DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 2 1 1 AHMEDABAD, AHMEDABAD V. HDB FINANCIAL SERVICES LIMITED, AHMEDABAD

ITA 1710/AHD/2025

AI Insights

The case involves the Deputy Commissioner of Income Tax, Circle 1(1)(1) as the appellant and HDB Financial Services Limited as the respondent. The dispute arose from the assessment year 2021-22, where the assessee declared an income of Rs.16,18,88,82,610, which was later assessed at Rs.23,84,69,91,098. The Revenue appealed against the CIT(A)'s decision which partly allowed the assessee's appeal, particularly concerning the deletion of a disallowance of Rs.17,93,76,718 under Section 14A of the Act. The Tribunal's decision was based on the absence of any exempt income earned by the assessee during the year, a fact supported by previous judgments and the legal interpretation of Section 14A post the amendment effective from April 1, 2022.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 789074 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: misc
• Appeal Filed On: 04-09-2025
• Other Referred Cases: PCIT vs. Adani Wilmar Limited, Williamson Financial Services Limited vs. CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AKHILENDRA PRATAP YADAV
• Assessee Lawyers: BIREN SHAH
• Keywords: Set aside; Retrospective amendment; Capital Gains; Earning of tax free income; Rule 8D
• Section: 143(3); 14A

