DCIT, New Delhi V. M/s. Alpha G. Corp. Development Ltd., New Delhi

ITA 6050/DEL/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3418 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2011-2012
• Appeal Filed On: 06-11-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SHRAVAN GOTRU
• Keywords: Earning of tax free income; Commercial expediency
• Section: 143(3); 14A; 147; 56

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D : NEW DELHI BEFORE SHRI H.S.SIDHU , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 6049, 6050, 6051/DEL/2015 (ASSESSMENT YEAR: 2008 - 09, 2011 - 12 AND 2012 - 13 ) DCIT, CIRCLE - 2(1), ROOM NO. 392, CR BUILDING, IP ESTATE, NEW DELHI VS. ALPHA G. CORP DEVELOPMENT LTD, 10 TH FLOOR, ASHOKA PLACE, 12, BARAKHAMBA ROAD, CONNAUGHT PLACE, NEW DELHI PAN:AAECA5259Q (APPELLANT) (RESPONDENT) REVENUE BY : SHRI SHRAVAN GOTRU, SR. DR ASSESSEE BY: NONE DATE OF HEARING 31/08 /2017 DATE OF PRONOUNCEMENT 22 / 11 /2017 O R D E R PER PRASHANT MAHARISHI , A. M. 1. TH ESE ARE THE APPEALS FILED BY THE REVENUE AGAINST THE ORDER OF THE LD CIT(A) - I, NEW DELHI DATED 21.08.2015 AND CIT(A) - 42, NEW DELHI DATED 18/08/2015 FOR THE ASSESSMENT YEAR 2008 - 09, 2011 - 12 AND 2012 - 13 , WHEREIN THE DISALLOWANCE ON ACCOUNT U/S 14A WERE DELETED. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL FOR ASSESSMENT YEAR 2008 - 09: - 1 THE LD CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE AO TO EXCLUDE INVESTMENTS IN SUBSIDIARY COMPANIES FOR THE PURPOSE OF CALCULATING DISALLOWANCE U/S 14A AND ALLOWING CONSEQUENTIAL RELIEF THEREOF. 2 THE LD CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE AO TO EXCLUDE INVESTMENTS IN MUTUAL FUNDS WHICH GENERATE EXEMPT INCOME FOR THE PURPOSE OF CALCULATING DISALLOWANCE U/S 14A HOLDING IT AS TEMPORARY PHENOMENA AND ALLOWING CONSEQUENTIAL RELIEF THEREOF. 3 THE LD CIT( A) HAS ERRED IN PLACING RELIANCE ON THE DECISION OF THE HON'BLE HIGH DELHI COURT IN CIT VS. ORIENTAL STRUCTURAL ENGINEERING PVT. LTD. AS THE FACTS OF WHICH CASE ARE DIFFERENT FROM THE FACTS OF INSTANT CASE. 4 THE LD CIT(A) HAS FAILED TO APPRECIATE THE FACT THAT IN THE CASE OF ORIENTAL STRUCTURAL ENGINEERING PVT. LTD., INVESTMENTS WERE MADE IN SPECIAL PURPOSE VEHICLES WHEREAS IN THE PRESENT ASSESSEE INVESTMENTS WERE MADE IN THE SUBSIDIARIES THAT TOO NOT ON ACCOUNT OF COMMERCIAL EXPEDIENCY BUT TO CIRCUMVENT T HE LAND CEILING ACT, 1975 OF THE STATE OF HARYANA. 5 3. