ITAT : Rejects exclusion of strategic investments in Sec 14A-disallowance computation, reverses CIT(A) order

Mumbai ITAT rules against taxpayer & reverses CIT(A), denies relief from Sec 14A in respect of strategic investment made by assessee (a cooperative bank) in its subsidiary company;  Observes that the statute does not grant any exemption to strategic investments which are capable of yielding exempt income for arriving at Sec. 14A disallowance; Thus holds that any investment including strategic investments in subsidiary company as well as in other securities which are capable of yielding tax-free income (by way of dividend) shall be included for the purpose of computing disallowance u/s 14A; Relies on Karnataka HC ruling in United Breweries, Bombay HC rulings in Reliance Utilities and HDFC Bank Ltd. and coordinate bench ruling in Uma Polymers Ltd. ; Separately holds that assessee being a cooperative society is not subject to Sec. 40A(2) disallowance in respect of payment towards software and data entry services to its related enterprise, relies on Bombay HC ruling in Manjara Shetkari Saharakari Karkhana Ltd. in this regard:ITAT