LODHA BULDERS P. LTD, MUMBAI V. DCIT CEN CIR 7(3), MUMBAI

ITA 2871/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0944 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-05-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: J
• Assessment Year: 2010-2011
• Appeal Filed On: 13-05-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: J MOHAMMED RIZWAN
• Keywords: Earning of tax free income; Question of law
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'J' BENCH, MUMBAI BEFORE SHRI JASON P. BOAZ, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 2871/MUM/2015 (ASSESSMENT YEAR: 2010-11) M/S. LODHA BUILDERS P. LTD. VS. DCIT, CIRCLE - 7(3) 412, 4 TH FLOOR, 17G, VARDHAMAN CHAMBER, CAWASJI PATEL ROA HORNIMAN CIRCLE, FORT MUMBAI 400001 ROOM NO. 655, 6 TH FLOOR AAYAKAR BHAVAN M.K. ROAD, MUMBAI 400020 PAN AAACL1722F APPELLANT RESPONDENT APPELLANT BY: SHRI VIJAY MEHTA RESPONDENT BY: SHRI J. MOHAMMED RIZWAN DATE OF HEARING: 01.05.2017 DATE OF PRONOUNCEMENT: 03.05.2017 O R D E R PER JASON P. BOAZ, A.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)- 48, MUMBAI DATED 19.03.2015 FOR A.Y. 2010-11. 2. THE FACTS OF THE CASE, BRIEFLY, ARE AS UNDER: - 2.1 THE ASSESSEE COMPANY, ENGAGED IN THE BUSINESS O F LAND DEVELOPMENT AND CONSTRUCTION, FILED ITS RETURN OF INCOME FOR A. Y. 2010-11 ON 25.09.2010 DECLARING NIL INCOME. SUBSEQUENTLY, A RE VISED RETURN OF INCOME WAS FILED ON 14.10.2010 DECLARING LOSS OF (- ) ` 2,92,74,985/-. THE CASE WAS TAKEN UP FOR SCRUTINY AND THE ASSESSMENT C OMPLETED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHOR T 'THE ACT') VIDE ORDER DATED 21.03.2013 WHEREIN THE ASSESSEES LOSS WAS DE TERMINED AT (-) ` 2,79,60,850/- IN VIEW OF THE FOLLOWING DISALLOWANCE S: - (I) INTEREST ON LATE PAYMENT OF INCOME TAX ` 4,55,079/ - (II) DISALLOWANCE UNDER SECTION 14A R.W. RULE 8D ` 3,67,730/ - (III) DIFFERENCE OF INTEREST ON LOAN ADVANCE ` 4,91,328/ - ITA NO. 2871/MUM/2015 M/S. LODHA BUILDERS P. LTD. 2 2.2 AGGRIEVED BY THE ORDER OF ASSESSMENT DATED 21.0 3.2013 FOR A.Y. 2010-11, THE ASSESSEE PREFERRED AN APPEAL BEFORE TH E CIT(A) 48, MUMBAI CHALLENGING (I) THE DISALLOWANCE UNDER SECTION 14A R/.W. RULE 8D AND (II) THE DISALLOWANCE OF INTEREST ON LOAN ADVANCE. THE L EARNED CIT(A) DISPOSED OFF THE APPEAL VIDE THE IMPUGNED ORDER DATED 19.03. 2015 ALLOWING THE ASSESSEE PARTIAL RELIEF. 3. THE ASSESSEE BEING AGGRIEVED BY THE ORDER OF THE CI T(A)-48, MUMBAI DATED 19.03.2015, HAS PREFERRED THIS APPEAL RAISING THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A)] ERRED IN CONFIRMING THE ACTION OF T HE AO IN MAKING DISALLOWANCE OF RS.3,67,730/- U/S 14A. