DCIT-1(2)(1), MUMBAI., MUMBAI V. INDIAN CLEARING CORP ORATION LIMITED, MUMBAI

ITA 873/MUM/2025

AI Insights

The case involves the Income Tax Department (revenue) appealing against the order of the ld. CIT(A) which deleted the addition made by the AO under Section 14A read with Rule 8D of the Income Tax Act. The AO had increased the disallowance amount to Rs. 2,00,28,069, claiming the assessee's initial disallowance of Rs. 19,49,000 was unsatisfactory. The CIT(A) found the AO's reasoning inadequate and deleted the addition. The tribunal, referencing decisions from the Hon'ble High Court of Delhi and the Supreme Court, upheld the CIT(A)'s decision, emphasizing that the AO must record his non-satisfaction based on objective criteria and the accounts of the assessee before applying Rule 8D.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 772331 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-08-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Assessment Year: 2014-2015
• Other Referred Cases: Indiabulls Financial Services Ltd. Vs DCIT [2017] 395 ITR 242 (Delhi), PCIT vs. M/s. Bombay Stock Exchange Ltd. in Income Tax Appeal No. 1017 of 2017, order dated 15/10/2019, Maxopp Investment Ltd. v. Commissioner of Income Tax
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIRABHADRA S. MAHAJAN; DR
• Assessee Lawyers: NIRAJ D. SHETH; AR
• Keywords: Question of law; Earning of tax free income; Rule 8D
• Section: 14A

