DCIT, New Delhi V. M/s hero Corporate Service Ltd., New Delhi

ITA 3534/DEL/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3505 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2012-2013
• Appeal Filed On: 15-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S RANA; K TIWARI
• Assessee Lawyers: SUMIT KR BANSAL
• Keywords: Business income; Earning of tax free income; Tangible material
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: G NEW DELHI BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND SH.B.R.R.KUMAR, ACCOUNTANT MEMBER I.T.A .NO.-3534/DEL/2016 (ASSESSMENT YEAR-2012-13) DCIT, CIRCLE-11(1), NEW DELHI. ( APPELLANT) VS M/S. HERO CORPORATE SERVICES LTD., E-11, QUTAB HOTEL COMPLEX, SHAHEED JEET SINGH MARG, NEW DELHI-110016. PAN-AAACH1277P (RESPONDENT) APPELLANT BY SH. K.TIWARI, SR.DR & SH. S.S.RANA, CIT DR RESPONDENT BY SH. SUMIT KR. BANSAL, CA DATE OF HEARING 12.02.2018 DATE OF PRONOUNCEMENT 13.02.2018 ORDER PER B.R.R.KUMAR, AM THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER DATED 04.03.2016 OF LD.CIT(A)-16, NEW DELHI PERTAIN ING TO 2012-13 AY ON THE FOLLOWING GROUNDS:- 1. WHETHER ON THE FACTS & THE CIRCUMSTANCES OF THE CA SE, LD. CIT(A) WAS CORRECT IN DELETING THE DISALLOWANCE OF RS.2,76,36,280/- MADE ON ACCOUNT U/S 14A R.W.R. 8D? 2. THE APPELLANT CRAVES LEAVE, TO ADD, ALTER OR AMEND ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF THE HEARING. I.T.A .NO.-3534/DEL/2016 DISALLOWANCE U/S 14A:- 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY IS ENGAGED IN BUSINESS OF CONSULTANCY, ONLINE DATE, RETRIEVAL SERVICES, CORPORATE INSURANCE AGENCY SOFTWARE DEVELOPMENT. DURING THE YEAR THE COMPANY HAS EARNED TAX FREE INCOME OF AND FOR THE P URPOSE THE COMPANY HAS MADE INVESTMENT OF RS.1,12,62,25,693/-. IT WAS ALSO NOTICED THAT THE COMPANY HAS PAID INTEREST AMOUNTIN G TO RS.4,85,07,256/-. THE AO HAS ASKED THE ASSESSEE TO FURNISH THE DETAILS OF EXEMPT INCOME AND EXPENDITURE PERTAINING TO EARNING OF THE EXEMPT INCOME. AFTER CONSIDERING THE REPLY OF THE ASSESSEE, AO OBSERVED THAT THE ESTIMATION MADE BY THE ASSESSEE I S NOT SATISFACTORY AND ACCEPTABLE AND HELD THAT RULE 8D OF INCOME TAX RULES 1962 IS SQUARELY APPLICABLE TO THE ASSESSEE. ACCORDINGLY, THE AO HAS DISALLOWED AN AMOUNT OF RS.2,76,36,280/- U/S 14A OF INCOME TAX ACT, 1961 (IN SHORT ACT) R.W.S. RULE 8D OF THE IN COME TAX RULES. THE ASSESSEE CONTESTED THE DISALLOWANCE BEFORE LD.C IT(A). 