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED CIT(A) ERRED IN IGNORING THE FACT THAT THE APPELLANT HAD NOT INCURRED ANY EXPENSE FOR THE PURPOSES OF EARNING OF EXEMPT INCOME, HENCE, THE DISALLOWANCE U/S 14A WAS UNCALLE D FOR. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED CIT (A) ERRED IN CONFIRMING THE ABOVE DISAL LOWANCE WITHOUT APPRECIATING THE FACT THAT THE APPELLANT HA S NOT EARNED ANY EXEMPT INCOME. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THE FACT T HAT THE INVESTMENTS HAVE BEEN MADE IN THE SUBSIDIARY COMPAN Y FOR THE PURPOSES OF HAVING STRATEGIC CONTROL THEREIN AND NO T FOR THE PURPOSES OF EARNING OF EXEMPT INCOME. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED CIT (A) ERRED IN HOLDING THAT 'IF IT WAS IN DEED A STRATEGIC INVESTMENT AND FOR THE BUSINESS PURPOSES, IT SHOULD HAVE BEEN REFLECTED AS BUSINESS ASSETS AND CURRENT ASSET' 6. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.4,81,328/- U/S 36(1)(III) OF THE I.T. ACT BEING DIFFERENTIAL INTEREST ON ADVANCES GIVEN TO ITS FELLOW SUBSIDIARY COMPANIE S COMPARED TO THE RATE OF BORROWING, IGNORING THE FACT THAT CAPIT AL BORROWED IS FOR BUSINESS PURPOSE ONLY. 4. GROUND NOS. 1 TO 5 DISALLOWANCE UNDER SECTION 14A R.W. RULE 8D ` `` ` 3,67,730/- 4.1.1 IN THESE GROUNDS AT 1 TO 3 (SUPRA), THE ASSE SSEE ASSAILS THE IMPUGNED ORDER OF THE LEARNED CIT(A) IN CONFIRMING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER (AO) UNDER SECTION 14A OF THE ACT WITHOUT, INTER ITA NO. 2871/MUM/2015 M/S. LODHA BUILDERS P. LTD. 3 ALIA, APPRECIATING THE FACT THAT THE ASSESSEE HAS N OT EARNED ANY EXEMPT INCOME DURING THE YEAR UNDER CONSIDERATION AND NO E XPENDITURE WAS INCURRED IN THIS REGARD AND THEREFORE NO DISALLOWAN CE UNDER SECTION 14A OF THE ACT COULD HAVE BEEN MADE. IN SUPPORT OF THIS PR OPOSITION, THE LEARNED A.R. OF THE ASSESSEE PLACED RELIANCE ON THE FOLLOWI NG JUDICIAL PRONOUNCEMENTS: - (I) CHEMINVEST LTD. VS. CIT (378 ITR 33 (DEL.) (II) GARWARE WALL ROPES LTD. VS. ADD, CIT (ITA NO. 5408/MUM/2012) (III) VAKRANGEE LTD. VS. ACIT (ITA NO. 6988/MUM/201 4 DATED 10.08.2016) 4.1.2 IT WAS ALSO CONTENDED IN GROUND NOS. 4 & 5 (S UPRA) THAT THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THAT SINCE THE INV ESTMENTS WERE MADE IN SUBSIDIARY GROUP CONCERNS FOR THE PURPOSE OF CONTRO L AND NOT FOR THE PURPOSE OF EARNING OF EXEMPT INCOME AND BEING STRAT EGIC INVESTMENT, THESE INVESTMENTS SHOULD BE EXCLUDED FOR COMPUTING DISALL OWANCE UNDER SECTION 14 OF THE ACT. IN SUPPORT OF THIS PROPOSITION, RELI ANCE WAS PLACED ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS:- (I) CHEMINVEST LTD. VS. CIT (378 ITR 33 (DEL.) (II) GARWARE WALL ROPES LTD. VS. ADD, CIT (ITA NO. 5408/MUM/2012) (III) VAKRANGEE LTD. VS. ACIT (ITA NO. 6988/MUM/201 4 DATED 10.08.2016) 4.2 THE LEARNED D.R. PLACED STRONG SUPPORT ON THE O RDER OF THE LEARNED CIT(A), ON THE ISSUE OF DISALLOWANCE UNDER SECTION 14A OF THE ACT. IN WRITTEN SUBMISSIONS DATED 01.05.2017 REVENUE CONTEN DS AS UNDER: - THE ABOVE MENTIONED CASE CAME UP FOR HEARING TODAY BEFORE THE HON'BLE BENCH WHEREIN LD. COUNSEL OF THE ASSESSEE R ELIED ON DELHI HIGH COURT JUDGEMENT IN THE CASE OF CHEMINVEST LTD. ITA NO.749/2014 AS THERE WAS NO EXEMPT INCOME RECEIVED BY THE ASSESSEE DURING THE YEAR. THEREFORE, ACCORDING TO T HE LD. COUNSEL OF THE ASSESSEE, NO DISALLOWANCE U/S. 14A OF THE INCOM E TAX ACT R.W. RULE 8D WAS TO BE MADE. 2. IN THIS REGARD, IT IS SUBMITTED THAT AS PER THE SCHEME OF THE ACT AS ENVISAGED IN SEC. 14A RELATED TO DISALLOWANCE OF EX PENDITURE INCURRED IN RELATION TO INCOME NOT INCLUDABLE IN TOTAL INCOM E, THERE NEED NOT BE ACTUAL RECEIPT OF EXEMPT INCOME FOR ACTUAL DISALLOW ANCE. THIS IS A CONSTANT POSITION OF THE DEPARTMENT AS ELUCIDATED I N CBDT'S CIRCULAR ITA NO. 2871/MUM/2015 M/S. LODHA BUILDERS P. LTD. 4 NO. 5/2014 DT.1L.2.2014. THE RELEVANT PORTION OF TH E CIRCULAR IS REPRODUCED AS UNDER: 'THUS, LEGISLATIVE INTENT IS TO ALLOW ONLY THAT EXP ENDITURE WHICH IS RELATABLE TO EARNING OF INCOME AND IT THEREFORE FOL LOWS THAT THE EXPENSES WHICH ARE RELATABLE TO EARNING OF EXEMPT I NCOME HAVE TO BE CONSIDERED FOR DISALLOWANCE, IRRESPECTIVE OF THE FACT WHETHER ANY SUCH INCOME HAS BEEN EARNED DURING THE FINANCIAL-YE AR OR NOT. THE ABOVE POSITION IS FURTHER CLARIFIED BY THE USAG E OF TERMS 'INCLUDIBLE' IN THE HEADING TO SEC. 14A OF THE ACT AND ALSO THE HEADING TO RULE 8D OF THE IT. RULES, 1962 WHICH INDICATES THAT IT IS N OT NECESSARY THAT EXEMPT INCOME SHOULD NECESSARILY BE INCLUDING IN A PARTICULAR YEAR'S INCOME, FOR DISALLOWANCE TO BE TRIGGERED. ALSO, SEC . 14A OF THE ACT DOES NOT USE THE WORD 'INCOME OF THE YEAR' BUT 'INC OME UNDER THE ACT'............... THUS, IN THE LIGHT OF ABOVE, CENTRAL BOARD OF DIREC T TAXES, IN EXERCISE OF ITS POWERS UNDER SEC.119 OF THE ACT HER EBY CLARIFIES THAT RULE 8D R.W.S.14A OF THE ACT PROVIDES FOR DISA LLOWANCE OF THE EXPENDITURE EVEN WHERE TAXPAYER IN A PARTICULAR YEAR HAS NOT EARNED ANY EXEMPT INCOME'. 3. HOWEVER, HON'BLE DELHI HIGH COURT IN THE CASE OF CH EMINVEST LTD. VS CIT HAS HELD THAT NO DISALLOWANCE U/S. 14A CAN B E MADE IN A YEAR IN WHICH NO EXEMPT INCOME HAS BEEN EARNED OR RECEIV ED BY THE ASSESSEE. 