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“strategic investment”

DisallowancesSection 14ASection 14A426 judgments

The decision most relied on for strategic investment is Maxopp Investment Ltd. v. CIT (402 ITR 640), cited in 1,596 judgments on BharatTax.

Leading authorities on strategic investment

Maxopp Investment Ltd. v. CIT
402 ITR 640 · 2018 · Supreme Court
1,596
citing judgments

Disallowance under Section 14A is not automatic and requires the Assessing Officer to record satisfaction before applying Rule 8D. Only investments yielding exempt income are considered for disallowance, irrespective of their strategic nature.

Garware Wall Ropes Ltd. v. ACIT
65 SOT 86 · 2014 · ITAT
74
citing judgments

Disallowance under Section 14A read with Rule 8D(2)(iii) does not apply to long-term investments, including those in subsidiary/group concerns or strategic investments, and such investments should be excluded from the calculation.

Mazagaon Dock Ltd. v. CIT & Excess Profits Tax
34 ITR 368 · 1958 · Supreme Court
57
citing judgments

Investments made by a holding company in its subsidiary can be considered a business activity, allowing related business expenditures to be deducted and not disallowed.

Southern Petro Chemical Industries v. DCIT
3 SOT 157 · 2005 · ITAT
34
citing judgments

Proportionate management expenses are deductible when computing exempt dividend income, as investment decisions are strategic and involve top management.

Gareware Wall Ropes Ltd. v. ACIT
46 Taxmann.com 18 · 2014 · ITAT
22
citing judgments

Strategic investments in wholly-owned subsidiaries are to be excluded when calculating the disallowance under Section 14A, which pertains to expenses incurred in relation to exempt income. This exclusion applies even when these investments are made for holding a controlling stake rather than for earning dividends.

Pr. Commissioner of Income Tax-2 v. Enrich Agro Food Products Pvt. Ltd.
148 Taxmann.com 26 · 2023 · High Court
20
citing judgments

The Delhi High Court confirms that when shares are issued at a premium to investors, the valuation of such shares must be assessed based on established methods like the NAV or DCF method, and the revenue cannot arbitrarily determine the fair market value.

Mahindra & Mahindra Limited v. JCIT
36 SOT 348 · 2010 · ITAT
14
citing judgments

Investments on which no exempt income was received during the year, and investments in subsidiaries considered strategic, are excluded from average investment calculations for determining disallowance of interest expenses.

366 ITR 505 (Bom), CIT v. Reliance Utilities and Power
239 ITR 735 · High Court
13
citing judgments

Investments made by an assessee are presumed to be out of interest-free funds, and no disallowance under Section 14A is warranted if no dividend income is received from such strategic investments.

Judgments citing strategic investment

Rajeev S Reniwal, Mumbai vs. ITO Circle- 3(2)(3), Mumbai

In the result, this appeal by the assessee stands partly allowed for statistical purpose

ITA 726/MUM/2020[2013-14]Status: DisposedITAT Mumbai14 Feb 2022AY 2013-14

Bench: Shri Shamim Yahya

Section 14ASection 24

order. He held that as per Hon’ble Supreme Court decision in Maxopp Investments Ltd. 402 ITR 640. The argument of strategic investment as well as stock in trade is not to be considered. He also held that whether the dividend income has been earned of such investment

ACIT -3(1)(1), Mumbai vs. M/S. Rideema Toll P. Ltd., Mumbai

In the result, this appeal is dismissed

ITA 521/MUM/2021[2017-18]Status: DisposedITAT Mumbai09 Feb 2022AY 2017-18
Section 143(3)Section 36(1)(iii)

furtherance of its business interest. When both the holding company and subsidiary are in the business of toll collection, such an investment is a strategic investment to wrest control over the subsidiary. The immediate advantage derived may not be in money terms; wresting control over the Board of Directors

Tata Realty and Infrastructure Ltd, Mumbai vs. Ast CIT 2(3)(1), Mumbai

ITA 763/MUM/2020[2015-16]Status: DisposedITAT Mumbai28 Jan 2022AY 2015-16
For Appellant: Aarti VissanjiFor Respondent: Sanjeev Kashyap
Section 115JSection 143(2)Section 143(3)

balance sheet of the asesssee company placed at page No. 2 to 5 of the paper book and neither we find any evidence of strategic investment made in the above referred companies nor the assessee had correlated any significant investment in such companies except advancing of impugned interest free loans

