Interglobe Enterprises Ltd., Gurgaon v. DCIT, New Delhi

ITA 1032/DEL/2013 | 2009-2010
Pronouncement Date: 04-04-2014 | Result: Partly Allowed

Appeal Details

RSA Number 103220114 RSA 2013
Bench Delhi
Appeal Number ITA 1032/DEL/2013
Duration Of Justice 1 year(s) 1 month(s) 13 day(s)
Appellant Interglobe Enterprises Ltd., Gurgaon
Respondent DCIT, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 04-04-2014
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted C
Tribunal Order Date 04-04-2014
Date Of Final Hearing 08-01-2014
Next Hearing Date 08-01-2014
Assessment Year 2009-2010
Appeal Filed On 20-02-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH C NEW DELHI) BEFORE SHRI U.B.S. BEDI JUDICIAL MEMBER AND SHRI T.S. KAPOOR ACCOUNTANT MEMBER I.T.A. NO.1362 & 1032/DEL/2013 ASSESSMENT YEAR : 2008-09 & 2009-10 INTERGLOBE ENTERPRISES LTD. DCIT BLOCK B DLF CORPORATE PARK CIRCLE-11 (1) DLF CITY PHASE-III GURGAON. V. NEW DELHI. AND I.T.A. NO.1580/DEL/2013 ASSESSMENT YEAR : 2009-10 DCIT INTERGLOBE ENTERPRISES LTD. CIRCLE-11 (1) BLOCK-B DLF CORPORATE PARK NEW DELHI. V. DLF CITY GURGAON. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI AJAY VOHRA ADVOCATE & SHRI SHAILY GUPTA C.A. DEPARTMENT BY : SHRI SATPAL SINGH SR. DR ORDER PER TS KAPOOR AM: THIS IS A GROUP OF THREE APPEALS CONSISTING OF TWO FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2008-09 & 2009-10 AND ONE FIL ED BY REVENUE FOR ASSESSMENT YEAR 2009-10. THE ONLY ISSUE ARGUE D IN THESE APPEALS IS DISALLOWANCE BY ASSESSING OFFICER ON ACCOUNT OF PROVISIONS OF SECTION 14A READ WITH RULE 8D. THE OTHER GROUNDS O F APPEAL AS CONTAINED IN GROUND NO.2 TO 4 IN ASSESSMENT YEAR 2008- 09 AND GROUND NO. 2 IN ASSESSMENT YEAR 2009-10 ARE DISMISSED AS NOT PRESSED . THE ASSESSING OFFICER IN ASSESSMENT YEAR 2008-09 MADE A TOTAL DISALLOWANCE OF ` .46 05 172/- CONSISTING OF FOLLOWING AMOUNTS:- ITA NO../DEL/ 2 I) UNDER RULE 8D(I). ` . 165 II) UNDER RULE 8D(II) ` . 88 450/- III) UNDER RULE 8D(III). ` .45 16 557/- ------------------ TOTAL ` .46 05 172/- ------------------- THOUGH THE ASSESSMENT ORDER REFLECTS DISALLOWANCE UNDER RULE 8D)(II) AS NIL BUT IT SEEMS TO BE DUE TO AN INADVERTENT MISTAKE . IN FACT THE TOTAL ADDITION MADE BY ASSESSING OFFICER AT ` .46 05 172/- RECONCILES ONLY IF ` .88 450/- IS TAKEN AS DISALLOWANCE UNDER RULE 8D(II). 2. IN THE ASSESSMENT YEAR 2009-10 THIS DISALLOWANCE U/S 1 4A WAS MADE FOR AN AMOUNT OF ` .75 37 219/- COMPRISING OF THE FOLLOWING AMOUNTS:- I) UNDER RULE 8D(I) NIL II) UNDER RULE 8D(II). ` .6 86 658/- III) UNDER RULE 8D(III). ` .68 50 561/- TOTAL ` .75 37 219/- 3. AGGRIEVED WITH THE ASSESSMENT ORDER THE ASSESSEE FILED APPEAL BEFORE LD CIT(A). THE LD CIT(A) AFTER GOING THROUGH THE SUBMISSIONS FILED BY ASSESSEE DID NOT AGREE WITH THE ARGUMENTS OF LD AR AND UPHELD THE ADDITION OF ` .46 05 172/- INADVERTENTLY MENTIONED AT ` . 4 51 65 575/-. IT APPEARS FROM THE ORDER OF LD CIT(A ) THAT HE HAD CONFIRMED THE DISALLOWANCE ONLY WITH RESPECT TO ADDIT ION UNDER RULE 8D(III) AS HE DID NOT MAKE ANY FINDING WITH RESPECT T O ADDITION UNDER RULE 8D(II). HOWEVER WE FIND THAT BEFORE LD CIT(A) THE ASSESSEE HAD TAKEN UP WHOLE ADDITION OF ` .46 05 172/-. BEFORE US ALSO THE ASSESSEE HAS TAKEN VIDE GROUND NO.1 THE ISSUE OF WHOLE ADDITION OF ` .46 05 172/- IN ASSESSMENT YEAR 2009-10 THE LD CIT(A) UPHELD THE DI SALLOWANCE ITA NO../DEL/ 3 UNDER RULE 8D(III) WHEREAS HE PARTLY ALLOWED THE REL IEF FOR DISALLOWANCE UNDER RULE 8D(II). FOR THE PART RELIEF GIVEN BY LD CIT(A) THE REVENUE IS IN APPEAL BEFORE US FOR WHOLE OF THE ADDITION AND FO R UPHOLDING THE DISALLOWANCE UNDER RULE 8D(III) THE ASSESSEE IS IN APPEA L BEFORE US. 4. AT THE OUTSET THE LD AR INVITED OUR ATTENTION TO THE UNINTENDED MISTAKES IN LD CIT(A)S ORDER AND FURTHER ON MERITS THE LD AR SUBMITTED THAT THERE WAS NO EXPENDITURE INCURRED TO E ARN THE EXEMPTED INCOME. HE FURTHER SUBMITTED THAT INTEREST EXPENSE WAS INCURRED FOR VEHICLE LOANS. THE LD AR SUBMITTED THA T THE ASSESSEE WAS A CASH RICH COMPANY AND IT HAD MADE INVESTMENTS OF ITS SURPLUS FUNDS IN THE UNITS OF MUTUAL FUNDS IN DEBT ORIENTED SCHEMES WHEREIN NO SPECIFIC EXPERTISE IS REQUIRED AND WHERE A FIXED INCO ME IN THE FORM OF DIVIDEND IS DISTRIBUTED BY MUTUAL FUNDS. IT WAS SUBMITT ED THAT THE ASSESSEE HAD DEPLOYED ITS SURPLUS FUNDS IN TAX EFFICIENT SCH EMES OF MUTUAL FUNDS AND SINCE THE MUTUAL FUNDS WERE NOT EQUI TY ORIENTED NO EXPERTISE WAS REQUIRED AND THEREFORE NO EXPENSES WERE I NCURRED FOR EARNING EXEMPT INCOME. IN THIS RESPECT OUR ATTENTION WAS INVITED TO PAPER BOOK PAGE 219 WHEREIN THE BREAK OF INVESTMENT IN MUTUAL FUNDS WAS PLACED. REGARDING OTHER INVESTMENTS IN EQUITY SHARE S OUR ATTENTION WAS INVITED TO PAPER BOOK PAGE 204A FOR ASS ESSMENT YEAR 2008-09 AND IT WAS SUBMITTED THAT OUT OF A TOTAL INVE STMENT OF ` .143.58 CRORES AS ON 31ST MARCH 2008 AN AMOUNT OF ` .101.74 CRORES WAS INVESTED IN THE SUBSIDIARY COMPANIES WHICH WERE FOR THE PURPOSE OF BUSINESS INTEREST OF THE ASSESSEE. IT WAS SUBMITTED THAT F RESH STRATEGIC INVESTMENTS WERE MADE DURING THE YEAR OUT OF FRESH CAPITAL AND INTERNAL ACCRUALS AND IN THIS RESPECT CASH FLOW STAT EMENT PLACED AT PAPER BOOK PAGE 200 WAS REFERRED. IT WAS FURTHER SUBMI TTED THAT NO FRESH LOANS WERE RAISED DURING THE YEAR UNDER CONSIDERA TION AND THE FRESH INTEREST BEARING LOANS WERE RAISED ONLY AS VEHICL E LOANS AND IN ITA NO../DEL/ 4 THIS RESPECT OUR ATTENTION WAS INVITED TO PAPER BOOK PAGE 203 RELATING TO ASSESSMENT YEAR 2008-09. 5. REGARDING OTHER INVESTMENTS IN THE FORM OF UNQUOTE D SHARES THE LD AR SUBMITTED THAT IN FACT IN THE YEAR UNDER CONSID ERATION INSTEAD OF FURTHER PURCHASE THERE WERE CERTAIN SALES IN THIS REGA RD. SIMILARLY IN RESPECT OF EQUITY SHARES OF QUOTED SHARES IT WAS SUBMITTED THAT NO NEW INVESTMENT WAS MADE AND THE INCREASE IN VALUE AS ON 31 .3.2008 HAD OCCURRED ONLY DUE TO LOWER PROVISIONS FOR DIMINUTION IN VALUE. AS REGARDS ASSESSMENT YEAR 2009-10 THE LD AR TOOK US TO PAGE 24 OF PAPER BOOK FOR ASSESSMENT YEAR 2009-10 AND SUBMITTED THA T INVESTMENTS IN SUBSIDIARY COMPANIES WAS OF SAME VALUE AS I N THE EARLIER YEAR AND THE DECREASE IN VALUE HAD OCCURRED DUE TO MORE PROVISION FOR DIMINUTION IN VALUE. SIMILARLY IN RESPE CT OF OTHER UNQUOTED SHARES OUR ATTENTION WAS INVITED TO THE COMPARABLE FIG URES WITH THE EARLIER YEAR WITH THE PROPOSITION THAT INVESTMENT DUR ING THIS PERIOD HAD IN FACT DECREASED BY A SMALL AMOUNT. REGARDING INVEST MENT IN EQUITY SHARES IT WAS SUBMITTED THAT IT WAS OF SAME VALUE AND THE DECREASE IN VALUE WAS ONLY ON ACCOUNT OF HIGHER PROVISIONING FOR DIMINUTION IN VALUE. AS REGARDS INVESTMENTS IN UNITS OF MUTUAL FUNDS T HE LD AR SUBMITTED THAT INVESTMENTS DURING THIS YEAR AND CONSIDER ABLY REDUCED AND THAT TOO REMAINED IN DEBT ORIENTED SCHEMES OF MUT UAL FUNDS WHEREIN NO EXPERTISE IS REQUIRED AND IN THIS RESPECT OU R ATTENTION WAS INVITED TO PAPER BOOK PAGE 38 WHEREIN THE FACT OF I NVESTMENT IN SHORT TERM MONEY FUND INVESTMENTS WAS MENTIONED. IN VIEW OF THE ABOVE SUBMISSIONS IT WAS SUBMITTED THAT A PART OF INVESTMENT WA S FOR STRATEGIC PURPOSES AND THERE TOO NO INTEREST BEARING FU NDS WERE UTILIZED AS THE ASSESSEE COMPANY WAS A RICH COMPANY AND W ITH REGARD TO OTHER INVESTMENTS IN MUTUAL FUNDS IT WAS SUBMITTED T HAT THE SAME WERE FOR DEBT ORIENTED SCHEMES AND THEREFORE DISALLOW ANCE U/S 14A ITA NO../DEL/ 5 WAS NOT WARRANTED. RELIANCE IN THIS RESPECT WAS PLACED ON THE CASE LAWS AS RELIED UPON BEFORE LD CIT(A) AS MENTIONED AT P APER BOOK PAGE 8 & 17. WITHOUT PREJUDICE TO THE ABOVE IT WAS SUBMIT TED THAT ADDITION WAS EXCESSIVE AND IN ANY CASE IT CANNOT EXCEED THE DIVI DEND INCOME AND IN THIS RESPECT RELIANCE WAS PLACED IN THE CASE LAW OF SAHARA INDIA FINANCIAL CORPORATION IN I.T.A. NO.3199/DEL/2013 WH EREIN THE DELHI TRIBUNAL HAD HELD THAT DISALLOWANCE U/S 14A CANNOT EX CEED EXEMPT INCOME. 6. LD DR ON THE OTHER HAND RELIED UPON THE ORDER OF ASSESSING OFFICER AND DETAILED FINDINGS OF LD CIT(A) IN RESPE CT OF UPHOLDING OF ADDITION WERE RELIED. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PAR TIES AND HAVE GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. FIRST WE TAKE UP THE APPEAL FOR ASSESSMENT YEAR 2008-09. IN THIS YEAR THE ASSESSEE HAD THREE TYPE OF INVESTMENTS ONE RELATING TO INVESTMENT I N SUBSIDIARY COMPANIES THE AMOUNT OF WHICH IS ` .101.74 CRORES. THE SECOND CATEGORY RELATES TO LONG TERM UNQUOTED SHARES THE AMO UNT OF WHICH IS ` .31.53 CRORES. THE THIRD CATEGORY IS OF EQUITY SHARES T HE VALUE OF WHICH IS ` .14.88 LAKHS AND THE LAST CATEGORY IS INVESTMENT IN UN ITS OF MUTUAL FUNDS AMOUNTING TO ` .10.15 CRORES. THESE FACTS AND FIGURES ARE VERIFIABLE FROM PAPER BOOK PAGE 204A. AS REGARDS THE FIRST CATEGORY OF SHARES IN THE FORM OF INVESTMENT INTO SUBSIDIARY COMPANI ES WE FIND THAT INVESTMENT INTO THIS CATEGORY OF SHARES HAD INCRE ASED FROM ` .78.17 LAKHS TO ` .101.74 CRORES WHICH IS DUE TO INCREASE IN INVESTMENT IN PREFERENCE SHARES AND OTHER EQUITY SHARES. DURING TH IS PERIOD THE INTEREST BEARING FUNDS HAD DECREASED FROM ` .1.49 CRORES TO ` .87 30 LAKHS AS IS APPARENT FROM PAPER BOOK PAGE 203 AND FURT HER MOST OF THE INTEREST BEARING LOANS ARE FOR VEHICLE LOANS AS MENTIO NED IN PAPER BOOK ITA NO../DEL/ 6 PAGE 203. DURING THIS YEAR UNDER CONSIDERATION THE A SSESSEE HAS EARNED A CASH PROFIT OF ` .11 CRORES. THE CASH FLOW STATEMENT AT PAPER BOOK PAGE 200 REFLECTS CASH FROM OPERATING ACTIVITIE S INCLUDING CASH PROFITS OF ` .49.28 CRORES. THE ASSESSEE HAS ALSO RAISED AN AMOUNT OF ` .50.80 CRORES BY ISSUE OF FRESH PREFERENCE SHARES AS IS APP ARENT FROM PAPER BOOK PAGE 200. IN VIEW OF THE ABOVE FACTS AND FIGURES IT IS APPARENT THAT ASSESSEE HAD UTILIZED INTEREST FREE FUNDS F OR MAKING FRESH INVESTMENTS AND THAT TOO INTO ITS SUBSIDIARIES WHICH IS NOT FOR THE PURPOSE OF EARNING EXEMPT INCOME AND WHICH ARE FOR ST RATEGIC PURPOSES ONLY. 8. IN VIEW OF THE ABOVE FACTS WE HOLD THAT NO DISALL OWANCE OF INTEREST IS REQUIRED TO BE MADE UNDER RULE 8D(I) & 8D (II) AS NO DIRECT OR INDIRECT INTEREST EXPENDITURE HAS INCURRED FOR MAKING INVESTMENTS. 9. AS REGARDS DISALLOWANCE UNDER RULE 8D(III) WE FIND THAT ASSESSEE HAD INVESTED IN FOUR DEBT ORIENTED SCHEMES OF DSP MER ILE LYNCH RELIANCE LIQUID PLUS RELIANCE MONTHLY INTERVAL MUT UAL FUNDS AND SBI LIQUID PLUS FUNDS. WE FIND THAT THESE ARE NOT REALLY I NVESTMENTS AND THESE ARE IN FACT PARKING OF SURPLUS FUNDS IN A MORE T AX EFFICIENT MANNER. HOWEVER SINCE THESE GIVES RISE TO EXEMPT INCO ME IN THE FORM OF DIVIDEND SECTION 14A READ WITH RULE 8D IS APPLICAB LE AS HELD BY HON'BLE DELHI HIGH COURT IN THE CASE OF MAXOPP IN VE STMENTS. THE HON'BLE DELHI HIGH COURT HAD HELD AS UNDER:- 24. WE DO NOT AGREE WITH THE SUBMISSION OF THE LEARNE D COUNSEL APPEARING ON BEHALF OF THE ASSESSEES THAT A NARRO W MEANING OUGHT TO BE ASCRIBED TO THE EXPRESSION 'IN REL ATION TO' APPEARING IN SECTION 14A OF THE SAID ACT. THE CON TEXT DOES NOT SUGGEST THAT A NARROW MEANING OUGHT TO BE GIV EN ITA NO../DEL/ 7 TO THE SAID EXPRESSION. IT IS PERTINENT TO NOTE THAT T HE PROVISION WAS INSERTED BY VIRTUE OF THE FINANCE ACT 2001 WITH RETROSPECTIVE EFFECT FROM 01/04/1962. IN OTHER WORDS IT WAS THE INTENTION OF PARLIAMENT THAT IT SHOULD APP EAR IN THE STATUTE BOOK FROM ITS INCEPTION THAT EXPENDITU RE INCURRED IN CONNECTION WITH INCOME WHICH DOES NOT FO RM PART OF TOTAL INCOME OUGHT NOT TO BE ALLOWED AS A DEDUCTION. THE FACTUM OF MAKING THE SAID PROVISION RETROSPECTIVE MAKES IT CLEAR THAT PARLIAMENT WANTED T HAT IT SHOULD BE UNDERSTOOD BY ALL THAT FROM THE VERY BEGINN ING SUCH EXPENDITURE WAS NOT ALLOWABLE AS A DEDUCTION. OF COURSE BY INTRODUCING THE PROVISO IT MADE IT CLEAR T HAT THERE WAS NO INTENTION TO REOPEN FINALIZED ASSESSMENTS PRIOR TO THE ASSESSMENT YEAR BEGINNING ON 01/04/2001. FURTHERMORE AS OBSERVED BY THE SUPREME COURT IN WALF ORT (SUPRA) THE BASIC PRINCIPLE OF TAXATION IS TO TAX THE NET INCOME I.E. GROSS INCOME MINUS THE EXPENDITURE AND O N THE SAME ANALOGY THE EXEMPTION IS ALSO IN RESPECT OF N ET INCOME. IN OTHER WORDS WHERE THE GROSS INCOME WOULD N OT FORM PART OF TOTAL INCOME IT'S ASSOCIATED OR RELATED EXPENDITURE WOULD ALSO NOT BE PERMITTED TO BE DEBITE D AGAINST OTHER TAXABLE INCOME. 25. WE ARE OF THE VIEW THAT THE EXPRESSION 'IN RELATI ON TO' APPEARING IN SECTION 14 A OF THE SAID ACT CANNOT BE ASCRIBED A NARROW OR CONSTRICTED MEANING. IF WE WERE TO ACCEPT THE SUBMISSION MADE ON BEHALF OF THE ASSESSEES THEN SUB-SECTION (1) WOULD HAVE TO BE READ AS FOLLOWS:- ITA NO../DEL/ 8 'FOR THE PURPOSES OF COMPUTING THE TOTAL INCOME UNDER THIS CHAPTER NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF EXPENDITURE INCURRED BY THE ASSESSEE WITH THE MAIN OBJECT OF EARNING INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT. THAT IS CERTAINLY NOT THE PURPORT OF THE SAID PROVISIO N. THE EXPRESSION IN RELATION TO DOES NOT HAVE ANY EMBEDDED OBJECT. IT SIMPLY MEANS IN CONNECTION WITH OR PERT AINING TO. IF THE EXPENDITURE IN QUESTION HAS A RELATION OR CONNECTION WITH OR PERTAINS TO EXEMPT INCOME IT CAN NOT BE ALLOWED AS A DEDUCTION EVEN IF IT OTHERWISE QUALIFIES UNDER THE OTHER PROVISIONS OF THE SAID ACT. IN WALFORT (SUPR A) THE SUPREME COURT MADE IT VERY CLEAR THAT THE PERMISSIBLE DEDUCTIONS ENUMERATED IN SECTIONS 15 TO 59 ARE NOW TO BE ALLOWED ONLY WITH REFERENCE TO INCOME WHICH IS BROU GHT UNDER ONE OF THE HEADS OF INCOME AND IS CHARGEABLE TO TAX. THE SUPREME COURT FURTHER CLARIFIED THAT IF AN INCO ME LIKE DIVIDEND INCOME IS NOT PART OF THE TOTAL INCOME THE EXPENDITURE/DEDUCTION RELATED TO SUCH INCOME THOUGH OF THE NATURE SPECIFIED IN SECTIONS 15 TO 59 CANNOT BE ALLOWED AGAINST OTHER INCOME WHICH IS INCLUDABLE IN T HE TOTAL INCOME FOR THE PURPOSE OF CHARGEABILITY TO TAX . SIMILARLY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MANUFACTURING CO. LTD. OBSERVED AS UNDER:- IN ORDER TO DETERMINE THE QUANTUM OF THE DISALLOWAN CE THERE MUST BE A PROXIMATE RELATIONSHIP BETWEEN THE EXPENDIT URE AND THE INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME. ONCE SUCH ITA NO../DEL/ 9 A PROXIMATE RELATIONSHIP EXISTS THE DISALLOWANCE HAS TO BE AFFECTED. ALL EXPENDITURE INCURRED IN THE EARNING OF INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME HAS TO BE DISALLOWA NCE SUBJECT TO COMPLIANCE WITH THE TEST ADOPTED BY SUPREME COURT IN WALFORT AND IT WOULD NOT BE PERMISSIBLE TO RESTRICT THE PROVISI ON OF SECTION 14A BY AN ARTIFICIAL METHOD OF INTERPRETATIO N. HOWEVER WE FIND THAT THE CALCULATION OF DISALLOWANC E UNDER RULE 8D(III) MADE BY THE ASSESSING OFFICER AND UPHELD BY LD CIT(A) I S NOT CORRECT IN VIEW OF THE FACT THAT ASSESSING OFFICER HAD INCLUDED TH E VALUE OF TOTAL INVESTMENTS FOR CALCULATION OF DISALLOWANCE WHEREAS IN OUR OPINION THE VALUE OF THOSE INVESTMENTS SHOULD HAVE BEEN INCLUDED WH ICH WERE MADE FOR THE PURPOSE OF EARNING EXEMPT INCOME. THE A SSESSEE HAD MADE SIGNIFICANT INVESTMENTS IN THE SHARES OF SUBSIDIARY C OMPANIES WHICH ARE DEFINITELY NOT FOR THE PURPOSE OF EARNING EXEMPT INCOME. THE HON'BLE TRIBUNAL IN I.T.A. NO.3349/DEL/2011 IN THE CASE OF PROMAIN LTD. AFTER RELYING UPON A KOLKATTA JUDGMENT OF TRIBUNAL IN I.T.A. NO.1331 HAS HELD THAT STRATEGIC INVESTMENT HAS TO BE EXCLUDED FOR THE PURPOSE OF ARRIVING AT DISALLOWANCE UNDER RULE 8D(III). THE TR IBUNAL HAD RELIED UPON THE FINDINGS OF KOLKATTA TRIBUNAL IN THE CASE OF REI AGRO LTD. V. DCIT IN I.T.A. NO./ 1331/DEL/2011 DATED 29.7.2011. THE RELEVANT PORTION OF TRIBUNAL FINDINGS AS CONTAINED IN THE KOLK ATTA TRIBUNAL ARE REPRODUCED BELOW:- (III) FURTHER IN RULE 8D(2)(II) THE WORDS USED IN NUMERATOR B ARE THE AVERAGE VALUE OF THE INVESTMENT INCOME FROM WH ICH DOES NOT FORM OR SHALL NOT FORM PART OF THE TOTAL INCOME AS APPEARING IN THE BALANCE SHEET AS ON THE FIRST DAY AND IN THE LA ST DAY OF THE PREVIOUS YEAR. THE ASSESSING OFFICER WAS WRONG IN TAKING INTO CONSIDERATION THE INVESTMENT OF ` .103 CRORES MADE DURING THE ITA NO../DEL/ 10 YEAR WHICH HAS NOT EARNED ANY DIVIDEND OR EXEMPT INC OME. IT IS ONLY THE AVERAGE OF THE VALUE OF THE INVESTMENT FROM WHICH THE INCOME HAS BEEN EARNED WHICH IS NOT FALLING WITHIN TH E PART OF THE TOTAL INCOME THAT IS TO BE CONSIDERED. THUS . IT IS NOT THE TOTAL INVESTMENT AT ALL BEGINNING OF THE YEAR AND AT THE END OF THE YEAR WHICH IS TO BE CONSIDERED BUT IT IS THE AVER AGE OF THE VALUE OF INVESTMENTS WHICH HAS GIVEN RISE TO THE INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME WHICH IS TO BE CONSIDERED. THE TERM AVERAGE OF THE VALUE OF INVESTMENT IS USED TO TAKE CARE OF CASES WHERE THERE IS THE ISSUE OF DIVIDEND STRIPI NG. IV) UNDER RULE 8D(2)(III) WHAT IS DISALLOWABLE IS AN AMOUNT EQUAL TO PERCENTAGE OF THE AVERAGE VALUE OF INVESTMENT THE INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOT AL INCOME/. THUS UNDER SUB CLAUSE (III) WHAT IS DISALLOWED IS PER CENTAGE OF THE NUMERATOR B IN RULE 8D(2)III). THIS HAS TO BE CALCULATED ON THE SAME LINES AS MENTIONED EARLIER IN RESPECT OF NUMER ATOR B IN THE RULE 8D(2)(II). THUS NOT ALL INVESTMENTS BECOME T HE SUBJECT MATTER OF CONSIDERATION WHEN COMPUTING DISALLOWANCE U /S 14A READ WITH RULE 8D. THE DISALLOWANCE U/S 14A READ WITH RULE 8D IS TO BE IN RELATION TO THE INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME AND THIS CAN BE DONE ONLY BY TAKING INT O CONSIDERATION THE INVESTMENT WHICH HAS GIVEN RISE TO T HIS INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME. (A.Y.) (I.T.A. NO.1331/KOL/2011 DATED 29.7.2011. FOLLOWING THE ABOVE JUDICIAL PRECEDENTS WE HELD THA T VALUE OF STRATEGIC INVESTMENTS SHOULD BE EXCLUDED FOR THE PURPOSE OF DISALL OWANCE UNDER RULE 8D)III) FACTS WE DIRECT THE ASSESSING OFFICER TO CALCULATE THE DISALLOWANCE UNDER RULE8D(III) BY EXCLUDING THE VALU E OF STRATEGIC ITA NO../DEL/ 11 INVESTMENTS IN THE CALCULATION OF DISALLOWANCE. AS REGA RDS DISALLOWANCE UNDER RULE 8D(I) AND 8D(II) WE HAVE ALREADY HELD TH AT NO DISALLOWANCE IS WARRANTED. 10. IN THE RESULT THE APPEALS FILED BY THE ASSESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES WHEREAS THE APPEAL FILED BY THE REVENUE IS DISMISSED. 11. ORDER PRONOUNCED IN THE OPEN COURT ON 4TH DAY O F APRIL 2014. SD/- SD/- (U.B.S. BEDI) (T.S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DT. 04.04.2014. HMS COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)- NEW DELHI. 5. THE DR ITAT LOKNAYAK BHAWAN KHAN MARKET NEW DEL HI. TRUE COPY. BY ORDER (ITAT NEW DELHI). DATE OF HEARING 3.4.2014 DATE OF DICTATION 3.4.2014 DATE OF TYPING 3.4.2014 ITA NO../DEL/ 12 DATE OF ORDER SIGNED BY BOTH THE MEMBERS & PRONOUNCEMENT. DATE OF ORDER UPLOADED ON NET & SENT TO THE BENCH CONCERNED.