4. IN THIS REGARD, IT IS SUBMITTED THAT HON'BLE DELHI HIGH COURT HAS NOT CONSIDERED HON'BLE SUPREME COURT JUDGEMENT IN THE C ASE OF DISTRIBUTORS (BARODA) (P) LTD. VS. UNION OF INDIA ( 1985) 155 'TR 120/22 TAXMAN 49 (SC) WHEREIN IT WAS HELD THAT 'INC OME BY WAY OF DIVIDENDS' FROM DOMESTIC COMPANY INCLUDED IN THE GR OSS TOTAL INCOME WOULD, THEREFORE, OBVIOUSLY BE INCOME COMPUTED IN A CCORDANCE WITH THE PROVISIONS OF THAT ACT. HON'BLE SUPREME COURT E MPHASISES THAT IT IS THE INCOME THAT SHOULD BE CONSIDERED AND NOT SIM PLY THE RECEIPT. IT IS FURTHER SUBMITTED THAT THERE IS DIFFERENCE BETWE EN RECEIPT OF DIVIDEND AND INCOME FROM DIVIDEND. SIMILARLY, IT IS THE INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME WHICH IS REQUIRE D TO BE CONSIDERED U/S.14A OF THE I.T. ACT. IN SEC.10(34) OF THE ACT I T IS INCOME BY WAY OF DIVIDEND AND NOT THE RECEIPT OF DIVIDEND WHICH IS E XEMPTED. 5. FURTHER, SUCH INCOME BY WAY OF DIVIDEND AS IS REFER RED TO IN THE PROVISION OF SEC.115-0 OF THE ACT IS EXEMPT. IT MEA NS NOT ALL THE INCOME BY WAY OF DIVIDEND IS EXEMPT, SEC. 115-0 OF THE I.T. ACT DEALS WITH THE ADDITIONAL INCOME TAX CHARGEABLE ON DOMEST IC COMPANY ON ANY AMOUNT DECLARED, DISTRIBUTED, OR PAID BY SUCH C OMPANY BY WAY OF DIVIDEND. FOR DOMESTIC COMPANY THIS IS IN THE FO RM OF APPROPRIATION, WHILE THE SAME IS RECEIPT IN THE HANDS OF THE SHARE HOLDER. THUS, SEC. 115-0 (5) OF THE ACT RESTRICTS ANY DEDUCTION UNDER ANY OTHER PROVISION OF THE ACT TO BE ALLOWED TO SHAREHOLDER IN RESPECT OF SUCH DIVIDEND RECEIPT. IT IS, THEREFORE, FOR COMPUTING INCOME BY WAY OF DIVIDEND FROM ITA NO. 2871/MUM/2015 M/S. LODHA BUILDERS P. LTD. 5 THE DIVIDEND RECEIPT SO AS TO CLAIM EXEMPTION U/S. 10(34) OF THE ACT, NO EXPENDITURE CAN BE ALLOWED UNDER ANY OTHER PROVI SION. 6. IN VIEW OF THE ABOVE SUBMISSIONS, AND THE FACT THAT DELHI HIGH COURT HAS NOT CONSIDERED JUDGEMENT OF SUPREME COURT IN THE CASE OF BARODA DISTRIBUTORS AS CIT ABOVE, IT IS RESPECTFULL Y PRAYED THAT ORDER OF THE CIT(A) MAY KINDLY BE UPHELD. 4.3.1 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. ADMITTEDLY, THE ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME IN THE YEAR UNDER CONSIDERATION. THIS FACT HAS BEEN RECORDED BY THE AO AT PARA 5 OF THE ORDER OF ASSESS MENT FOR THE YEAR UNDER CONSIDERATION, AFTER PERUSAL OF THE ASSESSEES PROF IT & LOSS ACCOUNT AND ALSO ACKNOWLEDGED BY THE LEARNED CIT(A) AT PARA 4.6 OF THE IMPUGNED ORDER. IN THESE CIRCUMSTANCES, IN OUR CONSIDERED VI EW, THE RATIO OF THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CAS E OF CHEMINVEST LTD. (SUPRA) WOULD SQUARELY APPLY. THE HON'BLE