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL FOR ASSESSMENT YEAR 2011 - 12 : - 1. THE LD CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF ITS.97,84,132/ MADE BY THE AO ON ACCOUNT OF DISALLOWANCE U/S 14A R.W RULE 8D. DCIT ALPHA G. CORP DEVELOPMENT LTD ITA NO. 6049, 6050, 6051/DEL/2015 (ASSESSMENT YEAR: 2008 - 09, 2011 - 12 AND 2012 - 13 ) PAGE | 2 2. THE LD CIT(A) HAS ERRED IN PLACING RELIANCE ON THE DECISION OF THE HON'BLE HIGH DELHI COURT IN CIT VS. ORIENTAL STRUCTURAL ENGINEERING PVT. LTD. AS THE FACTS OF WHICH CASE ARE DIFFERENT FROM THE FACTS OF INSTANT CASE . 3. THE LD CIT(A) HAS FAILED TO APPRECIATE THE FACT THAT IN THE CASE OF ORIENTAL STRUCTURAL ENGINEERING PVT. LTD., INVESTMENTS WERE MADE IN SPECIAL PURPOSE VEHICLES WHEREAS IN THE PRESENT ASSESSEE INVESTMENTS WERE MADE IN THE SUBSIDIARIES THAT TOO NOT ON ACCOUNT OF COMMERCIAL EXPEDIENCY BUT TO CIRCUMVENT THE LAND CEILING ACT, 1975 OF THE STATE OF HARYANA. 4. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL FOR ASSESSMENT YEAR 2012 - 13 : - 1. THE LD CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE AO TO EXCLUDE INVESTMENTS IN SUBSIDIARY COMPANIES FOR THE PURPOSE OF CALCULATING DISALLOWANCE U/S 14A AND ALLOWING CONSEQUENTIAL RELIEF THEREOF. 5. THE BRIEF FACTS OF THE CASE IS THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF REAL ESTATE MANAGEMENT AND DEVELOPMENT OF REAL ESTATE. FOR ASSESSMENT YEAR 2008 - 09 IT FILED ITS RETURN OF INCOME. THE ASSESSMENT U/S 143(3) OF THE ACT WAS COMPLETED AND SUBSEQUENTLY, THE CASE WAS REOPENED U/S 147 OF THE ACT FOR MAKING DISALLOWANCE U/S 147 OF THE ACT. DURING THE YEAR THE ASSESSEE HAS EARNED DIVIDEND INCOME OF RS. 11.66 CRORES WHICH IS CLAIMED AS EXEMPT INCOME BUT NO DISALLOWANCE WAS MADE. THEREFORE, THE LD AO DISALLOWED SUM OF RS. 16350876/ - APPLYING RULE 8D OF THE INCOME TAX RULES AND DISALLOWANCE 0.5% OF THE AV ERAGE INVESTMENT OF THE ASSESSEE. THE ASSESSEE PREFERRED APPEAL BEFORE THE LD CIT(A) AGAINST THE ABOVE DISALLOWANCE. THE LD CIT(A) DELETED THE SAME. THEREFORE, THE REVENUE IS IN APPEAL BEFORE US. 6. THE LD DR VEHEMENTLY SUPPORTED ORDERS OF THE LD AO. HE STAT ED THAT THE ASSESSEE HAS MADE HUGE INVESTMENT AND ALSO HAS EARNED HUGE DIVIDEND WHICH IS EXEMPT. NO DISALLOWANCE HAS BEEN BY THE ASSESSEE . HE SUBMITTED THAT THE AO HAS NOT DISALLOWED ANY AMOUNT ON ACCOUNT OF INTEREST BUT ON ACCOUNT OF OTHER EXPENSES. HE TH EREFORE STATED THAT DISALLOWANCE HAS CORRECTLY BEEN MADE. 7. THE LD AR SUBMITTED THAT THE ASSESSEE HAS NOT INCURRED ANY EXPENDITURE ON ACCOUNT OF INTEREST AS AGREED BY THE LD AO. HE FURTHER SUBMITTED THAT THE ASSESSEE HAS NOT INCURRED ANY EXPENDITURE AS FOR THE PERSONAL CAUSE AS THE STAFF COST OF RS. 9.83 LACS HAVE BEEN RELATED TO THE SUBSIDIARY COMPANY AND THEY HAVE REIMBURSED IT. HE HOWEVER SUBMITTED THAT ON THE EXPLANATION OF THE ASSESSEE NO SATISFACTION HAS BEEN RECORDED BY THE LD AO. HE FURTHER STATED