Jt CIT(OSD) 2(3)(1), Mumbai vs. M/S Tata Realty and Infrastructure Ltd., Mumbai

ITA 730/MUM/2020[2015-16]Status: DisposedITAT Mumbai28 Jan 2022AY 2015-16
For Appellant: Aarti VissanjiFor Respondent: Sanjeev Kashyap
Section 115JSection 143(2)Section 143(3)

balance sheet of the asesssee company placed at page No. 2 to 5 of the paper book and neither we find any evidence of strategic investment made in the above referred companies nor the assessee had correlated any significant investment in such companies except advancing of impugned interest free loans

Ratna Commercial Enterprises Pvt. Ltd., New Delhi vs. Addl.CIT, Range-21, New Delhi

In the result, the appeal filed by the assessee is partly allowed

ITA 2086/DEL/2018[2014-15]Status: DisposedITAT Delhi28 Jan 2022AY 2014-15

Bench: Shri R.K. Panda & Shri Amit Shuklaassessment Year: 2014-15 Ratna Commercial Enterprises Pvt. Vs Addl. Cit, Ltd., Range-21, 4Th Floor, Punjabi Bhawan, New Delhi. 10, Rouse Avenue, New Delhi. Pan: Aaacr0354B (Appellant) (Respondent) Assessee By : Shri M.P. Rastogi, Advocate Revenue By : Shri N.K. Bansal, Sr. Dr Date Of Hearing : 29.11.2021 Date Of Pronouncement : 28.01.2022 Order Per R.K. Panda, Am: This Appeal Filed By The Assessee Is Directed Against The Order Dated 23Rd January, 2018 Of The Cit(A)-7, New Delhi, Relating To Assessment Year 2014-15. 2. The Grounds Of Appeal No. 1 & 2 Raised By The Assessee Are As Under:- “1. That Both The Ld. Cit(A) & Ld. Ao Erred In Law & In Facts In Disallowance Of Rs.1,08,69,547/- U/S 14A In A Mechanical Way Without Appreciating The Facts That The Assessee Himself Has Disallowed Rs 2.41 Lakhs & That There Cannot Be Any Further Disallowance U/S 14A Without A Cogent Reason. 2. That Both The Ld. Cit(A) & Ld. Ao Erred In Law & In Facts In Appreciating That Strategic Investments In Dabur India Limited As The Promoter Shareholder, Would Not Form Part Of Disallowance U/S 14A.”

For Appellant: Shri M.P. Rastogi, AdvocateFor Respondent: Shri N.K. Bansal, Sr. DR
Section 14A

without a cogent reason. 2. That both the Ld. CIT(A) and Ld. AO erred in law and in facts in appreciating that strategic investments in Dabur India Limited as the promoter shareholder, would not form part of disallowance u/s 14A.” 3. Facts of the case, in brief, are that

DCIT, New Delhi vs. M/S Futurz Next Services Ltd., New Delhi

In the result, the appeal filed by the Revenue is dismissed

ITA 3556/DEL/2016[2011-12]Status: DisposedITAT Delhi04 Jan 2022AY 2011-12
For Appellant: Shri Ved Jain, Advocate &For Respondent: Shri Satpal Gulati, CIT, DR
Section 132Section 142Section 153A

Rs.1,77,82,267/. (ii) During the appellate proceedings, the appellant has stated that the investment in group company JCSL, was strategic investment and not made for earning the dividend income. The dividend income on this investment was NIL and therefore, the A.O. was wrong in invoking provision of section ... dividend income has been earned, which can be treated as exempt income, and > The investment made in its group concern, is on account of strategic investments and on which, no dividend income has been earned. In view of .the above, I agree with the arguments of the appellant that

DCIT, Circle-19(2), New Delhi vs. Pci Ltd., New Delhi

The Appeal of the Assessee is dismissed

ITA 7959/DEL/2019[2015-16]Status: DisposedITAT Delhi22 Dec 2021AY 2015-16

Bench: Shri R. K. Pandaa N D Shri N. K. Choudhry(Through Video Conferencing)