HIGH COUR T IN THE AFORESAID JUDGEMENT HELD THAT NO DISALLOWANCE UNDER SECTION 1 4A OF THE ACT CAN BE MADE IN THE YEAR IN WHICH NO EXEMPT INCOME IS EARNE D. IT WAS HELD THAT THE EXPRESSION DOES NOT FORM PART OF THE TOTAL INC OME IN SECTION 14A OF THE ACT ENVISAGES THAT THERE SHOULD BE ACTUAL EARNING O F INCOME WHICH IS OT INCLUDIBLE IN THE TOTAL INCOME DURING THE RELEVANT YEAR FOR THE PURPOSE OF DISALLOWING ANY EXPENDITURE INCURRED IN RELATION TO THE SAID EXEMPT INCOME. 4.3.2 SIMILAR FINDING HAS BEEN RENDERED ON IDENTICA L FACTS BY THE JURISDICTIONAL HIGH COURT OF BOMBAY IN THE CASE OF PR. CIT VS. M/S. BALLARPUR INDUSTRIES LTD. WHICH IS EXTRACTED HEREUN DER: - ON HEARING THE LEARNED COUNSEL FOR THE DEPARTMENT AND ON A PERUSAL OF THE IMPUGNED ORDERS, IT APPEARS THAT BOTH THE AU THORITIES HAVE RECORDED A CLEAR FINDING OF FACT THAT THERE WAS NO EXEMPT INCOME EARNED BY THE ASSESSEE. WHILE HOLDING SO, THE AUTHO RITIES RELIED ON THE JUDGMENT OF THE DELHI HIGH COURT IN INCOME TAX APPEAL NO. 749/2014, WHICH HOLDS THAT THE EXPRESSION DOES NOT FORM PART OF THE TOTAL INCOME IN SECTION 14A OF THE INCOME TAX ACT, 1961 ENVISAGES THAT THERE SHOULD BE AN ACTUAL RECEIPT OF THE INCOM E, WHICH IS NOT INCLUDIBLE IN THE TOTAL INCOME, DURING THE RELEVANT PREVIOUS YEAR FOR THE PURPOSE OF DISALLOWING ANY EXPENDITURE INCURRED IN RELATION TO THE SAID INCOME. THE INCOME TAX APPELLATE TRIBUNAL HELD THAT THE PROVISIONS OF SECTION 14A OF THE INCOME TAX ACT, 19 61 WOULD NOT APPLY TO THE FACTS OF THIS CASE AS NO EXEMPT INCOME WAS RECEIVED OR ITA NO. 2871/MUM/2015 M/S. LODHA BUILDERS P. LTD. 6 RECEIVABLE DURING THE RELEVANT PREVIOUS YEAR. IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT ANY ACTUAL INCOME WAS RECEIV ED BY THE ASSESSEE AND THE SAME WAS INCLUDIBLE IN THE TOTAL I NCOME. IN THE FACTS OF THE CASE, THE AUTHORITIES HELD THAT SINCE THE IN VESTMENTS MADE BY THE ASSESSEE IN THE SISTER CONCERNS WERE NOT THE AC TUAL INCOME RECEIVED BY THE ASSESSEE, THEY COULD NOT HAVE BEEN INCLUDED IN THE TOTAL INCOME. THE FINDINGS OF FACTS RECORDED BY BOTH THE AUTHORIT IES DO NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW. SINCE NO SUBSTANTIAL QUESTION OF LAW ARISES IN THIS INCOME TAX APPEAL, THE INCOME TAX APPEAL IS DISMISSED WITH NO ORDER AS TO COSTS. 