Citation Codes

Equivalent Citations

citation codes

Case Number

ITA 1487/Hyd/2018

Attorney(S)

Acts

INCOME TAX ACT 1961
SECTION 37 INCOME TAX ACT 1961
u/s 143(3) of the Income- tax Act, 1961 (in short 'the Act')

See more information ...

Smart Summary

Summary of the Income Tax Appellate Tribunal Order — Madhucon Toll Highways Ltd. (AY 2012-13)

Factual and Procedural Background

This is an appeal pair (cross appeals by the assessee and the revenue) arising from the order of the Commissioner of Income Tax (Appeals) No. 4, Hyderabad dated 13/09/2017 passed under section 143(3) of the Income-tax Act, 1961 for assessment year 2012-13. The assessee, Madhucon Toll Highways Ltd., filed its return of income on 29/09/2012 declaring a loss of Rs. 2,04,76,935/-, the return was processed under section 143(1) and later selected for scrutiny.

The Assessing Officer (AO) completed the assessment under section 143(3) and made at least two principal additions: (i) disallowance of ROC fee paid of Rs. 2,03,52,090/- and (ii) disallowance of expenditure under section 14A amounting to Rs. 8,87,500/-. The assessee appealed to the CIT(A); the CIT(A) partly allowed the appeal (directed the AO to verify and allow ROC fee under section 35D and deleted the section 14A disallowance). Both the assessee and the revenue are before the ITAT seeking review of aspects of the CIT(A)'s order.

Procedurally, the ITAT noted that the assessee's appeal was filed 202 days late; the assessee sought condonation on account of the CIT(A)'s order being misplaced by staff. The Tribunal relied on Collector Land Acquisition Vs. Mst. Katiji & Ors and University of Delhi Vs. Union of India to condone the delay and proceeded to adjudicate the appeals on merits.

Legal Issues Presented

Whether the expenditure of Rs. 2,03,52,090 paid as ROC fee is allowable as revenue expenditure under section 37 of the Income-tax Act, 1961.
Whether, alternatively, the ROC fee can be allowed under section 35D of the Act (enhancing capital base / section 35D benefit).
Whether the Assessing Officer's disallowance under section 14A of Rs. 8,87,500/- was justified, given the facts that no exempt income was earned in the year and the nature of the investments/loans made to subsidiaries and associates.
Whether the CIT(A) erred in directing verification and allowance of the ROC fee, and whether the CIT(A) erred in deleting the section 14A disallowance (including alleged failure to consider CBDT Circular No. 5 of 2014 and Supreme Court authority cited by the revenue).

Arguments of the Parties

Appellant / Assessee's Arguments

The ROC fee of Rs. 2,03,52,090/- was incurred wholly and exclusively for the purposes of business and is therefore deductible under section 37 of the Act.
The increased share capital (for which ROC fee was paid) was utilized to assist subsidiary and associate companies for business purposes; there was a direct nexus between the increased capital and utilization of funds for working capital, and therefore the ROC fee is revenue in nature when the capital was used for working capital.
In the alternative, if not allowable under section 37, the ROC fee should be allowed under section 35D (enhancing capital base) — reliance placed on a coordinate bench decision (Ocimum Bio Solutions India Ltd. Vs. DCIT) for this proposition.
With respect to the section 14A addition, the assessee submitted that no exempt income was earned in the year from the investments, and therefore no disallowance under section 14A should be made. The assessee relied on decisions of coordinate Benches (including Pratista Industries Ltd. and other Hyderabad bench decisions) to support deletion of the disallowance.

Respondent / Revenue's Arguments

The revenue contended that the CIT(A) erred in directing the AO to verify and allow the ROC fee of Rs. 2,03,52,090/- for enhancing capital base under section 35D.
The revenue argued that deletion of the section 14A disallowance was incorrect and that the CIT(A) ignored applicable guidance, including CBDT Circular No. 5 of 2014 and the Supreme Court decision in CIT vs Walfort Share of Stock Brokers Pvt. Ltd. (326 ITR 1), which explains the mandate of section 14A to prevent claiming expenses incurred in relation to exempt income against taxable income.
The revenue further contended that benefits of section 35D cannot be availed for expenditures other than those specified in section 35D (relying on the Madras High Court decision in CIT vs Ashok Leyland Ltd. [2012] 349 ITR 663).