For Appellant: Shri SatishAggarwal, C. AFor Respondent: Shri M. Barnwal, Sr. D. R
Section 250Section 36(1)(iii)

contentions of the Assessee to the effect that the Assessee has invested the amount in its Joint Venture Company, group and subsidiary companies as strategic investment which had direct nexus with the business objectives of the Assessee and deleted the disallowance under consideration, while relying upon decision

Pci Ltd., New Delhi vs. ACIT, Circle-19(2), New Delhi

The Appeal of the Assessee is dismissed

ITA 7302/DEL/2019[2015-16]Status: DisposedITAT Delhi22 Dec 2021AY 2015-16

Bench: Shri R. K. Pandaa N D Shri N. K. Choudhry(Through Video Conferencing)

For Appellant: Shri SatishAggarwal, C. AFor Respondent: Shri M. Barnwal, Sr. D. R
Section 250Section 36(1)(iii)

contentions of the Assessee to the effect that the Assessee has invested the amount in its Joint Venture Company, group and subsidiary companies as strategic investment which had direct nexus with the business objectives of the Assessee and deleted the disallowance under consideration, while relying upon decision

DCIT, Circle- 13(2), New Delhi vs. Jindal Itf Ltd., New Delhi

Accordingly upheld. Consequently, the appeal filed by the Revenue is hereby dismissed

ITA 6871/DEL/2018[2015-16]Status: DisposedITAT Delhi08 Dec 2021AY 2015-16

Bench: Shri Anil Chaturvedi & Shri Amit Shukla

For Appellant: NoneFor Respondent: Shri Kumar Padmapani Bora, Sr.DR
Section 143(3)Section 14A

total exempt income earned by the assessee during the year was Rs.382/-. Ld. AO noted that assessee has huge investments mainly on unquoted strategic investments in subsidiary companies and proceeded to make a disallowance u/s 14A at Rs.21,15,14,527/- u/s 14A of the Act read with Rule

Puran Associates Pvt. Ltd., New Delhi vs. DCIT, Circle-20(1), New Delhi

In the result, the appeal of the assessee is allowed partly

ITA 2087/DEL/2018[2014-15]Status: DisposedITAT Delhi14 Oct 2021AY 2014-15

Bench: Shri Kul Bharat & Shri O.P. Kant[Through Video Conferencing] Assessment Year: 2014-15

Section 111ASection 143(3)Section 14A

disallowed Rs 24,38,508. 4) That both the Ld. CIT(A) and Ld. AO erred in law and in facts in appreciating that strategic investments in Dabur India Limited as the promoter shareholder, would not form part of disallowance u/s 14A. 5) That the CIT (Appeals)/ AO has erred ... assessee is dismissed. 6. In the Ground No. 4, the assessee has contested that the investment in Dabur India Ltd. being a strategic investment would not form part of the total income under the Act. However, in view of the decision of the Hon’ble Supreme Court in the case

DCIT, Circle- 12(1), New Delhi vs. Icra Ltd., New Delhi

In the result, the appeals of the Revenue for assessment year 2011-12 and 2012-13 are allowed partly for statistical purposes and Cross Objection of the assessee for assessment year

ITA 5707/DEL/2017[2012-13]Status: DisposedITAT Delhi14 Oct 2021AY 2012-13

Bench: Shri O.P. Kant & Shri Kuldip Singh[Through Video Conferencing] Assessment Year: 2011-12 & Assessment Year: 2012-13

Section 145

Supreme Court in the case of Maxxop Investment Ltd Vs. CIT, CIVIL APPEAL NOS. 104-109 OF 2015 & Ors. (Order dated 12th February, 2018) strategic investment for obtaining controlling stake has also been found liable for computing disallowance under Rule 8D(2)(iii) of the Rules and therefore to this

DCIT, Circle- 12(1), New Delhi vs. Icra Ltd., New Delhi

In the result, the appeals of the Revenue for assessment year 2011-12 and 2012-13 are allowed partly for statistical purposes and Cross Objection of the assessee for assessment year