4.3.2 IN THE FACTUAL AND LEGAL MATRIX OF THE CASE, AS DISCUSSED ABOVE, WE FIND THAT REVENUE HAS NOT BEEN ABLE TO CONTROVERT T HE FINDINGS RENDERED BY THE HON'BLE HIGH COURTS OF BOMBAY (SUPRA) AND DELHI (SUPRA). THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF BALLARPUR INDUSTRIES LTD. IN ITA NO. 51 OF 2016 DATED 13.10.2016, OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CHEM INVEST LTD. VS. CIT (378 ITR 33) (DEL) AND OF THE COORDINATE BENCH OF THIS T RIBUNAL IN THE CASE OF VAKRANGEE LTD. VS. ACIT (ITA NO. 6988/MUM/2014 DATE D 10.08.2016), WE HOLD THAT NO DISALLOWANCE UNDER SECTION 14A OF THE ACT CAN BE MADE IN THE CASE ON HAND FOR THE YEAR UNDER CONSIDERATION SINCE THE ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME. WE, THEREFORE, SET ASIDE THE DECISION OF THE AUTHORITIES BELOW AND DIRECT THE AO TO DELETE THE D ISALLOWANCE OF EXPENDITURE AMOUNTING TO ` 3,67,730/- UNDER SECTION 14A OF THE ACT. ACCORDINGLY, GROUNDS 1 TO 3 OF ASSESSEES APPEAL AR E ALLOWED. 4.4.1 FURTHER, THE LEARNED A.R. OF THE ASSESSEE IN RESPECT OF GROUNDS 4 & 5 (SUPRA) HAD CONTENDED THAT, EVEN OTHERWISE, THE SAI D DISALLOWANCE UNDER SECTION 14A R.W. RULE 8D OUGHT NOT HAVE BEEN MADE, AS THE ENTIRE INVESTMENTS IN SHARES AMOUNTING TO ` 2,37,61,417/- WAS STRATEGIC INVESTMENT IN ITS SUBSIDIARY GROUP COMPANY, M/S. SH REENIWAS COTTON MILLS LTD. FOR CONTROL OF THIS COMPANY AND NOT WITH THE I NTENTION OF EARNING TAX EXEMPT DIVIDEND INCOME. ON A PERUSAL OF THE DETAILS ON RECORD, I.E. THE IMPUGNED ORDER OF THE LEARNED CIT(A) AND THE ORDER OF ASSESSMENT, WE FIND THAT THE AVERMENTS OF THE LEARNED A.R. OF THE ASSES SEE THAT THE ENTIRE SHARES HELD BY THE ASSESSEE ARE IN RESPECT OF ITS S TRATEGIC INVESTMENT IN ITS ITA NO. 2871/MUM/2015 M/S. LODHA BUILDERS P. LTD. 7 SUBSIDIARY CONCERN, M/S. SHREENIWAS COTTON MILLS LT D., IS FACTUALLY CORRECT. WE FIND THAT A COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF M/S. VAKRANGEE LTD. VS. ACIT (ITA NO. 6988/MUM/2014 DATE D 10.08.2016, RELIED ON BY THE ASSESSEE, AT PARAS 3.5.1 AND 3.5.2 THEREOF, ON SIMILAR FACTS AND FOLLOWING THE DECISION OF ANOTHER COORDINATE BE NCH OF ITAT, MUMBAI IN THE CASE OF FIDUCIARY EUROMAX GLOBAL MARKETS LTD. ( ITA NO. 1349/MUM/2012 DATED 29.06.2016) HELD AS UNDER: - 3.5.1 FURTHER THE LEARNED A.R. FOR THE ASSESSEE HAS SUBMITTED THAT, EVEN OTHERWISE, THE SAID DISALLOWANCE UNDER SECTION 14A W.R. RULE 8D OUGHT NOT TO HAVE BEEN MADE AS THE ENTIRE INVESTMEN T IN SHARES MADE BY THE ASSESSEE OF ` 52,15,95,000/- WAS STRATEGIC INVESTMENT IN GROUP COMPANIES FOR CONTROL OVER THESE COMPANIES AND NOT FOR INVESTMENT PURPOSE WITH THE INTENTION OF EARNING OF TAX EXEMPT DIVIDEND INCOME. ON A PERUSAL OF THE DETAILS ON RECORD, I.E. THE IMP UGNED ORDER OF THE LEARNED CIT(A) AND THE ORDER OF ASSESSMENT WE FIND THAT THE AVERMENTS OF THE LEARNED A.R. THAT THE ENTIRE SHARE S HELD BY THE ASSESSEE ARE IN RESPECT OF ITS STRATEGIC INVESTMENT