THAT THE LD CIT(A) HAS DELETED THE ADDITION ON THE BASIS OF D ECISION OF HONBLE PUNJAB AND HARYANA HIGH COURT AS WELL AS DECISION OF THE HONBLE ALLAHABAD HIGH COURT. HE FURTHER STATED THAT AMOUNT OF INVESTMENT MADE BY THE ASSESSEE IS ALSO FOR STRATEGIC CONTROL AND BUSINESS EXPEDIENCY ON SUCH ADVANCE NO DISALLOWANCE CAN BE MADE. DCIT ALPHA G. CORP DEVELOPMENT LTD ITA NO. 6049, 6050, 6051/DEL/2015 (ASSESSMENT YEAR: 2008 - 09, 2011 - 12 AND 2012 - 13 ) PAGE | 3 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND ALSO PERUSED VARIOUS ORDERS OF THE LOWER AUTHORITIES. THE LD CIT(A) DEALT WITH THIS ISSUE AT PARA 21 TO 24 AS UNDER: - DECISION: I HAVE CONSIDERED THE SUBMISSION OF THE APPELLANT AND OBSERVATION OF THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. IT IS SEEN THAT ASSESSING OFFICER HAS DISALLOWED EXPENSES OF RS.1 ,63 50,876/ - U/S 14A READ WITH RULE 8D OF THE I.T. RULES, 1962 AS EXPENSES ATTRIBUTABLE TO EARNING OF EXEMPT INCOME. THE APPELLAN T COMPANY IS ENGAGED IN THE BUSINESS OF DEVELOPMENT OF INTEGRATED TOWNSHIPS, MALLS, DEVELOPMENT OF MANAGEMENT SERVICES. THE AREA OF OPERATION OF THE APPELLANT COMPANY IS MAINLY IN THE STATE OF HARYANA, GURJARAT AND PUNJAB. IN THE STATE OF HARYANA, IF A COM PANY INTEND TO DEVELOP A TOWNSHIP, THE MINIMUM AREA REQUIRED IS 50 ACRES, HOWEVER, AS PER SECTION 4 OF HARYANA URBAN LAND CEILING ACT 1975, HOLDING OF HARYANA URBAN LAND CEILING ACT, 1975, HOLDING OF THE LAND IN URBAN AREAS RESTRICTED TO RS. 7.25 HECTARES I.E. 17.915 ACRES BY A SINGLE ENTITY. IN VIEW OF THE ABOVE RESTRICTIONS OF THE HARYANA URBAN LAND CEILING ACT, THE APPELLANT COMPANY HAD INVESTED IN THE SUBSIDIARY COMPANIES FOR ACQUIRING THE LAND IN THE NAME OF SUBSIDIARY COMPANIES SO THAT MINIMUM REQUIR EMENT OF 50 ACRES OF LAND REQUIRED FOR DEVELOPING TOWNSHIP CAN BE MET BY ACQUIRING LAND IN THE NAME OF VARIOUS SUBSIDIARY COMPANIES. ONCE THE LAND IS ACQUIRED IN THE NAME OF SUBSIDIARY COMPANIES, THE DEVELOPMENT RIGHTS WERE TRANSFERRED BY THE SUBSIDIARY CO MPANIES TO THE HOLDING COMPANIES. DUE TO THIS, THE INCOME GENERATED OUT OF THE DEVELOPMENT OF THE ACQUIRED LAND HAS BEEN TAXED IN THE HANDS OF THE APPELLANT COMPANY I.E. HOLDING COMPANY. THE APPELLANT COMPANY HAS SHOWN TOTAL INVESTMENT AS ON 31.03.2008 OF RS.1,66,68,29,250/ - IN VARIOUS SUBSIDIARY AND JOINT VENTURE COMPANIES WHICH IS AS UNDER: COMPANY NAME LAND AREA (ACRES) NATURE TOTAL PAID UP SHARE CAPITAL SHARES HELD BY AGDPL % INVESTMENT MARCH, 2008 ACROPLIS BUILDTECH PVT. LTD. 48.00 SUBSIDIARY 10,000 9,999 100% 10,67,26,000 FORTUNE BUILDTECH PVT. LTD. 30.49 SUBSIDIARY 10,000 9,999 100% 1,17,98,000 HABITAT BUILDCON PVT. LTD. 16.27 SUBSIDIARY 10,000 