ITA 5706/DEL/2017[2011-12]Status: DisposedITAT Delhi14 Oct 2021AY 2011-12

Bench: Shri O.P. Kant & Shri Kuldip Singh[Through Video Conferencing] Assessment Year: 2011-12 & Assessment Year: 2012-13

Section 145

Supreme Court in the case of Maxxop Investment Ltd Vs. CIT, CIVIL APPEAL NOS. 104-109 OF 2015 & Ors. (Order dated 12th February, 2018) strategic investment for obtaining controlling stake has also been found liable for computing disallowance under Rule 8D(2)(iii) of the Rules and therefore to this

ACIT, Circle- 4(1), New Delhi vs. Bajaj Resource Ltd., Jaipur

In the result, the appeal of the Revenue in ITA No

ITA 4018/DEL/2018[2014-15]Status: DisposedITAT Delhi24 Sept 2021AY 2014-15

Bench: Shri N.K. Billaiya & Shri Sudhanshu Srivastava

For Appellant: Shri Sandeep Jhanwar, C.AFor Respondent: Shri Bhopal Singh, Sr. DR
Section 14A

detailed reply contending that it has incurred no expenditure for earning exempt income claiming that the investments have been made in group companies as strategic investment. 8. It was strongly contended that the assessee has sufficient own interest free funds to make investments and, therefore, there is no question ... deep business interests and under business expediency, it has invested various amounts in shares of group companies. In our considered opinion, these investments are strategic investments made for furtherance of business of its sister concern. 26. As mentioned elsewhere, apart from the investments in Bajaj Corp Ltd and Bajaj Hindustan

DCIT, New Delhi vs. M/S. Jaypee Capital Services Ltd., New Delhi

In the result, ITA.No.3559/Del

ITA 3559/DEL/2016[2012-13]Status: DisposedITAT Delhi21 Sept 2021AY 2012-13

Bench: Shri R.K. Panda & Shri Sudhanshu Srivastava

For Appellant: And Shri Ashish Goel, C.AFor Respondent: Shri Bhuvnesh Kulshreshtha
Section 132Section 153A

require to be set aside. [Para 5]" (iv) The appellant has made further submission that all the investments standing in the balance sheet, are strategic investments made in its group companies, which are strategically important for it and to maintain a direct nexus with the business, being carried ... earned from the shares held as stock in trade and not an investment.  The investment made in its group concerns, are on account of strategic investments and on which, no dividend income has been earned. In view of the above, I hold that the dividend income is incidental

DCIT, New Delhi vs. M/S. Jaypee Capital Services Ltd., New Delhi

In the result, ITA.No.3559/Del

ITA 3558/DEL/2016[2011-12]Status: DisposedITAT Delhi21 Sept 2021AY 2011-12

Bench: Shri R.K. Panda & Shri Sudhanshu Srivastava

For Appellant: And Shri Ashish Goel, C.AFor Respondent: Shri Bhuvnesh Kulshreshtha
Section 132Section 153A

require to be set aside. [Para 5]" (iv) The appellant has made further submission that all the investments standing in the balance sheet, are strategic investments made in its group companies, which are strategically important for it and to maintain a direct nexus with the business, being carried ... earned from the shares held as stock in trade and not an investment.  The investment made in its group concerns, are on account of strategic investments and on which, no dividend income has been earned. In view of the above, I hold that the dividend income is incidental

Ht Media Ltd., New Delhi vs. Addlcit, Range-4, New Delhi

In the result, the assessee’s appeal is partly

ITA 1876/DEL/2018[2013-14]Status: DisposedITAT Delhi26 Aug 2021AY 2013-14

Bench: Shri R.K. Panda & Shri Vijay Pal Rao

For Appellant: Sh. V.P. Gupta, AdvFor Respondent: Ms. Sunita Singh, CIT DR
Section 115JSection 14ASection 14A(1)

fairly brought to the notice of the Bench, the order of the Hon’ble Jurisdictional High Court clarifying the exclusion of income derived from strategic investments for the purpose of computation of disallowance. The order of the Hon’ble High Court is as under: IN THE HIGH COURT OF DELHI ... aspects i.e. the calculation of average investments (confined to the income generating part thereof) and the exclusion of tax exempt income derived from strategic investments. The observation of the ITAT on the latter aspect, i.e. exclusion of tax exempt income derived from a strategic investments, is not a correct view