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Collector Land Acquisition Vs. Mst. Katiji & Ors (AIR 1987 1353) (Supreme Court)	Delay condonation principle: delay supported by cogent reasons deserves to be condoned in the interest of substantial justice.	The Tribunal relied on this authority to condone the assessee's 202-day delay in filing the appeal because the CIT(A)'s order was misplaced by staff.
University of Delhi Vs. Union of India (Civil Appeal Nos. 9488 & 9489/2019, dated 17 Dec 2019)	Delay condonation principle reaffirming that delay with cogent reasons should be condoned for substantial justice.	The Tribunal relied on this decision along with Katiji to justify condonation of the assessee's delay.
CIT Vs. Kisench and Chellaram (India) P. Ltd. (1981 130 ITR 385 Madras)	Authority cited by the assessee in support of allowing certain expenditures under section 37 (revenue expenditure).	Placed before the CIT(A) and before the Tribunal as part of the assessee's support for allowing ROC fee under section 37.
Hindustan Machine Tools Limited Vs. CIT (ILR 1988 KAR 2012; 1989 175 ITR 220 Kar)	Authority relied on by the assessee on the nature/allowability of certain expenditures as business expenses (section 37 context).	Cited by the assessee in support of the contention that ROC fee could be revenue in nature; considered as part of assessee's submissions.
Federal Bank Ltd. Vs. CIT (1989 180 ITR 241 Ker)	Authority cited by the assessee in support of section 37 claims regarding business expenditure.	Cited by the assessee and placed before the CIT(A); formed part of the materials considered by appellate authorities.
M/s Navi Mumbai SEZ P. Ltd. Vs. ACIT ([2015] 54 Taxmann.com 259) — ITAT Mumbai	ITAT Mumbai decision treating ROC/related fees as revenue expenditure where funds/capital were used for business/working capital of group concerns.	The Tribunal expressly followed this coordinate-bench decision and, on its facts, directed the AO to allow the ROC fee as revenue expenditure under section 37.
Ocimum Bio Solutions India Ltd. Vs. DCIT (ITA No. 2178/Hyd/2018) — ITAT Hyderabad (coordinate bench)	Decision relied upon by the assessee for allowing ROC fee alternatively under section 35D.	The assessee relied on this decision as an alternative basis; the CIT(A) had directed verification/allowance under section 35D, but the Tribunal ultimately allowed the amount under section 37 by following Navi Mumbai SEZ decision.
CIT Vs. Ashok Leyland Ltd. ([2012] 349 ITR 663) — Madras High Court	Authority for the proposition that benefits under section 35D cannot be availed for expenses other than those specified (e.g., legal/ROC fees not covered).	Relied upon by the Departmental Representative to oppose allowance of ROC fee under section 35D; Tribunal found such cases distinguishable on facts.
CIT vs Walfort Share of Stock Brokers Pvt. Ltd. [326 ITR 1] — Supreme Court	Explains the mandate of section 14A to prevent claiming expenses incurred in relation to exempt income against taxable income.	Raised by the revenue in grounds; considered by the Tribunal in the context of whether section 14A applied — Tribunal noted that no exempt income arose and therefore section 14A did not apply, upholding the CIT(A).
Pratista Industries Ltd. vs DCIT (ITA No.1302/Hyd/2015) — ITAT Hyderabad	Coordinate-bench authority on non-applicability/deletion of section 14A disallowance where no exempt income is earned.	The CIT(A) followed this decision in deleting the section 14A addition; the Tribunal upheld that approach and found no infirmity where no exempt income was earned.
Madhucon Infra Ltd. Vs. ACIT (ITA No. 410/Hyd/2015)	Coordinate-bench decision cited by the assessee in support of section 14A argument (deletion where appropriate).	Cited among other Hyderabad-bench authorities relied upon by the assessee; the Tribunal relied on the line of coordinate bench authority to sustain deletion of the section 14A addition.
Phoenix Infratech India Pvt. Ltd. Vs. ITO (ITA No. 720/Hyd/2016)	Another Hyderabad-bench decision cited in support of deletion of section 14A disallowance.	Placed before the appellate authorities and considered as part of the assessee's reliance on coordinate bench jurisprudence; contributed to the Tribunal upholding deletion of section 14A addition.

