DCIT CC 3(1) CEN RG 3, MUMBAI vs. WIND WORLD WIND FARMS (KRISHNA) LTD, MUMBAI

The assessee is engaged in the business of manufacture and sale of wind energy. Consequent to the search operation conducted in the hands of the assessee, the present assessment was completed by the AO u/s 153A r.w.s. 143(3) of the Act. The AO noticed that the assessee has made investments in shares to the tune of Rs.352 crores and has disallowed a sum of Rs.2.00 lakhs only u/s 14A of the Act. It is pertinent to note that the assessee did not receive any dividend income in the instant year. The AO applied the provisions of Rule 8D of I T Rules and accordingly computed the disallowance. The Ld CIT(A) noticed that the assessee has made entire investment in the equity shares of its subsidiary company, which is strategic in nature. Accordingly, by following the decision rendered by the co-ordinate bench in the case of Garware Wall Ropes (ITA No.5408/M/2012 and J.M. Financials Ltd (ITA No.4521/M/2012), the Ld CIT(A) expressed the view that the strategic investments have to be excluded for the purpose of computing disallowance u/r 8D. In that case, there was no requirement of making any disallowance and accordingly the Ld CIT(A) deleted the addition made by the AO. Revenue is aggrieved by that decision.

I have heard the parties and perused the record. The fact remains that the assessee did not receive any dividend during the year under consideration. I also notice that the entire investment has been made in the subsidiary company named Vayu (India) Power Corporation P Ltd and hence there is commercial expediency in making investment. Under these set of facts, I am of the view that the Ld CIT(A) was justified in deleting the addition made u/s 14A of the Act by following the decision rendered by the co-ordinate bench of Tribunal. Accordingly I uphold his order.

In the result, the appeal filed by the revenue is dismissed. Order has been pronounced in the Court on 4.5.2017.