S IN SUBSIDIARY/GROUP CONCERNS IS FACTUALLY CORRECT. WE FIND THAT A COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF FI DUCIARY EUROMAX GLOBAL MARKETS LTD. IN ITA NO. 1349/MUM/2012 AND OT HERS DATED 29.06.2016, RELIED ON BY THE ASSESSEE, AT PARA 14 T HEREOF ON SIMILAR FACTUAL CIRCUMSTANCES HAS HELD THAT: - 14. ...................... .......... STRATEGIC INVESTMENT IN GROUP COMPANIES THEREFORE CANNOT BE HELD TO BE FOR INVESTMENT PURPOSES OR WIT H THE OBJECT OF EARNING OF DIVIDEND/TAX EXEMPT INCOME, BUT THE SAME , IN THE LIGHT OF ABOVE REFERRED TO JUDICIAL DECISIONS CAN SAFELY BE SAID TO BE RELATED TO THE BUSINESS ACTIVITY OF THE ASSESSEE AN D NO DISALLOWANCE, THEREFORE, IS ATTRACTED ON SUCH AN IN COME U/S 14A OF THE ACT. IN THE LIGHT OF THE ABOVE REFERRED TO D ECISIONS AND RESPECTFULLY FOLLOWING THE SAME, WE DIRECT THE AO T O EXCLUDE THE STRATEGIC INVESTMENTS MADE BY THE ASSESSEE IN GROUP COMPANIES WHILE CALCULATING THE DISALLOWANCE UNDER SECTION 14 A READ WITH RULE 8D OF THE INCOME TAX ACT. 3.5.2 FOLLOWING THE AFORESAID DECISION OF THE COORD INATE BENCH OF THIS TRIBUNAL IN THE CASE OF FIDUCIARY EUROMAX GLOB AL MARKETS LTD. (SUPRA), WE HOLD AND DIRECT THAT THE STRATEGIC ENTI RE INVESTMENTS MADE BY THE ASSESSEE IN GROUP COMPANIES ARE TO BE EXCLUD ED WHILE COMPUTING THE DISALLOWANCE UNDER SECTION 14A R.W. R ULE 8D. 4.4.2 FOLLOWING THE AFORESAID DECISION OF THE COORD INATE BENCH OF THIS TRIBUNAL IN THE CASE OF M/S. VAKRANGEE LTD. (SUPRA) AND FIDUCIARY EUROMAX GLOBAL MARKETS LTD. (SUPRA), WE HOLD AND DI RECT THAT ENTIRE ITA NO. 2871/MUM/2015 M/S. LODHA BUILDERS P. LTD. 8 STRATEGIC INVESTMENTS MADE BY THE ASSESSEE IN THE S HARES OF ITS SUBSIDIARY COMPANY, M/S. SHREENIWAS COTTON MILLS LTD. IS TO BE EXCLUDED WHILE COMPUTING THE DISALLOWANCE UNDER SECTION 14A R.W. R ULE 8D. CONSEQUENTLY, GROUNDS NO. 4 & 5 OF THE ASSESSEES A PPEAL ARE ALLOWED. 5. GROUND NO. 6 DISALLOWANCE UNDER SECTION 36(1)(III ) ` `` ` 4,81,328/- 5.1 THE LEARNED A.R. OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS NOT PRESSING GROUND NO. 6 RAISED IN THIS APPEAL (SUPRA) . IN VIEW THIS GROUND NOT BEING PRESSED, IT IS RENDERED INFRUCTUOUS AND A CCORDINGLY DISMISSED AS NOT PRESSED. 6. IN THE RESULT, THE ASSESSEES APPEAL FOR A.Y. 2010- 11 IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 3 RD MAY, 2017. SD/ - SD/ - (SAKTIJIT DEY) (JASON P. BOAZ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 3 RD MAY, 2017 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -48, MUMBAI 4. THE PR. CIT - 4, MUMBAI 5. THE DR, F BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.