Petronet Lng Ltd., New Delhi vs. Addl. CIT, New Delhi

Appeal of the assessee is allowed

ITA 5232/DEL/2015[2011-12]Status: DisposedITAT Delhi18 Mar 2021AY 2011-12

Bench: Sh. Sudhanshu Srivastavadr. B. R. R. Kumar(Through Video Conferencing) Ita No. 5230/Del/2015 : Asstt. Year : 2009-10 Ita No. 5231/Del/2015 : Asstt. Year : 2010-11 Ita No. 5232/Del/2015 : Asstt. Year : 2011-12 Petronet Lng Ltd., Vs Deputy Commissioner Of First Floor, World Trade Centre, Income Tax, Circle-19(2), Babar Road, Barakhamba Lane, New Delhi New Delhi-110001 (Appellant) (Respondent) Pan No. Aaacp8148D Ita No. 4902/Del/2015 : Asstt. Year : 2009-10 Ita No. 4903/Del/2015 : Asstt. Year : 2010-11 Ita No. 4904/Del/2015 : Asstt. Year : 2011-12 Deputy Commissioner Of Vs Petronet Lng Ltd., Income Tax, Circle-19(2), First Floor, World Trade Centre, New Delhi Babar Road, Barakhamba Lane, New Delhi-110001 (Appellant) (Respondent) Pan No. Aaacp8148D Assessee By : Sh. Vishal Kalra, Adv. Revenue By : Sh. H. K. Choudhary, Cit Dr Date Of Hearing: 27.01.2021 Date Of Pronouncement: 18.03.2021

For Appellant: Sh. Vishal Kalra, AdvFor Respondent: Sh. H. K. Choudhary, CIT DR
Section 14ASection 234C

confined to the ITA Nos. 5230, 5231 & 5232/Del/2015 & Petronet LNG Ltd. income generating part thereof) and the exclusion of tax exempt income derived from strategic investments. The observation of the ITAT on the latter aspect, i.e. exclusion of tax exempt income derived from a strategic investments, is not a correct

Petronet Lng Ltd., New Delhi vs. Addl. CIT, New Delhi

Appeal of the assessee is allowed

ITA 5231/DEL/2015[2010-11]Status: DisposedITAT Delhi18 Mar 2021AY 2010-11

Bench: Sh. Sudhanshu Srivastavadr. B. R. R. Kumar(Through Video Conferencing) Ita No. 5230/Del/2015 : Asstt. Year : 2009-10 Ita No. 5231/Del/2015 : Asstt. Year : 2010-11 Ita No. 5232/Del/2015 : Asstt. Year : 2011-12 Petronet Lng Ltd., Vs Deputy Commissioner Of First Floor, World Trade Centre, Income Tax, Circle-19(2), Babar Road, Barakhamba Lane, New Delhi New Delhi-110001 (Appellant) (Respondent) Pan No. Aaacp8148D Ita No. 4902/Del/2015 : Asstt. Year : 2009-10 Ita No. 4903/Del/2015 : Asstt. Year : 2010-11 Ita No. 4904/Del/2015 : Asstt. Year : 2011-12 Deputy Commissioner Of Vs Petronet Lng Ltd., Income Tax, Circle-19(2), First Floor, World Trade Centre, New Delhi Babar Road, Barakhamba Lane, New Delhi-110001 (Appellant) (Respondent) Pan No. Aaacp8148D Assessee By : Sh. Vishal Kalra, Adv. Revenue By : Sh. H. K. Choudhary, Cit Dr Date Of Hearing: 27.01.2021 Date Of Pronouncement: 18.03.2021

For Appellant: Sh. Vishal Kalra, AdvFor Respondent: Sh. H. K. Choudhary, CIT DR
Section 14ASection 234C

confined to the ITA Nos. 5230, 5231 & 5232/Del/2015 & Petronet LNG Ltd. income generating part thereof) and the exclusion of tax exempt income derived from strategic investments. The observation of the ITAT on the latter aspect, i.e. exclusion of tax exempt income derived from a strategic investments, is not a correct