Judgement Text

" THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “A” BENCH, AHMEDABAD BEFORE MS. SUCHITRA KAMBLE, JUDICIAL MEMBER AND SHRI NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER ITA No.1710/Ahd/2025 Assessment Year: 2021-22 Deputy Commissioner of Income Tax, Circle – 2(1)(1), 4th Floor, Aaykar Bhawan, Vejalpur, Ahmedabad – 380 015. (Gujarat) Vs. HDB Financial Services Limited, 2nd Floor, Radhika, Law Garden Road, Navrangpura, Ahmedabad – 380 009. (Gujarat). [PAN – AABCH 8761 M] (Appellant) (Respondent) Assessee by Shri Biren Shah, AR Revenue by Shri Akhilendra Pratap Yadav, CIT-DR Date of Hearing 04.11.2025 Date of Pronouncement 25.11.2025 O R D E R PER SHRI NARENDRA PRASAD SINHA, AM: This appeal is filed by the Revenue against the order of the National Faceless Appeal Centre (NFAC), Delhi (in short “the CIT(A)”) dated 10.07.2025 for the Assessment Year (A.Y.) 2021-22 in the proceeding under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’). 2. The brief facts of the case are that the assessee had filed its return of income for the A.Y. 2021-22 on 13.03.2022 declaring income of Rs.16,18,88,82,610/-. The case was selected for complete scrutiny under Printed from counselvise.com ITA No.1710/Ahd/2025 (Assessment Year: 2021-22) DCIT vs. HDB Financial Services Ltd. Page 2 of 5 CASS and the assessment was completed under Section 143(3) of the Act on 30.12.2022 at a total income of Rs.23,84,69,91,098/-. 3. Aggrieved with the order of the Assessing Officer, the assessee had filed an appeal before the First Appellate Authority which was decided by the Ld. CIT(A) vide the impugned order and the appeal of the assessee was partly allowed. 4. Now the Revenue is in appeal before us. The following grounds have been taken in this appeal: - “1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting disallowance of Rs.17,93,76,718/- under Section 14A of the Act without appreciating the fact that the AO was justified in applying Rule 8D(2)(ii) according to the facts of the case? 2. The appellant craves leave to amend or alter any ground or add a new ground, which may be necessary. 3. It is, therefore, prayed that the order of Ld. CIT(A) may be set aside and that of the Assessing Officer be restored?” 5. Shri Akhilendra Prasad Yadav, Ld. CIT-DR submitted that the Assessing Officer had made disallowance of Rs.17,93,76,718/- under Section 14A of the Act read with Rule 8D(2)(ii) of the Income Tax Rules. He explained that the assessee had made huge investment in securities being mutual funds and unquoted equity shares, the income from which did not form part of total income but no disallowance under Section 14A of the Act read with Rule 8D was made by the assessee. In the course of assessment, the Assessing Officer had worked out the disallowance of Rs.17,93,76,718/- in terms of Rule 8D of the Rules, being 1% of annual average of investments towards administrative expenses. The Ld. CIT- Printed from counselvise.com ITA No.1710/Ahd/2025 (Assessment Year: 2021-22) DCIT vs. HDB Financial Services Ltd. Page 3 of 5 DR submitted that the Ld. CIT(A) was not correct in deleting the addition as made by the Assessing Officer which was in accordance with the provisions of the Act and the Rules. 6. Per contra, Shri Biren Shah, Ld. AR of the assessee, submitted that the disallowance under Section 14A of the Act read with Rule 8D of the Rules could have made only when the assessee had earned any exempt income during the year. He explained that during the year, no exempt income was earned by the assessee and, therefore, the Ld. CIT(A) had correctly deleted the addition. The ld. AR further submitted that this issue was already covered by the decision of Co-ordinate Bench of this Tribunal in assessee’s own case in ITA No.1507/Ahd/2025 dated 16.10.2025. 7. We have considered the rival submissions. We find that this issue was already adjudicated in assessee’s own case in ITA No.1507/Ahd/2025. The relevant portion of the said order is reproduced below: - “7. We have considered the rival submissions. There is no dispute to the fact that no exempt income was earned by the assessee during the current year. The Ld. CIT(A) has given a finding that the income earned by the assessee from the investments was offered to tax as capital gains and this fact has not been controverted by the Revenue. The issue, as to whether any disallowance under Section 14A of the Act can be made in the absence of any exempt income, is no longer res integra. The Hon’ble Gujarat High Court had held in the case of PCIT vs. Adani Wilmar Limited, 133 taxmann.com 443 (Guj.) that no disallowance under Section 14A of the Act can be made if the assessee did not earn any exempt income during the year. The provision of Section 14A of the Act was amended and an Explanation was inserted w.e.f. 01.04.2022, as per which the disallowance under Section 14A of the Act can be made, even if no exempt income is earned during the year. The Hon’ble Guwahati High Court in the case of Williamson Financial Services Limited vs. CIT, 166 taxmann.com 607 (Gauhati) has held that the Explanation inserted to Section 14A of the Act vide Finance Act, 2022 w.e.f 01.04.2022 is prospective in nature and cannot be Printed from counselvise.com ITA No.1710/Ahd/2025 (Assessment Year: 2021-22) DCIT vs. HDB Financial Services Ltd. Page 4 of 5 presumed to have retrospective effect and applied to assessment years prior to 01.04.2022. Respectively following the judgement of Hon’ble Guwahati High Court, we are of the considered opinion that the Ld. CIT(A) had rightly deleted the addition made under Section 14A of the Act, as the assessee did not earn any exempt income during the year. Accordingly, the order of the Ld. CIT(A) on this issue is upheld. The ground taken by the Revenue is dismissed.” 8. The facts in the current year are found to be identical. In this year also, no exempt income was earned by the assessee and, therefore, following the binding judgement of Jurisdictional High Court, no disallowance under Section 14A of the Act could have been made. The Ld. CIT(A) had, therefore, rightly deleted the disallowance made by the Assessing Officer under Section 14A of the Act read with Rule 8D of the Income Tax Rules. Accordingly, the order of the Ld. CIT(A) is upheld and the ground raised by the Revenue is dismissed. 9. In the result, the appeal of the Revenue is dismissed. Order pronounced in the open Court on this 25th November, 2025. Sd/- Sd/- (SUCHITRA KAMBLE) (NARENDRA PRASAD SINHA) Judicial Member Accountant Member Ahmedabad, the 25th November, 2025 PBN/* Printed from counselvise.com ITA No.1710/Ahd/2025 (Assessment Year: 2021-22) DCIT vs. HDB Financial Services Ltd. Page 5 of 5 Copies to: (1) The appellant (2) The respondent (3) The PCIT (4) The CIT(A) (5) Departmental Representative (6) Guard File By order TRUE COPYE COPY Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad Printed from counselvise.com "