3. LD.CIT(A) HELD THAT THE ASSESSEE HAS SUO MOTTO M ADE THE DISALLOWANCE AND BASED ON THE JUDGEMENT IN THE CASE OF CIT-I LUDHIANA V ABHISHEK INDUSTRIES [2015] (2) TM-1, 672 (P&H), ITA NO.320 OF 2013 DATED 27.01.2015 HAS DELETED THE ADDITION. I.T.A .NO.-3534/DEL/2016 4. AGGRIEVED WITH THE DELETION, THE REVENUE FILED A N APPEAL BEFORE ITAT. 5. DURING HEARING BEFORE US, LD.DR REITERATED THE F ACTS AND RELIED ON THE ASSESSMENT ORDER. REGARDING THE SATISFACTIO N TO BE RECORDED U/S 14A(2), LD.DR ARGUED THAT AO HAS COMPUTED THE D ISALLOWANCE CLEARLY INDICATES THAT AN IMPLICIT SATISFACTION HAS BEEN DERIVED BY THE AO. IN SUPPORT OF THE PROPOSITION, LD. DR HAS REL IED ON THE FOLLOWING DECISIONS:- [1] INDIABULLS FINANCIAL SERVICES LTD. VS DCIT [20 16] 76 TAXMANN.COM 268 (DELHI) WHERE HONBLE DELHI HIGH COURT HELD THAT WHERE ASSE SSING OFFICER AFTER CARRYING OUT ELABORATE ANALYSIS AND F OLLOWING STEPS ENACTED IN STATUTE, HAD DETERMINED AMOUNT OF EXPEND ITURE INCURRED FOR EARNING TAX EXEMPT INCOME, MERELY BECA USE HE DID NOT EXPRESSLY RECORD HIS DISSATISFACTION ABOUT ASSE SSEES CALCULATION, HIS CONCLUSION COULD NOT BE REJECTED. [2] GODREJ & BOYCE MANUFACTURING COMPANY LTD. VS DC IT [2017] 81 TAXMANN.COM 11 (SC)/ [2017] 247 TAXMAN 361 (SC)/ [2017] 394 ITR 449 (SC)/ {2017} 295 CTR 121 (SC) WHERE HONBLE SUPREME COURT HELD THAT WHERE ASSESSI NG OFFICER AFTER CARRYING OUT ELABORATE ANALYSIS AND FOLLOWING STEPS ENACTED IN STATUTE, HAD DETERMINED AMOUNT OF EXPENDITURE IN CURRED FOR EARNING TAX EXEMPT INCOME, MERELY BECAUSE HE DID NO T EXPRESSLY I.T.A .NO.-3534/DEL/2016 RECORD HIS DISSATISFACTION ABOUT ASSESSEES CALCUL ATION, HIS CONCLUSION COULD NOT BE REJECTED. [3] PUNJAB TRACTORS LTD. VS CIT [2017-TIOL-353-P&H- IT] WHERE HONBLE PUNJAB & HARYANA HIGH COURT HELD THAT AO IS BOUND TO APPLY PROVISIONS OF RULES 8D WHERE HE IS N OT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF ASSESSEE IN RE SPECT OF EXPENDITURES INCURRED TO EARN EXEMPT INCOME. 6. REGARDING DISALLOWANCE OF INTEREST, LD. DR HAS A RGUED THAT THE FACT THAT INTEREST HAS BEEN DEBITED PROVED THAT POI NT THERE ARE BORROWED FUNDS WHICH HAVE BEEN UTILIZED FOR INVESTM ENT AS CAN BE DECIPHERED FROM BALANCE SHEET. HE ARGUED THAT SINCE BORROWED FUNDS HAVE BEEN UTILIZED FOR INVESTMENT, THE ACTION OF AO NEEDS TO BE UPHELD. 