9,999 100% 14,63,000 PICCADILLY REAL ESTATES PVT. LTD. 15.11 SUBSIDIARY 10,000 9,999 100% 63,16,000 PENGUIN BUILDTECH PVT. LTD. 64.57 SUBSIDIARY 10,000 9,999 100% 2,05,99,000 ROSEBUDS BUILDTECH PVT. LTD. 1.23 SUBSIDIARY 10,000 9,999 100% 1,14,000 SEVEN SEAS REAL ESTATES PVT. LTD. 15.66 SUBSIDIARY 10,000 9,999 100% 17,64,000 SEVEN WONDERS REAL ESTATES PVT. LTD. 31.33 SUBSIDIARY 10,000 9,999 100% 2,27,90,000 TOWN HALL REAL ESTATES PVT. LTD. 12.64 SUBSIDIARY 10,000 9,999 100% 35,90,000 RUCHI MALLS PVT. LTD. 7.04 SUBSIDIARY 99,110 99,109 100% 1,33,50,27,100 CRYSTAL ISLAND PARK PVT. LTD. 80.00 SUBSIDIARY 1,50,000 1,49,999 100% 1,00,000 AXCELO DEVELOPMENT PVT. LTD. 19.04 SUBSIDIARY 10,000 10,000 100% 1,00,000 ELEGANT REAL TECH PVT. LTD. 18.00 SUBSIDIARY 10,000 10,000 100% 1,00,000 ESPRIT DEVELOPMENT PVT. LTD. 19.13 SUBSIDIARY 10,000 10,000 100% 1,00,000 AMBROSE REAL ESTATE PVT. LTD. 51.76 SUBSIDIARY 10,000 10,000 100% 1,00,000 CANTERBURY REAL TECH PVT. LTD. SUBSIDIARY 10,000 10,000 100% 1,00,000 STYLUS DEVELOPMENT PVT. LTD. 5.54 SUBSIDIARY 10,000 10,000 100% 1,00,000 VENTURE REAL TECH PVT. LTD 14.12 SUBSIDIARY 10,000 10,000 100% 1,00,000 OPAL DEVELOPMENT PVT. LTD. 14.83 SUBSIDIARY 10,000 10,000 100% 1,00,000 ALPHA G: CORP MANAGEMENT SERVICES PVT. LTD. SUBSIDIARY 10,000 10,000 100% 1,00,000 ACCORD DEVELOPMENT PVT. LTD. SUBSIDIARY 10,000 10,000 100% REGAL VISTA DEVELOPERS PVT. LTD. 0.95 SUBSIDIARY 10,000 10,000 100% AGES EDUCATION PVT. LTD. SUBSIDIARY 10,000 10,000 100% EPITOME REAL TECH PVT. LTD. 17.67 SUBSIDIARY 69,40,000 50,07,215 72% 5,00,72,150 DCIT ALPHA G. CORP DEVELOPMENT LTD ITA NO. 6049, 6050, 6051/DEL/2015 (ASSESSMENT YEAR: 2008 - 09, 2011 - 12 AND 2012 - 13 ) PAGE | 4 OPTIMA DEVELOPMENT PVT. LTD. JOINT VENTURE 20,000 10,000 50% 1,00,000 1,66,68,29,250 IT IS SUBMITTED BY THE APPELLANT THAT THE INVESTMENTS MADE IN THE ABOVE MENTIONED COMPANIES HAS BEEN MADE WITH THE INTENTION TO OBTAIN THE LICENSE AND TO ARRANGE 50 ACRES OF LAND WITH THE HELP OF SUBSIDIARY COMPANIES FOR DEVELOPING A TOWNSHIP. IT IS FURTHER SUBMITTED BY THE APPELLANT THAT ALL THESE SUBSIDIARIES HAVE TRANSFERRED THEIR DEVELOPMENT RIGHTS TO THE HOLDING COMPANIES FOR THE LAND BOUGHT IN THEIR NAME. THEREFORE, THE INTENTION OF T HE APPELLANT TO INVEST IN THE SUBSIDIARY COMPANIES WAS NEVER TO EARN DIVIDEND BUT THE SAME WAS MADE TO ACQUIRE LAND TO MEET THE MINIMUM REQUIREMENT OF HARYANA TOWN AND COUNTRY PLANNING ACT AND TO OVERCOME THE RESTRICTIONS PUT BY THE HARYANA URBAN LAND CEIL ING ACT, 1995. THE INVESTMENTS IN THE SUBSIDIARIES WERE FOR DEVELOPMENT OF BUSINESS AND FOR THE COMMERCIAL EXPEDIENCY. THESE INVESTMENTS WERE TO GET THE STRATEGIC ADVANTAGE