUT OF TOTAL I NVESTMENT OF RS.64,18,19,775/-, RS.63,31,25,715/- IS INVESTED IN WHOLLY OWNED SUBSIDIARY. THIS FACT SUPPORTS THE CASE OF THE ASS ESSEE THAT THE ASSESSEE IS NOT INTO THE BUSINESS OF INVESTMENT AND THE INVESTMENTS MADE BY THE ASSESSEE ARE ON ACCOUNT OF BUSINESS EXP EDIENCY. ANY DIVIDEND EARNED BY THE ASSESSEE FROM INVESTMENT IN SUBSIDIARY COMPANY IS PURELY INCIDENTAL. THEREFORE, THE INVES TMENTS MADE BY THE ASSESSEE IN ITS SUBSIDIARY ARE NOT TO BE RECKONED F OR DISALLOWANCE U/S. 14A R.W.R. 8D. THE ASSESSING OFFICER IS DIRECTED T O RE-COMPUTE THE AVERAGE VALUE OF INVESTMENT UNDER THE PROVISIONS OF RULE 8D AFTER DELETING INVESTMENTS MADE BY THE ASSESSEE IN SUBSID IARY 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. 8. THEREFORE, FOLLOWING THE AFORESAID DECISION OF T HE TRIBUNAL, WE HEREBY DIRECT THE LEARNED ASSESSING OF FICER TO DELETE THE ADDITION MADE ON ACCOUNT OF SECTION 1 4A WHERE INVESTMENTS ARE MADE IN SISTER CONCERNS SUCH AS EQUITY SHARES AND SHARE APPLICATION MONEY. HOWEVER, IF THE INVESTMENTS ARE MADE FROM BORROWED FUNDS, SECTI ON 14A OF THE ACT WOULD BE APPLICABLE AND LEARNED ASSE SSING OFFICER SHALL COMPUTE THE DISALLOWANCE UNDER SECTIO N 14A READ WITH RULE 8D IN ACCORDANCE WITH LAW. 6.2 ACCORDINGLY WE HEREBY REMIT BACK THE MATTER TO THE FILE OF THE LD. AO TO CONSIDER THE ISSUE AFRESH IN THE LIGHT OF THE ABOVE ORDER OF THE TRIBUNAL AND PASS APPROPRIATE ORDER IN ACCORDAN CE WITH MERITS AND LAW. WE ALSO MAKE IT CLEAR THAT FOR THE INVEST MENTS MADE IN MUTUAL FUNDS, PROVISIONS OF SECTION 14A READ WITH R ULE 8D WILL BE APPLICABLE SINCE THE ASSESSEE WOULD INCUR SOME EXPE NDITURE AT 12 I.T.A. NOS.2684 TO 2687/MDS/2016 LEAST FOR THE DECISION MAKING PROCESS AS TO IN WHIC H MUTUAL FUND THE INVESTMENT HAS TO BE MADE AND AT WHAT POINT OF TIME EXIT FROM SUCH FUNDS. IT IS ORDERED ACCORDINGLY. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE FOR TH E ASSESSMENT YEAR S 2005-06 IS ALLOWED, 2007-08 IS PARTLY ALLOWE D AND 2008-09 & 2010-11 ARE ALLOWED FOR STATISTICAL PURPOSES AS IND ICATED HEREIN ABOVE. ORDER PRONOUNCED ON 23 RD MARCH, 2017 AT CHENNAI. SD/- SD/- ( . ) )) ) (G. PAVAN KUMAR) /JUDICIAL MEMBER ( . ) (A. MOHAN ALANKAMONY) / ACCOUNTANT MEMBER /CHENNAI, /DATED, THE 23 RD MARCH, 2017. JR. /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. ( )/CIT(A) 4. /CIT, 5. /DR 6. /GF.