“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

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

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

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

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

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

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

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

DCIT, New Delhi vs. M/S. Mahatta Towers Pvt. Ltd., New Delhi

In the result, the appeal of the Revenue is dismissed

ITA 1137/DEL/2017[2012-13]Status: DisposedITAT Delhi10 Oct 2024AY 2012-13

Bench: Shri Kul Bharat & Shri Brajesh Kumar Singh[Assessment Year : 2012-13] Dcit, Vs M/S. Mahatta Towers Pvt.Ltd., Circle-16(1), 614, Plot No.54, Mahatta Towers, New Delhi. B Block, Community Center, Janakpuri, New Delhi-110058. Pan-Aaacm2109F Appellant Respondent Appellant By Shri Koushlender Tiwari, Cit Dr Respondent By Shri Ved Jain, Adv. Date Of Hearing 13.08.2024 Date Of Pronouncement 10.10.2024

Section 14Section 142(1)Section 143(2)Section 14A

relevant decisions have been carefully considered. From the submissions, the following facts emerge:- (i) The appellant has invested Rs.30 lakhs as a strategic investment. There is no change in the investment in the current year. The assessee's own funds are Rs.30.53 Cr. i.e. Rs.8 Cr. as equity and Rs.22.50

Idfc Limited, Chennai vs. DCIT, Co. Circle - II (3), Chennai

In the result, the appeal filed by the assessee in ITA

ITA 677/CHNY/2020[2010-11]Status: DisposedITAT Chennai30 Sept 2024AY 2010-11

Bench: Shri Aby T. Varkey & Shri Jagadishआयकर अपील सं./Ita No.877/Chny/2018 & 677/Chny/2020 िनधा&रण वष& /Assessment Years: 2010-11

For Appellant: Shri Farookh V. Irani, AdvocateFor Respondent: Shri A. Sasikumar, CIT

Section 14ASection 36(1)Section 36(1)(vi)Section 36(1)(vii)

applied, then interest relating to loans taken for specific purposes is to be excluded; iv. Even if Rule 8D is applied, then strategic investments in subsidiaries are to be excluded for the purpose of Rule 8D(2)(iii); v. Only the investments from which the Appellant has earned exempt income

DCIT Corporate Circle 2(2), Chennai vs. Idfc Limited, Chennai

In the result, the appeal filed by the assessee in ITA

ITA 878/CHNY/2018[2010-11]Status: DisposedITAT Chennai30 Sept 2024AY 2010-11

Bench: Shri Aby T. Varkey & Shri Jagadishआयकर अपील सं./Ita No.877/Chny/2018 & 677/Chny/2020 िनधा&रण वष& /Assessment Years: 2010-11

For Appellant: Shri Farookh V. Irani, AdvocateFor Respondent: Shri A. Sasikumar, CIT

Section 14ASection 36(1)Section 36(1)(vi)Section 36(1)(vii)

Idfc Limited, Chennai vs. DCIT Company Circle II(3), Chennai

ITA 877/CHNY/2018[2010-11]Status: DisposedITAT Chennai30 Sept 2024AY 2010-11

Bench: Shri Aby T. Varkey & Shri Jagadishआयकर अपील सं./Ita No.877/Chny/2018 & 677/Chny/2020 निर्धारण वर्ष / Assessment Years: 2010-11 Idfc Limited, (Erstwhile Known As Infrastructure Vs. Income Tax, Development Finance Company Circle-Ii(3), Limited), Krm Tower, 8Th Floor, No.1, Harrington Road, Chetpet, Chennai – 600 031. Pan: Aaaci 2663N (अपीलार्थी/Appellant) The Dy. Commissioner Of Chennai. (प्रत्यर्थी/Respondent) आयकर अपील सं./ Ita No.878/Chny/2018 निर्धारण वर्ष / Assessment Year: 2010-11 The Dy. Commissioner Of Income Tax, Corporate Circle-2(2), Chennai Idfc Limited, (Erstwhile Known As Infrastructure Development Finance Company Vs. Limited), Krm Tower, 8Th Floor, No.1, Harrington Road, Chetpet, Chennai – 600 031. Pan: Aaaci 2663N अपीलार्थी की ओर से / Assessee By प्रत्यर्थी की ओर से /Revenue By सुनवाई की तारीख /Date Of Hearing : Shri Farookh V. Irani, Advocate : Shri A. Sasikumar, Cit : 23.07.2024 घोषणा की तारीख / Date Of Pronouncement : 30.09.2024

Section 14ASection 36(1)Section 36(1)(vi)Section 36(1)(vii)Section 36(1)(viia)

ACIT 14(I)(2), Mumbai vs. Godrej Properties Limited, Mumbai

ITA 3880/MUM/2024[2017-18]Status: DisposedITAT Mumbai20 Sept 2024AY 2017-18

Bench: Shri Pavan Kumar Gadale & Shri Gagan Goyal1. Ita No. 3880/Mum/2024 (A.Y.2017-18)