Court's Reasoning and Analysis

The Tribunal's analysis proceeded in distinct stages:

Delay condonation: The Tribunal accepted the assessee's affidavit explaining the delay (misplacement of CIT(A)'s order by staff), and relying on Collector Land Acquisition vs Katiji and University of Delhi vs Union of India, held the delay was neither intentional nor deliberate and condoned it in the interest of substantial justice.
Facts and initial assessment: The AO had disallowed ROC fee (Rs. 2,03,52,090/-) as not allowable under the Act and made a section 14A disallowance of Rs. 8,87,500/-. On appeal, the CIT(A) rejected the assessee's section 37 contention but found merit in allowing the expenditure under section 35D and directed the AO to verify and allow accordingly; the CIT(A) also deleted the section 14A disallowance.
Assessee's case on ROC fee: The assessee argued the ROC fee was wholly and exclusively for business because the enhanced capital was used to assist subsidiaries/associates and for working capital. The assessee relied on multiple authorities including ITAT Mumbai in Navi Mumbai SEZ P. Ltd. to show that comparable fees may be treated as revenue when there is such a nexus.
Revenue's case on ROC fee: The revenue advanced that section 35D benefits cannot be applied to expenses not specified under section 35D (citing Ashok Leyland) and challenged the CIT(A)'s direction.
Tribunal's application of facts to law on ROC fee: The Tribunal examined the assessee's financial statements (noting substantial investments in subsidiaries and associates and specific loans/advances to named group companies). Considering the "totality of the facts" and the assessee's demonstrated use of increased capital (investments and loans to related companies), the Tribunal respectfully followed the ITAT Mumbai decision in M/s Navi Mumbai SEZ P. Ltd. and directed the AO to allow the ROC fee as revenue expenditure under section 37. The Tribunal found the revenue's cited authorities distinguishable on the facts.
Section 14A analysis: The AO had applied Rule 8D to compute the section 14A disallowance (Rs. 8,87,500/-) because investments and loans were shown in the balance sheet and no income from those investments was included in the assessee's computation. On appeal, the CIT(A) deleted the disallowance following coordinate bench decisions (Pratista Industries Ltd. et al.). The Tribunal noted from the financial statements and the record that no exempt income was earned in the year under consideration; therefore, section 14A was not applicable. Following the coordinate-bench line cited by the assessee, the Tribunal upheld deletion of the section 14A addition and dismissed the revenue's challenge on this point.

Holding and Implications

Core Ruling: Assessee's appeal is partly allowed and the revenue's appeal is dismissed.

Direct consequences (as expressly ordered in the opinion):

The Tribunal directed the Assessing Officer to allow the assessee's claim of Rs. 2,03,52,090/- paid as ROC fee as revenue expenditure under section 37 of the Income-tax Act, based on the facts showing use of enhanced capital for investments and loans to subsidiaries/associates and following the ITAT Mumbai decision in M/s Navi Mumbai SEZ P. Ltd.
The Tribunal upheld the deletion of the section 14A disallowance of Rs. 8,87,500/-, concluding that section 14A was not attracted since no exempt income was earned in the relevant year.
The revenue's grounds challenging the CIT(A) on these matters were dismissed (ground Nos. 2 to 4 of the revenue were dismissed and ground No. 1 of the revenue was dismissed with respect to ROC fee direction being inappropriate in the specific facts).

The opinion does not purport to lay down any novel legal principle beyond applying and following existing coordinate-bench and higher-court precedent on the facts; therefore, no new precedent or broad legal rule is announced by this order beyond the application of cited authorities to the particular facts.