7. LD. DR HAS FURTHER RELIED ON THE DECISION IN THE CASE OF VIPIN MALIK VS ACIT 45 ITR 589 (ITAT, DELHI), ON THE PREPOSITION THAT WHERE NO DISALLOWANCE WAS MADE BY THE ASSESSEE INVOKING T HE PROVISIONS OF RULE 8D(2)(III) DISALLOWANCE MADE BY THE AO, WAS HE LD TO BE JUSTIFIED AND SINCE THE CASE IS ALSO ON THE SIMILAR GROUNDS, THE ACTION OF THE AO DISALLOWING THE EXPENSES UNDER RULE 8D(2)(III) N EEDS TO BE UPHELD. I.T.A .NO.-3534/DEL/2016 8. AGAINST THE ARGUMENTS OF LD.DR, LD.AR SUBMITTED THAT THERE ARE THREE DIFFERENT INVESTMENTS MADE BY THE ASSESSE E WHICH ARE AS UNDER:- PARTICULARS STRATEGIC ADVISORY DIVISION N-SURE DIVISION WINDMILL DIVISION TOTAL STRATEGIC INVESTMENTS IN UNLISTED SHARES OF SUBSIDIARIES AND ASSOCIATE COMPANIES 76.59 0 0 76.59 DEBT ORIENTED MUTUAL FUNDS- DIVIDEND PLAN 10.76 0 0 10.76 DEBT ORIENTED MUTUAL FUNDS- GROWTH PLAN 0 21.21 0 21.21 INVESTMENT IN ALTERNATIVE INVESTMENT PLANS 0 1.06 0 1.06 EQUITY ORIENTED MUTUAL FUNDS- GROWTH OPTION 0 4.72 0 4.72 TOTAL 87.35 26.99 0 114.34 9. IT WAS FURTHER ARGUED BY LD.AR THAT AS FAR AS RS .10.76 CRORES OF INVESTMENTS IN DEBT ORIENTED MUTUAL FUNDS-DIVIDEND PLANS IS CONCERNED, AN AMOUNT OF RS.6.66 LAKHS HAS BEEN DISA LLOWED SUO MOTTO AGAINST THE EXEMPT INCOME AND RS.26.20 LAKHS. HE FURTHER ARGUED THAT REGARDING THE INVESTMENT MADE BY N-SURE DIVISION OF RS.27 CRORES, A SUM OF RS.21.21 CRORES IS INVESTED IN DEBT ORIENTED MUTUAL FUNDS-GROWTH OPTION INCOME OF WHICH IS TAXAB LE; OUT OF THE BALANCE INVESTMENTS, THE ASSESSEE HAS EARNED DIVIDE ND INCOME OF RS.24.15 LAKHS AND EXEMPT CAPITAL LOSS OF RS.5.01 L AKHS. THE I.T.A .NO.-3534/DEL/2016 ASSESSEE HAS SUO-MOTTO DISALLOWED A SUM OF RS.25.7 LAKHS CONSTITUTING MANAGEMENT FEES PAID FOR INVESTMENTS I N MULTIPLE PRIVATE EQUITY FUND. THERE ARE NO LOANS IN THE N-S URE DIVISION. ALL THE LOANS ARE APPEARING IN THE STRATEGIC ADVISORY D IVISION. FURTHER, THE N-SURE DIVISION HAS NOT TAKEN ANY INTER DIVISIO N LOAN FROM STRATEGIC ADVISORY DIVISION. 10. LD.AR FURTHER ARGUED THAT THERE WERE NO COLLECT ION EXPENSES FOR THE INVESTMENT MADE IN EQUITY ORIENTED MUTUAL FUNDS -GROWTH PETITION OF RS.4.72 CRORES AND ALSO NO MAJOR MANAGERIAL WORK WAS REQUIRED TO INVEST. OUT OF ABOVE INVESTMENTS OF RS.4.72 CRORES AS ON 31.03.2012, INVESTMENTS WERE 3.25 CRORES (7 OUT 12 SCHEMES) WER E INVESTED IN EXISTING SCHEMES CARRIED FORWARD FROM PREVIOUS YEAR . LD.AR FURTHER ARGUED THAT AN AMOUNT OF RS.76.59 CRORES HAS BEEN H ELD A STRATEGIC INVESTMENT IN UNLISTED SHARES OF SUBSIDIARY AND ASS OCIATE COMPANIES. HENCE, NO DISALLOWANCE ON THIS AMOUNT IS REQUIRED A S THE LEGAL PROPOSITION HAS ALREADY BEEN ESTABLISHED ON THIS IS SUE. LD.AR RELIED ON THE FOLLOWING SUBMISSIONS FOR READY-REFERENCE:- (A) CIT-I LUDHIANA V ABHISHEK INDUSTRIES [2015] 38 0 ITR 652 (P&H) DECIDED 011 27/1/2015 HAS HELD THAT- I.T.A .NO.