For Appellant: Shri P. Suresh, Ld. DRFor Respondent: Shri Jeet Kamdar, Ld. AR

Section 14ASection 250

which respondent was a partner. The CIT (A) has taken a view that the investments made by company are in the form of strategic investments and directed the AO to compute the disallowance at 5% of the fixed/semi variable expenditure incurred by respondent and there was nothing wrong

DCIT 15-1-2, Mumbai vs. Hcc Concessions Ltd, Mumbai

In the result, appeals of the revenue bearing ITAs No

ITA 2941/MUM/2024[2015-16]Status: DisposedITAT Mumbai11 Sept 2024AY 2015-16

Bench: Shri Anikesh Banerjee & Shrigirish Agrawal

Section 143(3)Section 14ASection 250

with rule 8D of the Rule. When showcause notice was issued, the asessee explained that the investment in subsidiary is more of compulsory or strategic investments in order to get contracts and not made to earn any dividend/exempt income.The ld. AO, however, did not find it acceptable, he proceeded

DCIT 15-1-2, Mumbai vs. Hcc Concessions Ltd, Mumbai

In the result, appeals of the revenue bearing ITAs No

ITA 2940/MUM/2024[2017-18]Status: DisposedITAT Mumbai11 Sept 2024AY 2017-18

Bench: Shri Anikesh Banerjee & Shrigirish Agrawal

Section 143(3)Section 14ASection 250

DCIT 15(1)(2), Mumbai vs. Hcc Concessions Limited, Mumbai

In the result, appeals of the revenue bearing ITAs No

ITA 2690/MUM/2024[2013-14]Status: DisposedITAT Mumbai11 Sept 2024AY 2013-14

Bench: Shri Anikesh Banerjee & Shrigirish Agrawal

Section 143(3)Section 14ASection 250

DCIT Circle 15(1)(2), Mumbai vs. Hcc Concessions Ltd, Mumbai

In the result, appeals of the revenue bearing ITAs No

ITA 2578/MUM/2024[2014-15]Status: DisposedITAT Mumbai11 Sept 2024AY 2014-15

Bench: Shri Anikesh Banerjee & Shrigirish Agrawal

Section 143(3)Section 14ASection 250

Rashleela Enterprises Private Limited, Jaipur vs. The PCIT (Central), Jaipur

ITA 461/JPR/2024[2019-20]Status: DisposedITAT Jaipur05 Sept 2024AY 2019-20

For Appellant: Sh. Tarun Mittal, CAFor Respondent: Sh. Arvind Kumar, CIT-DR

Section 143(2)Section 143(3)Section 14ASection 153DSection 263

also not applicable on the investments made in subsidiary and associates firms as the investments made in those firms are strategic investments and as submitted above the business of the appellant is of mining and bulk transportation services. Thus, investment in subsidiaries and associates were definitely not with the intention ... exempt income, which may or may not arise actually. Hence investments made in these subsidiaries and associate concerns clearly comes under the ambit of “Strategic Investment”, which are not made with the motive to earn exempt income in the shape of dividend or capital gain. These investments are meant

Sparsh Beauty Care Pvt. Ltd., Haryana vs. ITO Ward-2(4), Haryana

In the result, the appeals of the assesses are allowed

ITA 86/DEL/2021[2016-17]Status: DisposedITAT Delhi05 Sept 2024AY 2016-17

Bench: Dr. B. R.R. Kumar & Sh. Sudhir Kumarassessment Year: 2016-17 M/S. Punyah Building Vs Ito Materials Pvt. Ltd. Ward-2 (1) House No.1002, Near Talab Faridabad Shiv Colony, Old Faridabad Haryana Ballahgarh Haryana 122002 Pan No.Aagcp8742B (Appellant) (Respondent) Assessment Year: 2016-17 Sparsh Beauty Care Pvt. Ltd. Vs Ito Plot No.1066, Near Janta Barat Ward-2 (4) Ghar Baba Nagar, Faridabad Faridabad Haryana 121002 Haryana Pan No.Aascs2575D (Appellant) (Respondent) Assessment Year: 2016-17 Speedy Courier Services Pvt. Vs Ito Ltd. Ward- 2 (4) Plot No.1022, Near Talab Shiv Faridabad Colony, Faridabad Haryana Pan No.Aascs2579R (Appellant) (Respondent)

Section 131oSection 142(1)Section 143Section 143(2)Section 143(3)Section 251(1)Section 271(1)(c)Section 56(2)(viib)Section 68

some instrument which could have yielded return/ profit in the revenue projection made at the time of issuance of shares, without understanding that strategic investments and risks are undertaken for appreciation of capital and larger returns and not simply dividend and interest. Any businessman or entrepreneur, visualise the business based

Punyah Building Materials Pvt Ltd, Faridabad vs. ITO Ward - 2(1), Faridabad

In the result, the appeals of the assesses are allowed

ITA 81/DEL/2021[2016-17]Status: DisposedITAT Delhi05 Sept 2024AY 2016-17

Section 131oSection 142(1)Section 143Section 143(2)Section 143(3)Section 251(1)Section 271(1)(c)Section 56(2)(viib)Section 68