Order pronounced in open court on 13th April 2022. (S.S. Godara, Judicial Member; L.P. Sahu, Accountant Member)

Show full summary ...

Madhucon Toll Highways Limited , Hyderabad v. Asst. Commissioner of Income Tax, Circle-16(2), Hyderabad

IN THE INCOME TAX APPELLATE TRIBUNAL

HYDERABAD BENCHES "A": HYDERABAD

(THROUGH VIRTUAL CONFERENCE)

BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER

AND

SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER

S.No. ITA No. AY Appellant Respondent 1 1487/Hyd/2018 2012- Madhucon Toll Asst.

13 Highways Ltd., Commissioner Hyderabad. of Income-tax, Circle - 16(2),

PAN - AAFCM 7371J Hyderabad 2 2100/Hyd/2017 2012- Dy. Madhucon Toll

13 Commissioner of Highways Ltd., Income-tax, Hyderabad.

Circle - 16(2),

Hyderabad PAN - AAFCM 7371J Revenue by: Shri T. Sunil Goutam Assessee by: Shri P. Murali Mohan Rao

Date of hearing: 07/04/2022

Date of pronouncement: 13/04/2022

O R D E R

PER L.P. SAHU, A.M.:

Both these appeals are cross appeals by assessee and revenue directed against the CIT(A) - 4, Hyderabad's order dated 13/09/2017 passed u/s 143(3) of the Income- tax Act, 1961 (in short 'the Act') for the AY 2012-13.

2. We notice at the outset that assessee's instant appeal suffers from 202 days delay in filing before the ITAT. In this connection, the assessee has filed a petition for

condonation of delay along with an affidavit, wherein, it was affirmed that since the Pr. CIT(A)'s order misplaced by one of its staff and tracing out the same caused the impugned delay in filing the appeal belatedly. We rely on Case law Collector Land Acquisition Vs. Mst. Katiji & Ors,

1987 AIR 1353 (SC) and University of Delhi Vs. Union of India, Civil Appeal No. 9488 & 9489/2019 dated 17 December, 2019, hold that such a delay; supported by cogent reasons, deserves to be condoned so as to make way for the cause of substantial justice. We accordingly hold that assessee's impugned delay in filing this appeal is neither intentional nor deliberate but due to the circumstances beyond its control. The same stands condoned. Case is now taken up for adjudication on merits.

3. Briefly the facts of the case are that the assessee company is in the business of investments and it filed its return of income for the A.V. 2012-13 on 29/09/2012 declaring loss of Rs. 2,04,76,935/-, which was processed u/s 143(1) of the Act. Subsequently, the case was selected for scrutiny and accordingly, statutory notices were issued to the assessee. The AO completed the assessment u/s 143(3) of the Act by adding the following additions:

1. Disallowance of ROC fee paid of Rs. 2,03,52,090/-

2. Disallowance of expenditure u/s 14A of Rs. 8,87,500/-

3. When the assessee preferred an appeal before the CIT(A) against the order of AO, the CIT(A) partly allowed the appeal of the assessee.

4. Aggrieved by the order of CIT(A), both the assessee and the revenue are in appeals before the ITAT.

5. The assessee has raised the following grounds of appeal:

"1) The Ld. Commissioner of Income Tax (Appeals) erred in passing her order without adjudicating ground Nos.2 and 3 of the grounds of appeal.

2) The Ld. Commissioner of Income Tax (Appeals) erred in not allowing appellant's claim of expenditure towards payment of ROC fee amounting to Rs.2,03,53,090, under section 37 of the Income Tax Act,

1961.

3) The Ld. Commissioner of Income Tax (Appeals) erred in not considering the fact that provisions of section 37 of the Income Tax Act, 1961 are applicable to appellant's claim of expenditure towards payment of ROC fee.

4) The Ld. Commissioner of Income Tax (Appeals) erred in not considering the decisions of Hon'ble High Courts and Hon'ble ITAT's on which the appellant relied in support of its claim of expenditure towards payment of ROC fee.