-3534/DEL/2016 'SECTION 14A OF THE ACT REQUIRES THE ASSESSING OFFI CER TO RECORD SATISFACTION THAT INTEREST BEARING FUNDS HAV E BEEN USED TO EARN TAX FREE INCOME. THE SATISFACTION TO B E RECORDED MUST BE BASED UPON CREDIBLE AND RELEVANT EVIDENCE. THE ONUS, THEREFORE, TO PROVE THAT INTERE ST BEARING FUNDS WERE USED, LIES SQUARELY ON THE SHOUL DERS OF THE REVENUE. THUS, IF THE ASSESSING OFFICER IS ABLE TO REFER TO RELEVANT MATERIAL WHILE RECORDING SATISFACTION T HAT BORROWED FUNDS WERE USED TO EARN INTEREST FREE INCO ME AS OPPOSED TO THE ASSESSEE'S OWN FUNDS, THE ASSESSING OFFICER MAY LEGITIMATELY DISALLOW SUCH A CLAIM. THE ASSESSING OFFICER, HOWEVER, CANNOT, BY RECORDING GE NERAL INTEREST BEARING FUNDS, PROCEED TO INFER THAT INTER EST BEARING INCOME MUST HAS BEEN USED TO EARN EXEMPTED INCOME. SECTION 14A OF THE ACT, BEING IN THE NATURE OF AN EXCEPTION, HAS TO BE CONSTRUED STRICTLY AND ONLY WH ERE THE ASSESSING OFFICER RECORDS SATISFACTION, ON THE BASI S OF CLEAR AND COGENT MATERIAL, SHALL AN ORDER BE PASSED UNDER SECTION 14A OF THE ACT, DISALLOWING SUCH A CLAIM. A S THERE IS NO TANGIBLE MATERIAL ON RECORD THAT COULD HAVE E NABLED THE ASSESSING OFFICER TO RECORD SATISFACTION IN TER MS OF SECTION 14A OF THE ACT, FINDINGS RECORDED BY THE CI T(A) AND THE ITAT THAT THE ASSESSING OFFICER HAS FAILED TO D ISCHARGE THIS ONUS ARE NEITHER PERVERSE NOR ARBITRARY AND, T HEREFORE, DO NOT CALL FOR INTERFERENCE. I.T.A .NO.-3534/DEL/2016 (B) CIT V / S. DEEPAK MITTAL 361 ITR 131 (P /H) THE HIGH COURT HAS HELD THAT AO COULDN'T APPLY RULE 8D BLINDLY DESPITE ASSESSEE'S CONTENTIONS THAT NO EXPE NDITURE WAS INCURRED TO EARN EXEMPT INCOME, BY REFERRING TO THE DECISION IN THE CASE OF CIT V /S HERO CYCLES LTD [2 010] 323 ITR 518/189 TAXMAN 50 (PUNJAB. & HARYANA) HAS HELD THAT 'THE CONTENTION OF THE REVENUE THAT DIRECTLY O R INDIRECTLY SOME EXPENDITURE IS ALWAYS INCURRED WHIC H MUST BE DISALLOWED UNDER SECTION 14A AND THE IMPACT OF EXPENDITURE SO INCURRED CANNOT BE ALLOWED TO BE SET OFF AGAINST THE BUSINESS INCOME WHICH MAY NULLIFY THE MANDATE OF SECTION 14A, CANNOT BE ACCEPTED. DISALLO WANCE UNDER SECTION 14A REQUIRES FINDING OF INCURRING OF