ACIT 16(1), MUMBAI V. AISHWARYA RAI BACHCHAN, MUMBAI

ITA 5403/MUM/2025

AI Insights

The case involves an appeal by the revenue against the order of the CIT(A) which had allowed the appeal of Aishwarya Rai Bachchan, the respondent, concerning the disallowance of expenses related to exempt income under Section 14A read with Rule 8D of the Income-tax Act, 1961. The AO had made a disallowance of Rs. 4,60,63,388, which was contested by the assessee who had already made a suo-moto disallowance of Rs. 49,08,657. The CIT(A) found in favor of the assessee, leading to the revenue's appeal to the Tribunal. The Tribunal upheld the CIT(A)'s decision, emphasizing the need for the AO to provide specific reasons for any disallowance beyond the assessee's own, as mandated by the Supreme Court in Maxopp Investments Ltd. v. CIT.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 785939 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2022-2023
• Appeal Filed On: 29-08-2025
• Other Referred Cases: Maxopp Investment Ltd. v. CIT, Vireet Investments Pvt. Ltd. v ACIT
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANI JAIN
• Assessee Lawyers: SURENDRA MOHAN
• Keywords: Earning of tax free income; Rule 8D
• Section: 143(3); 14A

Judgement Text

"IN THE INCOME-TAX APPELLATE TRIBUNAL “A” BENCH, MUMBAI BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER & SMT.RENU JAUHRI, ACCOUNTANT MEMBER ITA No.5403/MUM/2025 (A.Y.2022-23) ACIT 16(1) Room No. 439, Aaykar Bhavan, MK Road, Marine Lines, Mumbai-400020. Vs. Aishwarya Rai Bachchan Jalsa B-2 Kapole CHS V L Mehta Road JVPD Scheme Juhu, Mumbai-400049. \u0001थायी लेखा सं./जीआइआर सं./PAN/GIR No:ADLPR35537P Appellant .. Respondent Appellant by : Shri Mani Jain Respondent by : Shri Surendra Mohan- Sr. DR Date of Hearing 29.10.2025 Date of Pronouncement 31.10.2025 आदेश / O R D E R PER RENU JAUHRI [A.M.] :- This appeal is filed by the Revenue against the order of the Learned Commissioner of Income-tax (Appeals), Mumbai/National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”] dated 16.06.2025 passed u/s. 250 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for the Assessment Year [A.Y.] 2022-23. Printed from counselvise.com P a g e | 2 ITA NO. 5403/mum/2025. 2. The grounds of appeal are as follows: “1. Whether the Ld. CIT(A) erred in not applying the principle laid down by the Hon'ble Supreme Court in Maxopp Investment Ltd. v. CIT (2018) 402 ITR 640 (SC) that Section 14A is attracted where the expenditure is incurred in relation to exempt income, and the availability of interest-free funds is not a standalone defense unless proven to be directly used for investments?” 3. The brief fact of the case are that the assessee filed her return for A.Y. 2022-23 on 22.10.2022 declaring total income of Rs. 39,33,02,240/-. The case was selected for complete scrutiny for verification of several issues. After considering the assessee response, the ld. AO proposed to make disallowance of expenses relating to exempt income u/s. 14A r/w Rule 8D of the Act. The assessee submitted that suo-moto disallowance of Rs. 49,08,657/- has already been made despite no expenditure being incurred for earning the exempt income. However, ld. AO did not accept the assessee contention and made disallowance u/s. 14A r.w.s 8D as per the following computation: S. No. Particulars Investment as on 31.03.2021 (Rs.) Investment on 31.03.200(Rs.) Total 1 Investment in Tax Free Income Earning Assests 4,49,43,98,145 4,71,82,79,581/- 9,21,26,77,726/- Avg. Value of investment 4,60,63,38,863/- Disallowance @1% of above = Rs. 4,60,63,388/- After reducing the suo-moto disallowance of Rs. 49,08,657/- balance amount of Rs. 4,11,54,731/- was disallowed u/s. 14A of the Act and assessment completed at an income of Rs. 43,44,56,971/- vide order u/s. 143(3) dated 16.03.2024. Printed from counselvise.com P a g e | 3 ITA NO. 5403/mum/2025. 3.2 Aggrieved, the assessee preferred an appeal before the ld. CIT(A). After detailed examination of the issue, ld. CIT(A) allowed the assessee’s appeal with the following observations: Printed from counselvise.com P a g e | 4 ITA NO. 5403/mum/2025. Printed from counselvise.com P a g e | 5 ITA NO. 5403/mum/2025. Printed from counselvise.com P a g e | 6 ITA NO. 5403/mum/2025. Aggrieved with the order above of ld. CIT(A), the revenue is in appeal before the Tribunal. 