5) The Ld. Commissioner of Income Tax (Appeals) ought to have allowed appellant's claim of expenditure towards payment of ROC fee, under the provisions of section 37 of the Income Tax, 1961 instead of section 35D of the Act.

5) The Ld. Commissioner of Income Tax (Appeals) erred in not adjudicating ground Nos. 5,6,7,11,12,13,14,15 and 16 of the grounds of appeal ofthe appellant relating to the addition of Rs.8,87,500 made by the Assessing Officer under section 14A of the Income Tax Act, 1961, through she has deleted the above addition.

7) The Ld. Commissioner of Income Tax (Appeals) erred in not cancelling the penalty proceedings ix] s 271 (1 )(

c) initiated by the Assessing Officer, when the appel1ant has neither concealed any particulars of income nor resorted to furnishing of inaccurate particulars of income.

8) The appel1ant may add or alter or mend or modify or substitute or delete and/ or rescind all or any of the grounds of appeal at any time before or at the time of hearing of the appeal."

5.1 The revenue has raised the following grounds of appeal:

"1. The CIT (A) erred in directing the AO to verify and allow ROC fee paid of Rs.2,03,52,090/- for enhancing capital base u/s. 35D.

2. The CIT (A) erred in deleting the disallowance u/s 14A of Rs.8,87,500/-.

3. The CIT (A) erred in ignoring CBDT's Circular No.5 of 2014 dated 11.02.2014.

4. The CIT(A) erred in ignoring the Supreme Court decision in the case of CIT VS Walfort Share of Stock Brokers P Ltd [326 ITR 1J. wherein it was held that the mandate of section 14A was to curb the practice of claiming deduction of expenses incurred in relation to exempt income against taxable income and at the same time avail of the tax incentive by way of exempt income

without making any apportionment of expenses incurred in relation to exempt income.

5. Any Other Ground that may be urged at the time of hearing."

6. As regards the assessee's ground Nos. 2 to 5 relating to assessee's claim of expenditure towards payment of ROC fee amounting to Rs. 2,03,53,090/-, during the course of assessment proceedings, the Assessing Officer noticed that the appellant had paid Rs.2,03,52,090/- toward ROC fee. Since the ROC fee was not allowable expenditure as per provisions of IT Act, the same was disallowed and added to the returned income.

7. During the course of appellate proceedings before the CIT(A), the appellant submitted that the Assessing Officer had not considered the entire ROC expenditure incurred for the purpose of business and the same was in direct proportion to the business needs of the company. It was submitted that entire expenditure wholly and exclusively for the purpose of business and it was necessary for the smooth functioning of business and therefore should be allowed u/s 37 of the Act and the same was extracted below:

"37 (1) Any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee, laid out or expended wholly and exclusively for the purposes of the business or

profession shall be allowed in computing the income chargeable under the head "Profits and gains of business or profession".

7.1 In support of appellant's claim reliance is placed on the following case laws:

(i} CIT Vs. Kisenchand Chellaram (India) P. Ltd.

1981130 ITR 385 Mad.

(ii} Hindustan Machine Tools Limited Vs. CIT ILR 1988 KAR 2012, 1989175 ITR 220 KAR, 1989175 ITR 220 Kar, 1988(3) Kar. U 460

(iii} Federal Bank Ltd. Vs. CIT -1989180 ITR 241 Ker.

8. The CIT(A) after considering the submissions of the assessee, observed as under:

"4.3 I have carefully considered the assessment order, facts of the case and case laws relied upon by the appellant. In this case, as per the details in the assessment order I am in agreement with the Assessing Officer and so the submissions of the appellant rejected with regard to the liability of the ROC fee u/s 37 of the Act but alternatively the ground raised by the appellant in ground No. 4 were verified and found that there is a merit of this expenditure to be allowed u/s 35D and therefore the Assessing Officer is directed to verify and allow accordingly."

