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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI S. JAYARAMAN
आदेश /O R D E R
PER N.R.S. GANESAN, JUDICIAL MEMBER:
This appeal of the Revenue is directed against the order of the Commissioner of Income Tax (Appeals) -3, Chennai, dated 30.08.2017 and pertains to assessment year 2013-14. The assessee filed the cross- objection against the very same order of the CIT(Appeals). Therefore, we heard both the appeal and the cross-objection together and disposing the same by this common order.
Shri AR.V. Sreenivasan, the Ld. Departmental Representative, submitted that the CIT(Appeals) directed the Assessing Officer to exclude the investment made in the subsidiary companies by placing reliance on the order of this Tribunal in EIH Associated Hotels Ltd. v. DCIT 2013 (9)
TMI 604. Referring to the judgment of Apex Court in Maxopp Investment Ltd. v. CIT (2018) 402 ITR 640, the Ld. D.R. submitted that even if the investment was made in the subsidiary companies or in strategic investments, the provisions of Section 14A of the Income-tax Act, 1961 (in short 'the Act') is applicable. Therefore, according to the Ld. D.R., the CIT(Appeals) is not correct in directing the Assessing Officer to exclude the investments made in subsidiary companies.
On the contrary, Sh. R. Vijayaraghavan, the Ld.counsel for the assessee, submitted that the assessee had sufficient funds for making investments. When the assessee has invested its own funds, according to the Ld. counsel, there cannot be any disallowance. On a query from the Bench when the investments were made? Whether the assessee had sufficient surplus funds on the date of investments? The Ld.counsel submitted that the details are not available and the matter may be remitted back to the file of the Assessing Officer for reconsideration.
Referring to Rule 8D(2)(ii) and (iii) of the Income-tax Rules, 1962, the Ld.counsel submitted that the investment, which does not result in exempted income, has to be excluded for computation. According to the Ld. counsel, only those investments which earned exempted income during the year under consideration, has to be considered for disallowance.
We have considered the rival submissions on either side and perused the relevant material available on record. The main claim of the assessee is that when sufficient own funds were available for making investment in the shares, then there cannot be any disallowance towards expenditure. However, the details of the date of investments in the shares and availability of funds on the date of investments are not available on record. Therefore, as submitted by the Ld.counsel for the assessee, the matter needs to be re-examined by the Assessing Officer.
Accordingly, orders of both the authorities below are set aside and the entire issue of disallowance made under Section 14A read with Rule 8D is remitted back to the file of the Assessing Officer. The Assessing Officer shall re-examine the matter and bring on record the actual dates of investments made in the shares, availability of the assessee’s own funds on the date of investments and the investment which earned the exempted income and thereafter decide the issue afresh in accordance with law, in the light of the judgment of Apex Court in Maxopp Investment Ltd. (supra) after giving a reasonable opportunity to the assessee.
The cross-objection is for applicability of Section 14A of the Act and the expenditure for earning exempted income. The issue raised in the cross-objection is also remanded back to the Assessing Officer for reconsideration.
In the result, the appeal of the Revenue and the cross-objection of the assessee are allowed for statistical purposes. Order pronounced in the court on 2nd January, 2020 at Chennai.