Petronet Lng Ltd., New Delhi vs. Addl. CIT, New Delhi

Appeal of the assessee is allowed

ITA 5230/DEL/2015[2009-10]Status: DisposedITAT Delhi18 Mar 2021AY 2009-10

Bench: Sh. Sudhanshu Srivastavadr. B. R. R. Kumar(Through Video Conferencing) Ita No. 5230/Del/2015 : Asstt. Year : 2009-10 Ita No. 5231/Del/2015 : Asstt. Year : 2010-11 Ita No. 5232/Del/2015 : Asstt. Year : 2011-12 Petronet Lng Ltd., Vs Deputy Commissioner Of First Floor, World Trade Centre, Income Tax, Circle-19(2), Babar Road, Barakhamba Lane, New Delhi New Delhi-110001 (Appellant) (Respondent) Pan No. Aaacp8148D Ita No. 4902/Del/2015 : Asstt. Year : 2009-10 Ita No. 4903/Del/2015 : Asstt. Year : 2010-11 Ita No. 4904/Del/2015 : Asstt. Year : 2011-12 Deputy Commissioner Of Vs Petronet Lng Ltd., Income Tax, Circle-19(2), First Floor, World Trade Centre, New Delhi Babar Road, Barakhamba Lane, New Delhi-110001 (Appellant) (Respondent) Pan No. Aaacp8148D Assessee By : Sh. Vishal Kalra, Adv. Revenue By : Sh. H. K. Choudhary, Cit Dr Date Of Hearing: 27.01.2021 Date Of Pronouncement: 18.03.2021

For Appellant: Sh. Vishal Kalra, AdvFor Respondent: Sh. H. K. Choudhary, CIT DR
Section 14ASection 234C

confined to the ITA Nos. 5230, 5231 & 5232/Del/2015 & Petronet LNG Ltd. income generating part thereof) and the exclusion of tax exempt income derived from strategic investments. The observation of the ITAT on the latter aspect, i.e. exclusion of tax exempt income derived from a strategic investments, is not a correct

DCIT, New Delhi vs. M/S. Petronet Lng Ltd., New Delhi

Appeal of the assessee is allowed

ITA 4904/DEL/2015[2011-12]Status: DisposedITAT Delhi18 Mar 2021AY 2011-12

Bench: Sh. Sudhanshu Srivastavadr. B. R. R. Kumar(Through Video Conferencing) Ita No. 5230/Del/2015 : Asstt. Year : 2009-10 Ita No. 5231/Del/2015 : Asstt. Year : 2010-11 Ita No. 5232/Del/2015 : Asstt. Year : 2011-12 Petronet Lng Ltd., Vs Deputy Commissioner Of First Floor, World Trade Centre, Income Tax, Circle-19(2), Babar Road, Barakhamba Lane, New Delhi New Delhi-110001 (Appellant) (Respondent) Pan No. Aaacp8148D Ita No. 4902/Del/2015 : Asstt. Year : 2009-10 Ita No. 4903/Del/2015 : Asstt. Year : 2010-11 Ita No. 4904/Del/2015 : Asstt. Year : 2011-12 Deputy Commissioner Of Vs Petronet Lng Ltd., Income Tax, Circle-19(2), First Floor, World Trade Centre, New Delhi Babar Road, Barakhamba Lane, New Delhi-110001 (Appellant) (Respondent) Pan No. Aaacp8148D Assessee By : Sh. Vishal Kalra, Adv. Revenue By : Sh. H. K. Choudhary, Cit Dr Date Of Hearing: 27.01.2021 Date Of Pronouncement: 18.03.2021

For Appellant: Sh. Vishal Kalra, AdvFor Respondent: Sh. H. K. Choudhary, CIT DR
Section 14ASection 234C

confined to the ITA Nos. 5230, 5231 & 5232/Del/2015 & Petronet LNG Ltd. income generating part thereof) and the exclusion of tax exempt income derived from strategic investments. The observation of the ITAT on the latter aspect, i.e. exclusion of tax exempt income derived from a strategic investments, is not a correct