9. Before us, the ld. AR of the assessee filed written submissions in support of assessee's case which are as under:

9.1 In addition to the above written submissions, the ld.AR of the assessee submitted that the assessee increased the share capital money to utilize for assisting the subsidiary and associate companies for business purpose and, therefore, there was direct nexus between the increased capital and the utilization of the funds for working capital purpose. He, therefore, submitted that the ROC fee paid after commencement of the business is a revenue expenditure if the amount has been utilized for the business purposes immediately. In this connection, he relied on the judgment of the Hon'ble Bombay High Court in the case of M/s Navi Mumbai SEZ P. Ltd., (supra) .

10. The ld. DR, on the other hand also filed written submissions, which are as under:

11. We have considered the rival submissions and perused the material on record as well as gone through the orders of revenue authorities. The AO disallowed the assessee's claim of expenditure of Rs. 2,03,52,090/ - towards ROC on the ground that it was not allowable expenditure as per the provisions of IT Act. Whereas, the CIT(A) directed the AO to allow the said expenditure u/s 35D of the Act. The ld. AR of the assessee stated that the entire ROC expenditure claimed was actually incurred wholly and exclusively for the working capital purpose of its subsidiaries business activity and such expenses incurred are in nature of revenue expenditure which is liable to be allowed u/s 37 of the Act. For this proposition, he relied on the decision of the ITAT, Mumbai in the case of

M/s Navi Mumbai SEZ P. Ltd. Vs. ACIT, [2015] 54 Taxmann.com 259. Alternatively, he also stated in written submissions that the ROC expenditure incurred towards increase of share capital as per section 35D of the Act and, therefore, the same may be allowed u/s 35D of the Act. For this proposition, he relied on the decision of the coordinate bench of ITAT, Hyderabad in the case of Ocimum Bio Solutions India Ltd. Vs. DCIT in ITA No. 2178/Hyd/2018.

11.1 On the other hand, the ld. DR in his written submissions stated that the benefit of provisions of section 35D cannot be availed when expenses other than those specified in section 35D are incurred such as legal paid to ROC, professional consultation and share valuation expenses etc. For this proposition, he relied on the decision of the Hon'ble Madras High Court in the case of CIT Vs. Ashok Leyland Ltd. [2012] 349 ITR 663.

11.2 In view of the above observations, it is observed that the assessee has paid ROC fees to the Registrar of companies for raising the authorised share capital of a company which is wholly and exclusively in the nature of revenue expenditure because as per the submissions made by the ld. AR that the increased capital has been invested in its subsidiaries and associated companies for the working capital purpose. On going through the financial statements, as per Schedule - 2.5, under the head "non-current

investments", there was a total investment of Rs. 277,95,82,000/- invested in the associated and subsidiaries. The name of the subsidiary companies and associate companies are mentioned at page 29 at para No. 4 & 5 of the paper book. Further, we also find that the assessee has given loans and advances to Chhapra Hajipur Expressways Ltd. of Rs. 18,50,00,000/- and Barasat Krishnagar Expressways Ltd. of Rs. 17,00,00,000/-. These are subsidiary and associate companies also. Therefore, considering the totality of the facts as well as considering the submissions of the ld. AR and respectfully following the decision of the ITAT, Mumbai in the case of M/s Navi Mumbai SEZ P. Ltd. Vs. ACIT, [2015] 54 Taxmann.com 259, on which reliance placed by the assessee, we direct the AO to allow the assessee's claim of expenditure of Rs. 2,03,52,090/- towards ROC Fee as revenue expenditure u/s 37 of the Act. The case laws relied on by the ld. DR are distinguishable to the facts of the case on hand. Accordingly, ground Nos. 2 to 5 raised by the assessee on this issue are allowed and ground No. 1 raised by the revenue is dismissed.

12. As regards ground No. 6 relating to 14A of the Act, during the course of assessment proceedings, the Assessing Officer found in the Balance Sheet filed by the appellant company that an amount of Rs.35,50,00,000/- has been shown under the head Loans & Advances as on 31.3.2012.