EXPENDITURE WHERE IT IS FOUND THAT FOR EARNING EXEMPTED INCOME NO EXPENDITURE HAS BEEN INCURRED, DISALLOWANCE UNDER SECTION 14A CANNOT STAND. IN THE PRESENT CASE FINDING ON THIS ASPECT, AGAINST THE RE VENUE, IS NOT SHOWN TO BE PERVERSE. CONSEQUENTLY, DISALLOWANC E IS NOT PERMISSIBLE.' (C) ACIT V BHARAT HOTELS LTD, ITAT DELHI, ITA NO 4959/DEL/2012 & 5401/DEL/2013 DECIDED ON 29/12/2014 IN PARA 5.3 'FROM THE ABOVE DECISION OF HON'BLE DELHI HIGH COUR T, WE FIND THAT HON'BLE HIGH COURT HAS CONSIDERED VARIOUS CASE LAWS FOR ARRIVING AT THE CONCLUSION THAT IN CASE TH E DIVIDEND INCOME IS NOT RECEIVED BY AN ASSESSEE, THE I.T.A .NO.-3534/DEL/2016 DISALLOWANCE U/S 14A CANNOT BE MADE. MOREOVER WE FI ND THAT INVESTMENTS WERE FOR STRATEGIC PURPOSES AND SU CH INVESTMENT CANNOT BE SAID TO HAVE BEEN MADE EARNING OF DIVIDEND AS HELD BY VARIOUS COURTS. (D) DCIT V INTER GLOBE ENTERPRISES, ITA NO. 1362 & 1032/DEL/2013 (DEL BENCH 'C'] DECIDED ON 4/4/2014 O N PAGE 9 & 10 OF THE ORDER 'HOWEVER, WE FIND THAT THE CALCULATION OF DISALLOWA NCE UNDER RULE 8D(III) MADE BY THE ASSESSING OFFICER AN D UPHELD BY LD C1T(A) IS NOT CORRECT IN VIEW OF THE F ACT THAT ASSESSING OFFICER HAD INCLUDED THE VALUE OF TOTAL INVESTMENTS FOR CALCULATION OF DISALLOWANCE WHEREAS IN OUR OPINION THE VALUE OF THOSE INVESTMENTS SHOULD HAVE BEEN INCLUDED WHICH WERE MADE FOR THE PURPOSE OF EARNING EXEMPT INCOME. THE ASSESSEE HAD MADE SIGNIFICANT INVESTMENTS IN THE SHARES OF SUBSIDIARY COMPANIES, WHICH ARE DEFINITELY NOT FOR THE PURPOSE OF EARNING EXEMP T INCOME. THE HON'BLE TRIBUNAL IN ITA NO. 3349/DEL/20 11 IN THE CASE OF PROMAIN LTD, AFTER RELYING UPON A KO LKATA JUDGMENT OF TRIBUNAL IN ITA NO. 1331 HAS HELD THAT STRATEGIC INVESTMENT HAS TO BE EXCLUDED FOR THE PUR POSE OF ARRIVING AT DISALLOWANCE UNDER RULE BD(III). FOLLOWING THE ABOVE JUDICIAL PRECEDENTS, WE HELD TH AT VALUE OF STRATEGIC INVESTMENT SHOULD BE EXCLUDED FO R THE PURPOSES OF DISALLOWANCE UNDER RULE 8D(3). WE DIREC T THE ASSESSING OFFICER TO CALCULATE THE DISALLOWANCE UND ER RULE I.T.A .NO.-3534/DEL/2016 8D(3) BY EXCLUDING THE VALUE OF STRATEGIC INVESTMEN TS IN THE CALCULATION OF DISALLOWANCE. (E) U.P. ELECTRONICS CORPORATION LTD V DCIT (TDS), ITA NO. 538/LKW /2012 DATED 23/1/2015 (AY 09-10) IN THE CASE OF DCL'T V JINDAL PHOTO LTD IN ITA NO. 814/DEL/2011, THE DELHI BENCH OF THE TRIBUNAL HAS A LSO EXPRESSED SIMILAR VIEW, IN WHICH IT HAS BEEN HELD T HAT SATISFACTION OF THE