TO GAIN THE BENEFIT OF SYNERGIES IN THE DIFFERENT MARKETS. IT IS SUBMITTED BY THE A PPELLANT THAT INVESTMENT HELD BY WAY OF SHARES IN SUCH COMPANIES CANNOT BE SUBJECT TO DISALLOWANCE U/S 14A OF THE I.T. ACT. ON GOING THROUGH THE INVESTMENT TABLE REPRODUCED ABOVE, IT IS SEEN THAT THESE INVESTMENTS WERE MADE IN THE SUBSIDIARY COMPANIES OF T HE APPELLANT WHICH ARE ENGAGED IN THE BUSINESS OF ACQUIRING LAND FOR DEVELOPMENT OF TOWNSHIPS AND MALLS ETC. IT IS ALSO SEEN THAT APPELLANT IS HOLDING ALMOST ENTIRE SHARES IN THESE SUBSIDIARY COMPANIES AND 50% SHARES IN THE JOINT VENTURE COMPANIES. IT IS A LSO SEEN THAT ALL THESE SUBSIDIARY COMPANIES ACQUIRED LAND TO HELP THE APPELLANT COMPANY IN ITS BUSINESS. THE ENTIRE SHARE CAPITAL OF THESE SUBSIDIARY COMPANIES HAS BEEN CONTRIBUTED BY THE APPELLANT. IT IS ALSO SEEN THAT APPELLANT HAS CLAIMED FINANCIAL EXP ENSES DURING THE YEAR OF RS.20,11,080/ - WHICH INCLUDES GUARANTEE COMMISSION AND CHARGES FOR ACQUIRING BANK GUARANTEE TO BE SUBMITTED TO VARIOUS AUTHORITIES OF THE STATE GOVERNMENT. THE APPELLANT HAS ALSO CLAIMED INTEREST ON VEHICLE LOANS OF RS.2,42,761/ - A ND INTEREST ON OTHERS OF RS.29,300/ - . FROM THE ABOVE IT IS SEEN THAT THE APPELLANT HAS NOT PAID ANY INTEREST FOR MAKING INVESTMENTS IN THE SUBSIDIARY COMPANIES. ON GOING THROUGH THE BALANCE SHEET OF THE COMPANY, IT IS SEEN THAT APPELLANT HAS RECEIVED EXEMP T INCOME OF RS. 11,54,07,071/ - FROM THE NON - TRADE INVESTMENTS MADE IN THE MUTUAL FUNDS. IT IS EXPLAINED BY THE APPELLANT THAT DURING THE FINANCIAL YEAR 2006 - 07 APPELLANT COMPANY HAS RECEIVED INVESTMENT FROM SSIII INVESTMENTS ONE LIMITED UNDER THE FOREIGN D IRECT INVESTMENT OF RS.287 CRORES AND IN THE FINANCIAL YEAR 2007 - 08, AN INVESTMENT OF RS.344 CRORES FROM WYNDFORD INVESTMENTS LTD. THIS MONEY WAS RECEIVED BY WAY OF SHARE CAPITAL AND SHARE PREMIUM ACCOUNT. TILL THE MONEY WAS UTILIZED BY THE APPELLANT COMPA NY FOR MAKING INVESTMENTS IN THE PROJECT, IT WAS INVESTED IN THE MUTUAL FUNDS. FROM THAT INVESTMENT THESE DIVIDENDS WERE RECEIVED BY THE APPELLANT. IT WAS CONTENDED BY THE APPELLANT THAT FOR MAKING THESE INVESTMENTS APPELLANT DID NOT INCUR ANY FINANCIAL CO ST AND ADMINISTRATION COST. HE HAS STATED THAT IT HAS DEPLOYED THE FUNDS IN MUTUAL FUNDS AND FOR INVESTMENT IN MUTUAL FUNDS ADVISOR DO NOT CHARGE ANY FEE AND WHATEVER FEE OR OTHER CHARGES ARE CHARGED THEY ARE DEDUCTED FROM THE AMOUNT OF INVESTMENT ITSELF. THEREFORE, IT WAS SUBMITTED BY THE APPELLANT THAT NO FINANCIAL OR ADMINISTRATION EXPENSES DIRECTLY OR INDIRECTLY HAVE BEEN INCURRED BY THE APPELLANT FOR EARNING THE DIVIDEND INCOME. IT IS ALSO SUBMITTED BY THE APPELLANT THAT THE DIVIDEND DISTRIBUTED BY