The appellant company has not shown any income from the said loans & advances in its accounts. Further, no income has been offered in the computation of income from the said investments apparently for the reason that the same was exempt from tax and paid nil interest. As per section 14A of the Act, where the assessee claims that no expenditure has been incurred by him in relation to income which does not form part of the total income under this, the Assessing Officer shall determine the amount of expenditure incurred in relation to such income which does not form part of the total income under this Act in accordance with such method as may be prescribed. Rule 8D of the IT Rules lays down the method of calculating the expenditure incurred in relation to income which does not form part of total Income. The assessee has claimed that it has invested out of its own funds and it was having reserves and own funds in the said financial year. However, it has not denied the fact that there was income which does not form part of the total income and expenditure which was incurred In relation to income which does not form part of the said total income. Further, as it can be seen from Rule 8D of the Rules, no evidence was required to be examined to see that the expenditure has been actually incurred in relation to income not includible in total income. In case where no expenditure was said to have been incurred or where the Assessing Officer was not satisfied with the correctness of the claim of expenditure,

the expenditure was required to be determined following the method laid down under Rule 8D. In view of the same, the expenditure to be disallowed u/s 14A of the Act has been worked out as Rs.8,87,500/- and added to the returned income.

13. During the course of the appellate proceedings the appellant submitted that the expenditure of Rs.8,87,500/ - was done on the presumption that the assessee had incurred certain expenditure towards investment, the income there from which does not or shall not form part of the total Income. The assessee company had made Investments in Subsidiary Companies and no expenses were incurred for maintaining the portfolio of the investments or for holding the same and the assessee has made investments for having the control for the purpose of business of company. The appellant further submitted that the assessee-company during the year under consideration has not received any dividend from the investments made therefore no disallowance u/s 14A of the Act can be made. In support of appellant's claim, it relied upon the following case laws:

(i) Pratista Industries Ltd. secunderabad Vs. DCIT in ITA No. 1302/Hyd/2015.

(ii) Madhucon Infra Ltd. Vs. ACIT in ITA No. 410/Hyd/201S dt. 20.05.2016

(iii) phoenix Infrateeh India Pvt. Ltd. Vs. ITO, Wd.16(2), Hyd. in ITA No. 720/Hyd/2016 dt.28.09.2016.

14. The CIT(A) after considering the submissions of the assessee and following the decision of ITAT, Hyderabad in the case of Prathista Industries Ltd (supra), on which reliance placed by the assessee, deleted the disallowance made by the AO on the ground that assessee has not earned any exempt income during the year.

15. The ld. AR of the assessee in his written submissions strongly relied on the order of the CIT(A) and also relied on various cases including the decision of ITAT, Hyderabad in the case of Prathista Industries Ltd. (supra).

16. The ld. DR, on the other hand, relied on the order of the AO.

17. We have considered the rival submissions and perused the material on record. In the case under consideration, we find from the financial statements that no exempt income was earned from the investments so made, and, therefore, the provisions of Section 14A will not applicable to the case of assessee. Therefore, following the said decision of the coordinate bench cited supra, we find no infirmity in the order of the CIT(A) and accordingly we uphold the same and dismiss the ground No. 6 raised by the assessee as infructuous and the ground Nos. 2 to 4 raised by the revenue are dismissed.

19. In the result, assessee's appeal is partly allowed and the revenue's appeal is dismissed in above terms. A copy of this common order be placed in the respective case files. Pronounced in the open court on 13^th April, 2022

Sd/- Sd/-

(S.S. GODARA) (L. P. SAHU)

JUDICIAL MEMBER ACCOUNTANT MEMBER

Hyderabad, Dated: 13^th April, 2022. kv

Copy to :

1	Madhucon Toll Highways Ltd., C/o P. Murali & Co., CAs, 6-3-655/2/3, 1st Floor, Somajiguda, Hyderabad – 82
2	ACIT, Circle – 16(2), Hyderabad
3	CIT(A) – 4, Hyderabad.
4	The Pr. CIT – 4, Hyderabad
5	ITAT, DR, Hyderabad.
6	Guard File.

Madhucon Toll Highwa... v. Asst. Commissioner o...