4. Before us, ld. DR has vehemently argued that the ld.AO has correctly applied the provisions of section 14A r.w.r. 8D to compute the disallowance of expenses incurred on earning the exempt income. He has further submitted that the ld. AO has duly recorded his satisfaction for invoking the provisions of section 14A r.w.r 8D in para 3.4 of his order. In view of these facts, the order of the ld. AO deserves to be upheld. 4.2 Ld. AR, on the other hand, has submitted that no proper satisfaction had been recorded by the ld. AO. In response to the show-cause notice, the assessee had submitted a detailed reply dated 09.03.2024 which has been reproduced in the assessment order by the ld. AO but it has been rejected without due consideration. Ld. AO has not given any findings on the merits of the assessee’s submissions and no satisfaction has been recorded as to why the AO disagrees with the explanation of the assessee. Ld. AR has further pointed out that the total expenditure incurred by the assessee is only Rs. 2.48 cr as against which the disallowance of Rs. 4.60 cr has been computed by the ld. AO which is preposterous. Lastly, Ld. AR has also placed reliance on the ld. CIT(A)’s order for A.Y. 2014-15 wherein on similar facts, he had deleted the addition made by ld. AO. Printed from counselvise.com P a g e | 7 ITA NO. 5403/mum/2025. 5. We have heard the rival submissions and perused the material available on record. Admittedly, the assessee had suo-moto made a disallowance of Rs. 49,08,657/- u/s. 14A in respect of total exempt income of Rs. 2,14,26,224/- at the time of filing her return of income. This amount includes direct expenses of Rs. 37,59,718/- transaction tax of Rs. 1,65,189/-, STT of Rs. 4,95,328/- and indirect expenses of Rs. 4,88,422/- being 5% of the total expenses. As per the settled legal position, in view decision of Hon’ble Apex Court in the case of Maxopp Investments Ltd. Vs. CIT(2018) 402 ITR 640, ld. AO had to record his satisfaction as to why the suo-moto disallowance made by the assessee was not acceptable which has not been done and, therefore, ld. CIT(A) has righty allowed relief to the assessee. 5.2 Further, the assessee had submitted the working as per section 14A r.w.r 8D after considering only those investments from which exempt income was earned during the year in view of the decision of the special bench in Vireet Investments Pvt. Ltd. V ACIT 165 TRD 27, as per which the disallowance works out to Rs. 21,95,734/-. Ld. AO simply rejected the computation submitted by the assessee and proceeded to compute the disallowance u/s. 14A r.w.r 8D at Rs. 4,60,63,388/- without segregating the investments from which exempt income was derived. Moreover, it is seen that the total expenses debited to the P&L account are only Rs. 2,48,11,639/- and thus the computation of disallowance of Rs. 4,60,63,38,863/- is devoid of any logic and clearly unreasonable. Thus it Printed from counselvise.com P a g e | 8 ITA NO. 5403/mum/2025. is clear that ld. AO has not considered the entire factual matrix of the case nor gone through the relevant accounts and the disallowance has been made without proper appreciation of facts in the light of the settled legal position. Accordingly, we are of the considered view, that the disallowance made by the ld. AO over and above the suo-moto disallowance made by the assessee is without any basis and deserves to be deleted. 6. In the result, the appeal of the revenue is dismissed. Order Pronounced in Open Court on 31.10.2025 Sd/- Sd/- (PAWAN SINGH) (RENU JAUHRI) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Place: Mumbai Date 31.10.2025 Anandi.Nambi/STENO आदेश की \u0015ितिलिप अ\u001aेिषत/Copy of the Order forwarded to : 1. अपीलाथ\b / The Appellant 2. थ\b / The Respondent. 3. आयकर आयु\u0011 / CIT 4. िवभागीय ितिनिध, आयकर अपीलीय अिधकरण DR, ITAT, Mumbai 5. गाड\u001b फाईल / Guard file. स ािपत ित //True Copy// आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण/ ITAT, Bench, Mumbai. Printed from counselvise.com "