Judgement Text

" | आयकर अपीलीय अिधकरण ा यपीठ, मुंबई | IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, MUMBAI BEFORE SHRI NARENDRA KUMAR BILLAIYA, HON’BLE ACCOUNTANT MEMBER & SHRI SANDEEP SINGH KARHAIL, HON’BLE JUDICIAL MEMBER I.T.A. No. 873/Mum/2025 Assessment Year: 2014-15 DCIT -1(2)(1), Mumbai Vs India Clearing Corporation Limited 25th Floor, P.J. Towers Dalal Street Fort Mumbai - 400001 [PAN: AABCI7140K] अपीला थ\u0016/ (Appellant) \u0017\u0018 यथ\u0016/ (Respondent) Assessee by : Shri Niraj D. Sheth, A/R Revenue by : Mr. Virabhadra S. Mahajan, Sr. D/R सुनवाई की तारीख/Date of Hearing : 20/08/2025 घोषणा की तारीख /Date of Pronouncement : 25/08/2025 आदेश/O R D E R PER NARENDRA KUMAR BILLAIYA, AM: This appeal by the revenue is preferred against the order dated 19/12/2024 of the NFAC, Delhi [hereinafter the “ld. CIT(A)”] pertaining to AY 2014-15. 2. The solitary grievance of the revenue is that the ld. CIT(A) erred in deleting the addition of Rs. 2,00,28,069/- made u/s 14A r.w.r. 8D, by the AO. 3. Briefly stated the facts of the case are that the assessee filed its return of income on 27/11/2014 declaring total income at Rs. 42,75,21,800/-. The return was selected for scrutiny assessment under CASS and accordingly statutory notices were issued and served upon the assessee. During the course of the scrutiny assessment proceedings, the AO noticed that the assessee has earned Rs. 32,96,91,275/- of exempt income from bonds and mutual funds. The assessee has made a Printed from counselvise.com I.T.A. No. 873/Mum/2025 2 disallowance of Rs. 19,49,000/- u/s 14A of the Act for earning exempt income. The AO simply observed that the claim made by the assessee is not satisfactory and invoking provisions of Section 14A r.w.r. 8D, the AO computed the disallowance at Rs. 2,00,28,069/-. The assessee challenged the addition before the ld. CIT(A) and reiterated that the suo moto disallowance made by it would suffice the disallowance u/s 14A of the Act. 4. After considering the facts and the submissions, the ld. CIT(A) was convinced that the AO has merely stated that the claim made by the assessee is not satisfactory without providing detailed reasoning or objective criteria for his dissatisfaction. Drawing support from several judicial decisions, the ld. CIT(A) directed the AO to delete the disallowance of Rs. 2,00,28,069/-. 5. Before us, the ld. D/R strongly relied upon the assessment order and the ld. Counsel for the assessee reiterated what has been stated before the lower authorities. The ld. D/R supported his submissions by drawing support from the decisions of the Hon’ble High Court of Delhi in the case of Indiabulls Financial Services Ltd. Vs DCIT [2017] 395 ITR 242 (Delhi). 6. We have carefully considered the orders of the authorities below. It is true that the assessee has suo moto disallowed Rs. 19.49 Lakhs and has computed the disallowance as under:- Printed from counselvise.com I.T.A. No. 873/Mum/2025 3 Printed from counselvise.com I.T.A. No. 873/Mum/2025 4 Printed from counselvise.com I.T.A. No. 873/Mum/2025 5 7. A perusal of the assessment order shows that nowhere the AO has discussed any dissatisfaction insofar as the aforementioned computation of suo moto disallowance made by the assessee is concerned. The Hon’ble Jurisdictional High Court of Bombay in the case of PCIT vs. M/s. Bombay Stock Exchange Ltd. in Income Tax Appeal No. 1017 of 2017, order dated 15/10/2019, was seized with the following question of law:- “2. The Revenue has urged the following question of law for our consideration: “Whether on the facts and circumstances of the case and in law, the Tribunal has erred in holding that AO has not recorded satisfaction u/s 14A(2) despite the AO discussing the assessee’s method in para 5.3 before not accepting the same?” Printed from counselvise.com I.T.A. No. 873/Mum/2025 6 7.1. And interalia answered as under:- “11. Non-satisfaction with the disallowance offered by the assessee has to be arrived at on the basis of the accounts submitted by the assessee. In this case, the Assessing Officer had not carried out the aforesaid exercise but rejected the disallowance claimed by the assessee only on the ground that it was not in accordance with Rule 8D of the Rules. The application of Rule 8D of the Rules would only arise once the Assessing Officer is not satisfied on an objective criteria in the context of its accounts, that suo motu disallowance claimed by the assessee is not proper. 12. In fact, the Supreme Court in the case of Maxopp Investment Ltd. v. Commissioner of Income Tax' while upholding the view of the Delhi High Court has held that the Assessing Officer needs to record his non-satisfaction having regard to the sou motu disallowances claimed by the assessee in the context of its accounts. It is only thereafter, the occasion to apply rule 8D of the Rules for apportionment of expenses can arise. 13. In the present facts, the Tribunal has correctly come to the conclusion that non-satisfaction as recorded by the Assessing Officer for rejecting the suo moto disallowances claimed by the assessee is not done as required under sections 14A(2) of the Act. On facts, the view taken by the Tribunal is a possible view and calls for no interference.” 8. Respectfully following the binding decisions of the Hon’ble Jurisdictional High Court (supra), we decline to interfere with the findings of the ld. CIT(A). The effective ground/s raised by the revenue are dismissed. 9. In the result, appeal of the revenue is dismissed. Order pronounced in the Court on August, 2025 at Mumbai. Sd/- Sd/- (SANDEEP SINGH KARHAIL) (NARENDRA KUMAR BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated 25/08/2025 *SC SrPs *SC SrPs *SC SrPs *SC SrPs Printed from counselvise.com I.T.A. No. 873/Mum/2025 7 आदेश की \u0015ितिलिप अ\u001aेिषत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. \u0015 थ / The Respondent 3. संबंिधत आयकर आयु\" / Concerned Pr. CIT 4. आयकर आयु\" ) अपील ( / The CIT(A)- 5. िवभागीय \u0015ितिनिध ,आयकर अपीलीय अिधकरण, मुंबई /DR,ITAT, Mumbai, 6. गाड& फाई/ Guard file. आदेशानुसार/ BY ORDER TRUE COPY Assistant Registrar आयकर अपीलीय अिधकरण ITAT, Mumbai Printed from counselvise.com "