IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH “A” DELHI
BEFORE SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER
AND
SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER
I.T.As. No.5935, 5936, 5937, 5938/DEL/2019
Assessment Years 2014-15, 2015-16, 2016-17 & 2017-18
Deputy Commissioner of Income Tax,
Central Circle-31, New Delhi.
Vs.
M/s. Bhilwara Energy Ltd.,
40-41, Bhilwara Bhawan, Community Centre,
New Friends Colony, New Delhi.
TAN/PAN: AACCB9081B
(Appellant)
(Respondent)
Appellant by: Shri P.K. Jain, CA
Respondent by: Shri Amaresh Singh, CIT-DR
Date of hearing: 21 06 2022
Date of pronouncement: 02 08 2022
ORDER
PER PRADIP KUMAR KEDIA, A.M.:
The captioned appeals have been filed by the Assessee against the consolidated order of the Commissioner of Income Tax (Appeals)-XXX, New Delhi (‘CIT(A)’ in short) dated 30.04.2019 arising from the common assessment order dated 29.12.2008 passed by the Assessing Officer under Section 153A/143(3) of the Income Tax Act, 1961 (the Act) concerning AY 2014-15, 2015-16, 2016-17 and 2017-18.
As per its grounds of appeal, the assessee has challenged the disallowances made under Section 14A of different amounts which is tabulated year-wise hereunder:
Assessment Year | Disallowances made u/s 14A in Rs. | Total Investment | Investment other than subsidiaries i.e. share of Punjab & Sind Bank | Total Exempt income in Rs. |
---|---|---|---|---|
2014-15 | 9,90,90229 | 473,49,30,273 | 58,680 | 2093 |
2015-16 | 9,86,94,172 | 476,81,80,229 | 58,680 | 293 |
2016-17 | 10,11,01,788 | 476,81,80,229 | 58,680 | 293 |
2017-18 | 8,51,38,444 | 476,81,21,549 | 58,680 | Nil |
The CIT(A) by its combined and consolidated order for all the assessment years in question has disposed of all the issues in favour of the assessee. The submission made by the assessee and the conclusion drawn thereon by CIT(A) is reproduced hereunder:
In reference to the allowance of Rs.9,90,90,229/- the following is submitted:
1. Whereas the facts of the case do exhibit the nature of transaction is of investment in the subsidiary companies which were formed part of the business of the holding company i.e. the assessee company. In such circumstances when the holding company is making investment in subsidiary companies for achievement of its objects and to enhance the same business by diversification of its investment through separate special purpose vehicles, it cannot be said to have made investment to earn tax free income even if the investment is made in equity shares of these companies. The said matter has been decided by the Hon’ble Jurisdictional High Court in the case of CIT Vs. Holcim India P. Ltd ITA No.486/2014.
2. Now the question arises as to whether the interest paid on the funds borrowed by the company or such expenditure incurred by the assessee company was incurred for its business commercial expediency or not. It is also brought to your kind consideration that the assessee company is a holding company of several companies namely:
2.1 The assessee company’s main business is to carry on the business of power which is evident with the copy of Main objects of the company annexed herewith. The main objects consist of power generation and related business and ancillary objects consist of all such activity which are incidental to the main objects of the company. As per para 24 of the ancillary objects which is reproduced as below:
“24. To form, incorporate, promote any company or companies whether in India or elsewhere, having amongst its or their objects the acquisition of all or any of the assets or control management or development of the company or any other object or objects which in the opinion of the Company could or might assist the company in the management of its business or the development of its properties or otherwise prove advantageous to the Company and to pay all or any of the costs and expenses incurred in connection with any such promoter or incorporation and to remunerate any person or company in any manner it shall think fit for services rendered or to be rendered, in obtaining subscription for or placing or assisting to place or to obtain subscription for or for guaranteeing the subscription of or the placing of any shares in the capital of the Company or any bonds, debentures, obligations or securities of any other such Company held or owned by the company or in which the Company has any interest in or about the formation or promotion of any other such company in which the Company may have an interest.”
2.2 Accordingly, the company is borrowing the funds for achievement of its main objective and the funds have been utilized for the purpose of the business.
2.3 Under the scheme of the Act, interest incurred by an assessee is allowable business expenditure under section 36(1)(iii) of the Act, subject to the following conditions:
The Tribunal upheld the findings of the CIT(A) and dismissed the appeal filed by the DCIT. The order passed by CIT(A) was confirmed and the disallowance under Section 14A was held to be correctly decided in favor of the assessee.
This judgment highlights the principles related to business expenditure, particularly focusing on the allowance of interest under section 36(1)(iii) and the scope of Section 14A disallowance.
DCIT Central Circle-31 vs Bhilwara Energy Ltd: Detailed Tribunal Ruling Analysis (ITA 5936/DEL/2019)
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