THE MUTUAL FUNDS IS AFTER DEDUCTION OF TAX U/S 115R, THEREFORE, THESE DIVIDENDS ARE NOT TAX - FREE INCOME TO THE APPELLANT. THE DCIT ALPHA G. CORP DEVELOPMENT LTD ITA NO. 6049, 6050, 6051/DEL/2015 (ASSESSMENT YEAR: 2008 - 09, 2011 - 12 AND 2012 - 13 ) PAGE | 5 REVENUE HAS ALREADY COLLECTED THE TAX ON THE INCOME EARNED ON THE INVESTMENTS IN TERMS OF THE DIVIDEND TAX, HENCE, THE SAME CANNOT BE TAXED TWICE. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HELD THAT DIVIDEND EARNED FROM SUCH INVESTMENT IS NOT INCLUDABLE IN THE TOTAL INCOME OF THE APPELLANT COMPANY, THEREFORE, EXPENSES RELATING TO SUCH EXEMPT INCOME HAS TO BE DISALLOWED. HOWEVER, IT IS SEEN THAT DIVIDEND INCOME HAS BEEN EARNED BY THE APPELLANT FROM THE MUTUAL FUNDS AND NO DIRECT OR INDIRECT EXPENDITURE SEEMS TO BE INCURRED BY THE APPELLANT. THE MONEY WAS RECEIVED FROM THE FOREIGN INVESTOR AND TILL THE SAME WAS INVESTED IN THE PROJECT S, THE SAME WAS INVESTED IN THE MUTUAL FUNDS. THEREFORE, NO COST EXPENDITURE SEEMS TO BE INCURRED BY THE APPELLANT FOR MAKING THESE INVESTMENTS. IT IS ALSO SEEN THAT THE MAKING INVESTMENT IN THESE MUTUAL FUNDS WAS A SINGLE DAY ACTIVITY AND APPELLANT WAS NO T INVOLVED IN FREQUENT BUYING AND FREQUENT SELLING, THEREFORE, NO EXPENDITURE WAS INCURRED BY THE APPELLANT. THE APPELLANT HAS SUBMITTED THAT IT HAS MADE INVESTMENT IN THE SHARES OF SUBSIDIARY COMPANIES AS MENTIONED ABOVE NOT FOR EARNING DIVIDEND BUT THE I NVESTMENT WAS MADE ON ACCOUNT OF BUSINESS EXPEDIENCY. IT WAS ALSO SUBMITTED BY THE APPELLANT THAT PROVISIONS OF SECTION 14A ARE NOT APPLICABLE IN THE APPELLANTS CASE AS THE EXEMPT INCOME FROM THE INVESTMENT MADE IN MUTUAL FUNDS WAS A TEMPORARY PHENOMENA T ILL THE MONEY RECEIVED FROM FDI WAS INVESTED IN THE PROJECTS. THE INTENTION OF THE APPELLANT WAS NOT TO EARN DIVIDEND INCOME BUT TILL THE FINALIZATION OF THE PROJECT THE MONEY WAS KEPT TEMPORARILY IN THE MUTUAL FUNDS. IT WAS ALSO CONTENDED BY THE APPELLANT THAT IT HAS NOT DEBITED ANY EXPENDITURE RELATING TO INVESTMENTS IN ITS PROFIT & LOSS A/C, THEREFORE, NO DISALLOWANCE OF EXPENSES IS CALLED FOR U/S 14A READ WITH RULE 3D. IN SUPPORT OF ITS CONTENTION, THE APPELLANT HAS RELIED UPON THE JUDGMENT OF HONBLE D ELHI HIGH COURT IN THE CASE OF CIT VS. ORIENTAL STRUCTURAL ENGINEERS PVT. LTD. ITA NO. 605/2012 WHEREIN THE COURT HAS HELD THAT IN CASE OF STRATEGIC INVESTMENT NO DISALLOWANCE IS WARRANTED U/S 14A OF THE I.T. ACT. THE APPELLANT HAS SUBMITTED THAT IN THE NU MBER OF JUDICIAL PRONOUNCEMENT IT HAS BEEN HELD THAT PROVISIONS OF SECTION 14A ARE NOT APPLICABLE WHEN INVESTMENT IS MADE IN A GROUP COMPANY FOR STRATEGIC CONTROL AND FOR BUSINESS EXPEDIENCY. THE HONBLE MUMBAI