Speedy Courier Services Pvt Ltd, Faridabad vs. ITO Ward - 2(4), Faridabad

In the result, the appeals of the assesses are allowed

ITA 80/DEL/2021[2016-17]Status: DisposedITAT Delhi05 Sept 2024AY 2016-17

Section 131oSection 142(1)Section 143Section 143(2)Section 143(3)Section 251(1)Section 271(1)(c)Section 56(2)(viib)Section 68

Shri Nishit Kantilal Savla, Mumbai vs. Deputy Commissioner of Income Tax-Circle 27(2), Mumbai

In the result, appeal of the assessee is allowed

ITA 3963/MUM/2023[2018-2019]Status: DisposedITAT Mumbai26 Aug 2024AY 2018-2019

Section 10(34)Section 142(1)Section 143(3)Section 57

terms and conditions provided in the partnership deed and if the capital has been withdrawn and used for earning of interest or for strategic investment, then same has to be allowed. As long as there is a nexus between the income earned by that in the form of interest

Kotak Mahindra Bank Limited, Mumbai vs. Add/Joint/Deputy/ACIT, National E-Assessment Centre, Delhi

In the result, ground no. 1 raised by the revenue is

ITA 569/MUM/2023[2017-18]Status: DisposedITAT Mumbai08 Aug 2024AY 2017-18

Bench: Shri Amit Shuklaand

For Appellant: Shri Biswanath Das, Ld. DRFor Respondent: Shri Faroog Irani, Ld. AR

Section 250Section 36(1)Section 36(1)(vii)Section 36(2)(ii)Section 36(2)(viia)

Nos.4056/Mum/2023 & Others M/s. Kotak Mahindra Bank Ltd. 9. without prejudice to the above, Cross Objector prays that the AO be directed to exclude strategic Investments and Investments in unlisted companies for working out disallowance u/s. 14A. 8. The assessee has raised the following grounds of appeal in ITA No. 569/Mum/2023 ... r.w.rule 6D(2)(ii) of the Act. 7. Without prejudice to the above, the Appellant prays that the AO be directed to exclude strategic Investments made in subsidiary companies /JV/Unlisted companies etc. for working out disallowance u/s. 14A as it does not require any expenses on day-to-day basis

DCIT-2(3)(1), Mumbai vs. Kotak Mahindra Bank Limited, Mumbai

In the result, ground no. 1 raised by the revenue is

ITA 4056/MUM/2023[2012-13]Status: DisposedITAT Mumbai08 Aug 2024AY 2012-13

Bench: Shri Amit Shuklaand

For Appellant: Shri Biswanath Das, Ld. DRFor Respondent: Shri Faroog Irani, Ld. AR

Section 250Section 36(1)Section 36(1)(vii)Section 36(2)(ii)Section 36(2)(viia)

Dy CIT Circle -3(4), Mumbai vs. Asian Paints Limited, Mumbai

In the result, appeals filed by assessee and Revenue for

ITA 3063/MUM/2023[2017-18]Status: DisposedITAT Mumbai26 Jul 2024AY 2017-18

Section 143(3)Section 14ASection 2(43)Section 35Section 40Section 80GSection 90

IN THE INCOME TAX APPELLATE TRIBUNAL, ‘A‘ BENCH MUMBAI BEFORE: SHRI AMIT SHUKLA, JUDICIAL MEMBER & SMT RENU JAUHRI, ACCOUNTANT MEMBER

Dy CIT Circle 3(4), Mumbai vs. Asian Paints, Mumbai

ITA 2936/MUM/2023[2016-17]Status: DisposedITAT Mumbai26 Jul 2024AY 2016-17

Section 143(3)Section 14ASection 2(43)Section 35Section 40Section 80GSection 90

IN THE INCOME TAX APPELLATE TRIBUNAL, ‘A‘ BENCH MUMBAI BEFORE: SHRI AMIT SHUKLA, JUDICIAL MEMBER & SMT RENU JAUHRI, ACCOUNTANT MEMBER

Asian Paints Limited, Santacruz vs. Deputy Commissioner of Income Tax, Ltu Circle 2, Cuffe Parade

ITA 2700/MUM/2023[2016-17]Status: DisposedITAT Mumbai26 Jul 2024AY 2016-17

Section 143(3)Section 14ASection 2(43)Section 35Section 40Section 50Section 80GSection 90

IN THE INCOME TAX APPELLATE TRIBUNAL, ‘A’ BENCH MUMBAI BEFORE: SHRI AMIT SHUKLA, JUDICIAL MEMBER & SMT RENU JAUHRI, ACCOUNTANT MEMBER

Hero Motocorp Ltd (As Successor of Hero Investment P.Ltd), New Delhi vs. DCIT, Circle 11(1), New Delhi

The appeal is allowed

ITA 1053/DEL/2023[2011-12]Status: DisposedITAT Delhi24 Jul 2024AY 2011-12

Bench: Shri G.S. Pannu & Shri Anubhav Sharmaassessment Year: 2011-12

Section 143(3)

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “B”: NEW DELHI BEFORE SHRI G.S. PANNU, VICE PRESIDENT AND SHRI ANUBHAV