ASSESSING OFFICER IS PREREQUISI TE TO INVOKE THE PROVISIONS OF RULE 8D. THEREFORE, IN THE ABSENCE OF OBJECTIVE SATISFACTION BY THE ASSESSING OFFICER, THE DISALLOWANCE MADE UNDER RULE 8D IS NOT SUSTAINABLE IN THE EYES OF LAW. MOREOVER. THE INVESTMENT WAS MADE IN THE CASE OF SUBSIDIARY COMPANIES, THEREFORE, IN THOSE C ASES DISALLOWANCE U/S 14-A (2) OF THE ACT CANNOT BE WORK ED OUT UNLESS AND UNTIL IT IS ESTABLISHED THAT CERTAIN EXP ENDITURES ARE INCURRED BY THE ASSESSEE IN THESE INVESTMENTS. (F) JOINT INVESTMENTS (P) LTD. V IS. CIT ( ITA NO 1 17/2015) (DELHI HIGH COURT). PARA 9 ON PAGE 3 OF THE ORDER R EADS AS UNDER:- 'THE THIRD, AND IN THE OPINION OF THIS COURT, IMPOR TANT ANOMALY WHICH WE CANNOT BE UNMINDFUL IS THAT WHEREA S THE ENTIRE TAX EXEMPT INCOME IS 48,90,000/-, THE DISALLOWANCE ULTIMATELY DIRECTED WORKS OUT TO NEARL Y 110% OF THAT SUM, I.E. 52,56,197/-. BY NO STRETCH OF IMA GINATION CAN SECTION 14A OR RULE 8D BE INTERPRETED SO AS TO MEAN THAT THE ENTIRE TAX EXEMPT INCOME IS TO BE DISALLOW ED. THE I.T.A .NO.-3534/DEL/2016 WINDOW FOR DISALLOWANCE IS INDICATED IN SECTION 14A , AND IS ONLY TO THE EXTENT OF DISALLOWING EXPENDITURE 'I NCURRED BY THE ASSESSEE IN RELATION TO THE TAX EXEMPT INCOM E'. THIS PROPORTION OR PORTION OF THE TAX EXEMPT INCOME SURE LY CANNOT SWALLOW THE ENTIRE AMOUNT AS HAS HAPPENED IN THIS CASE.' (G) DAGA GLOBAL CHEMICALS. ITA NO. 5592/MUM/2012 DE CIDED ON 1/1/2015 DISALLOWANCE ULS 14A READ WITH RULE 80 CANNOT EXCEE D THE EXEMPT INCOME CLAIMED. (H) DCM LTD V DCIT. ITA NO. 4467 & 5176/DEL12012 (A Y 09- 10) DATED 1/912015 THE HON'BLE DELHI HIGH COURT IN THE CASE OF JOINT INVESTMENT PVT LTD V CIT, VIDE ITS ORDER DATED 25/2 /2015, HAS HELD THAT DISALLOWANCE U/S 14A CANNOT EXCEED TH E AMOUNT OF EXEMPT INCOME. THE DELHI HIGH COURT IN TH E CASE OF HOLCIM INDIA P LTD. REPORTED IN (2014) 272 CTR 2 82 (DEL), HAS HELD THAT THERE CAN BE NO DISALLOWANCE U /S 14A IN THE ABSENCE OF ANY EXEMPT INCOME. THE RATIONALES BEHIND THESE JUDGMENTS ARE THAT THE AMOUNT OF DISALLOWANCE SHOULD NOT EXCEED THE EXEMPT INCOME. (I) J.M. FINANCIAL LTD V ADDL. CIT, ITA NO. 4521/MU M/2012 DECIDED ON 26/3/2014, WHERE IT HAS BEEN STATED THAT - 'WHERE INVESTMENTS ARE MADE IN JOINT VENTURES WHICH ARE STRATEGIC IN NATURE AND WHERE NO DIVIDEND INCOME HA S TO BE EARNED, DISALLOWANCE U/S 14A IS NOT CALLED FOR.' I.T.A .NO.-3534/DEL/2016 (J) PARDEEP KHANNA VIS ACIT, CIRCLE 31, NEW DELHI, ITA NO. 953/2015 DECIDED ON 11/8/2016, PARA 7 OF WHICH READ S AS UNDER:- 'IN THE PRESENT CASE, WE NOTICE THAT THE AO HAS NOT ANALYZED OBJECTIVELY IN TERMS OF THE DECISION IN SH AH. IT WAS FIRSTLY INCUMBENT UPON HIM TO IN FACT EXAMINE THE A CCOUNTS LOOSELY AND DETERMINE IF AT ALL ANY EXPENDITURE COU LD BE ASCRIBED TO THE TAX EXEMPT DIVIDEND / INTEREST EARN ED BY THE ASSESSEE. IF INDEED THE TAX EXEMPTED INCOME WAS EAR NED WITHOUT THE INTERFERENCE OF ANY EMPLOYEE BUT RATHER THROUGH THE SOLICITATION AND ADVERTISEMENT OF THE BANK THE QUESTION OF ATTRIBUTING ANY EXPENDITURE CANNOT ARISE AT ALL. ' (K) ACB INDIA LTD. V IS. ACIT (DELHI HIGH COURT)- 2 4/03/2015 SECTION 14A & RULE BD(2)(III): IN COMPUTING THE 'AV ERAGE VALUE OF INVESTMENT': ONLY THE INVESTMENTS YIELDING NON- TAXABLE INCOME HAVE TO BE CONSIDERED AND NOT ALL INVESTMENTS. IN VIEW OF THE ABOVE SUBMISSION, IT IS PRAYED THAT THE CIT (A) ORDER MAY KINDLY BE UPHELD. 11. REBUTTING THE ARGUMENTS OF LD.AR, LD. DR ARGUED THAT IT CANNOT BE SAID THAT NO MANAGERIAL EXPENSES HAVE BEEN INCUR RED FOR INVESTMENTS AND ALSO THERE HAS BEEN AN INTEREST COM PONENT WHICH IS TO BE DISALLOWED AS BEING UTILIZED FOR EARNING THE EXEMPT INCOME. I.T.A .NO.-3534/DEL/2016 12. WE HAVE HEARD THE ARGUMENTS OF BOTH PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. TAKING INTO CONSIDER ATION, THE STRATEGIC INVESTMENT, DEBT ORIENTED GENERAL FUNDS (DIVIDEND), DEBT ORIENTED MUTUAL FUND (GROWTH OPTION), DEBT ORIENTED MUTUAL F UND, DEBT ORIENTED FUND DIVIDEND LOAN AND KEEPING IN VIEW THE JUDGEMENTS MENTIONED (SUPRA), AN AMOUNT OF RS. 10,49,770/- DIS ALLOWED BY THE ASSESSEE ON THE AMOUNT OF INTEREST. THE AOS ACTIO N OF DERIVING SATISFACTION WAS THUS WITHOUT ANY COGENT GROUNDS, T HE AO DOES NOT DERIVE ANY POWER FROM SECTION 14A(2) IN THE ABSENCE OF ANY COGENT GROUNDS TO ARRIVE AT A FINDING THAT THE APPELLANTS CLAIM OF DISALLOWANCE WAS NOT ON SOUND GROUNDS AS THE INVEST MENTS OF MORE THAN 90% OF THE INVESTMENTS ARE EITHER TAXABLE OR S TRATEGIC INVESTMENT. HENCE, NO FURTHER DISALLOWANCE IS REQU IRED TO BE MADE BY THE AO. 13. IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS DISMISSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 13 TH OF FEBRUARY, 2017. SD/- SD/- (DIVA SINGH) (B.R .R.KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE:-13 TH FEBRUARY, 2018 *AMIT KUMAR* I.T.A .NO.-3534/DEL/2016 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRA R ITAT NEW DELHI