ITAT IN THE CASE OF J.M. FINANCIAL LTD. VS. A CIT, ITA NO.4521/MUM/2012 HAS HELD THAT NO DISALLOWANCE COULD BE MADE U/S 14A FOR INVESTMENT MADE IN A SUBSIDIARY COMPANY FOR BUSINESS EXPEDIENCY. THE TRIBUNAL ALSO HELD THAT WHERE ASSESSEE BRINGS ON RECORD THAT NO EXPENDITURE HAS BEEN INCURRED ON INVESTME NT MADE IN SUBSIDIARY COMPANY, THE AO HAS TO RECORD HIS SATISFACTION FOR NOT ACCEPTING THE CLAIM OF THE ASSESSEE AND HE HAS TO GIVE HIS FINDING THAT THE EXPENDITURE HAS BEEN INCURRED BY THE ASSESSEE FOR EARNING EXEMPT INCOME. IT IS SEEN THAT NO SUCH FINDIN G HAS BEEN GIVEN BY THE ASSESSING OFFICER IN THE INSTANT CASE. IN VIEW OF THE DISCUSSION MADE ABOVE, THAT APPELLANT HAS MADE INVESTMENTS IN MUTUAL FUNDS AND ITS SUBSIDIARY COMPANIES FOR BUSINESS EXPEDIENCY, THEREFORE, PROVISIONS OF SECTION 14A ARE NOT APPL ICABLE AS HELD BY VARIOUS JUDICIAL PRONOUNCEMENTS CITED BY THE APPELLANT IN HIS SUBMISSION LIKE SWAPNA MURARKA 58 TAXMAN.COM 369 MUMBAI ITAT (2015), FALI S. NARIVAN 56 TAXMAN.COM 155 MUMBAI TRIBUNAL (2015) AND DY. CIT CIRCLE 10(1), NEW DELHI VS. DBH INTERN ATIONAL PVT. LTD. 55 TAXMAN.COM 424 DELHI TRIBUNAL (2015). THE APPELLANT HAS FURTHER RELIED UPON THE JUDGMENT OF HONBLE PUNJAB & HARYANA HIGH COURT AND ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. LAKHANI MARKETING INCORPORATION (2014) 111 DTR (P&H) 149 AN D CIT VS. SHIVAM MOTORS PVT. LTD. (2014) 111 DTR (ALLAHABAD) 153 RESPECTIVELY. THEREFORE, RESPECTFULLY FOLLOWING THE ABOVE JUDGMENTS AND IN VIEW OF THE FACT THAT NO SPECIFIC NEXUS HAS BEEN ESTABLISHED BY THE ASSESSING OFFICER ABOUT THE RECEIPT OF THE EXEMP T INCOME AND DCIT ALPHA G. CORP DEVELOPMENT LTD ITA NO. 6049, 6050, 6051/DEL/2015 (ASSESSMENT YEAR: 2008 - 09, 2011 - 12 AND 2012 - 13 ) PAGE | 6 INCURRING OF EXPENSES, HENCE, NO DISALLOWANCE OF EXPENSES I S CAL LED FOR. FURTHER, THE INVESTMENT IN MUTUAL FUNDS WAS A TEMPORARY PHENOMENA AND SAME ARRANGEMENT TILL THE MONEY WAS INVESTED IN PROJECTS. ACCORDINGLY, DISALLOWANCE OF RS. 16350876 / - MADE BY THE ASSESSING OFFICER AS EXPENSES PERTAINING TO EARNING EXEMPT INCOME IS DELETED. 9. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD CIT(A) AND THEREFORE, WE DISMISS THE APPEAL OF THE REVENUE. 10. ON IDENTICAL FACTS AND CIRCUMSTANCES RESPECTFULLY FOLLOWING THE DECISION IN ABOVE ITA NO. 6049/DEL/2015 , WE ALSO DISMISS THE APPEAL S OF THE REVENUE FOR ASSESSMENT YEAR 2011 - 12 AND 2012 - 13. 11. IN THE RESULT ALL THE THREE APPEAL OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 2 / 11 /2017. - S D / - - S D / - ( H.S.SIDHU ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 2 2 / 11 /2017 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI