JM Financial Limited vs. ACIT (ITAT Mumbai) In AY 2009-10, the assessee has specifically raised a point before
the AO that 97.82% of the investment is in subsidiary companies and
joint venture companies and, therefore, no expenditure was incurred for
maintaining the portfolio on these investments or for holding the same.
The assessee has also pointed out that these investments are long term
investment and no decision is required in
making the investment or
disinvestment on regular basis because these investments are strategic
in nature in the subsidiary companies on long term basis and, therefore,
no direct or indirect expenditure is incurred. The department has not
disputed this fact that out of the total investment about 98% of the
investments are in subsidiary companies of the assessee and, therefore,
the purpose of investment is not for earning the dividend income but
having control and business purpose and consideration. Therefore, prima
facie the assessee has made out a case to show that no expenditure has
been incurred for maintaining these long term investment in subsidiary
companies. The AO has not brought out any contrary fact or material to
show that the assessee has incurred any expenditure for maintaining
these investments or portfolio of these investments. In Godrej &
Boyce Mfg. Co it was held that s. 14A(2) does not ifso facto empower the
AO to apply the method prescribed by Rule 8D straightaway without
considering whether the claim made by the assessee is correct. Also, in
Garware Wall Ropes
it was held that a disallowance u/s 14A cannot be made if the primary
object of investment is holding controlling stake in the group concern
and not earning any income out of investment. Similarly, in
Oriental Structural Engineers
(approved by the Delhi High Court) it has been held that s. 14A
disallowance cannot be made for investment in subsidiaries and SPVs out
of commercial expediency