DICE DISTRICTS INDIA PRIVATE LIMITED ,MUMBAI V. ITO WARD 6(2)(1), MUMBAI

ITA 3506/MUM/2025

AI Insights

The case involves Dice Districts (India) Pvt. Ltd., which appealed against the order of the CIT(A) confirming the disallowance of Rs. 21,94,223 under Section 14A of the Income-tax Act, 1961. The Assessing Officer had initially made this disallowance, arguing that Section 14A applies even if no exempt income was earned, and invoked Rule 8D to compute the disallowance. The CIT(A) upheld this decision, referencing CBDT Circular No. 5/2014. However, the Tribunal, referencing judgments from the Bombay and Delhi High Courts, found that the disallowance under Section 14A without any exempt income is not applicable for the assessment year in question.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 712728 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2018-2019
• Other Referred Cases: Chem Investment Ltd. v. CIT, Ballarpur Industries Ltd. v. CIT
• Laws Referred To: Income-tax Act, 1961, Income-tax Rules, 1962
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRAVIN SALUNKHE
• Assessee Lawyers: DHARAN GANDHI
• Keywords: Set aside; Earning of tax free income; Rule 8D
• Section: 14A

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “H (SMC)” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI RAHUL CHAUDHARY (JUDICIAL MEMBER) ITA No. 3506/MUM/2025 Assessment Year: 2018-19 Dice Districts (India) Pvt. Ltd., 307-308, Midas, Sahar Plaza, Andheri East, Mumbai-400069. Vs. ITO Ward 6(2)(1), Aayakar Bhavan, Mumbai-400020. PAN NO. AAECD 2751 N Appellant Respondent Assessee by : Mr. Dharan Gandhi Revenue by : Mr. Pravin Salunkhe, Sr. DR Date of Hearing : 22/07/2025 Date of pronouncement : 30/07/2025 ORDER PER OM PRAKASH KANT, AM This appeal has been preferred by the assessee against order dated 27.03.2025 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2018-19, raising following grounds: 1 The Ld. CIT(A) erred in confirming the action of the Ld Assessing Officer in making disallowance of Rs.21,94,223/- u/s. 14A of the Act. Printed from counselvise.com 2 The Ld. AO has erred in levying of the Act. 3 The Ld. AO has erred in initiating penalty proceedings under 2. Briefly stated, the facts of the case are that the assessee is engaged in the activity of making investments in group companies. For the relevant assessment year, the assessee filed its return of income on 10.10.2018, declaring a total loss of return was selected for scrutiny, and statutory notices under the provisions of the Income \"the Act\") were issued and duly complied with. In the course of the assessment proceedings, the Assessing Officer noted that the assessee had made investments aggregating to equity shares of various private limited companies. However, no disallowance under Section 14A of the Act was made by the assessee on the ground that no exempt income had been earned during the year under consideration. The Assessing Officer, rejecting the said contention and held that the provisions of Section 14A of the Act are applicable even in cases where no exempt income is earned. Invoking Rule 8D of the Income (hereinafter referred to as proceeded to compute and disallow a sum of assessee carried the matter in appeal. The learned [CIT(A) upheld the disallowance made by the Assessing Officer, placing reliance on CBDT Circular No. 5/2014, which, according to the CIT(A), Dice Districts (India) Pvt. Ltd. ITA No. 3506/MUM/2025 2 The Ld. AO has erred in levying interest u/s 234B/ 234C 3 The Ld. AO has erred in initiating penalty under the Act riefly stated, the facts of the case are that the assessee is engaged in the activity of making investments in group companies. assessment year, the assessee filed its return of income on 10.10.2018, declaring a total loss of ₹19,29,974/ return was selected for scrutiny, and statutory notices under the provisions of the Income-tax Act, 1961 (hereinafter referred to as ) were issued and duly complied with. In the course of the assessment proceedings, the Assessing Officer noted that the assessee had made investments aggregating to ₹59,96,61,550/ equity shares of various private limited companies. However, no owance under Section 14A of the Act was made by the assessee on the ground that no exempt income had been earned during the year under consideration. The Assessing Officer, rejecting the said contention and held that the provisions of Section t are applicable even in cases where no exempt income is earned. Invoking Rule 8D of the Income-tax Rules, 1962 (hereinafter referred to as \"the Rules\"), the Assessing Officer proceeded to compute and disallow a sum of ₹91,05,193/ e matter in appeal. The learned [CIT(A) upheld the disallowance made by the Assessing Officer, placing reliance on CBDT Circular No. 5/2014, which, according to the CIT(A), Dice Districts (India) Pvt. Ltd. 2 ITA No. 3506/MUM/2025 interest u/s 234B/ 234C 3 The Ld. AO has erred in initiating penalty riefly stated, the facts of the case are that the assessee is engaged in the activity of making investments in group companies. assessment year, the assessee filed its return of 19,29,974/-. The return was selected for scrutiny, and statutory notices under the tax Act, 1961 (hereinafter referred to as ) were issued and duly complied with. In the course of the assessment proceedings, the Assessing Officer noted that the 59,96,61,550/- in equity shares of various private limited companies. However, no owance under Section 14A of the Act was made by the assessee on the ground that no exempt income had been earned during the year under consideration. The Assessing Officer, rejecting the said contention and held that the provisions of Section t are applicable even in cases where no exempt income tax Rules, 1962 ), the Assessing Officer 91,05,193/-. The e matter in appeal. The learned [CIT(A) upheld the disallowance made by the Assessing Officer, placing reliance on CBDT Circular No. 5/2014, which, according to the CIT(A), Printed from counselvise.com supported the view that disallowance under Section 14A can be made irrespective of relevant year. 3. We have heard the rival submissions and carefully perused the material available on record. Before us, learned counsel appearing on behalf of the assessee submitted that no exempt income was earned by the assessee during the relevant assessment year, and therefore, the invocation of Section 14A of the Act was legally unsustainable. In support of this proposition, reliance was placed on the judgment of the Hon’ble Bombay High Court in Industries Ltd. (ITA No. 51 of 2016) and the judgment of the Hon Delhi High Court in Chem Investment Ltd. v. CIT (Del)]. Per contra, the ld DR referred to Explanation below the section 14A of the Act to support that section 14A is applica even in no exempted income Said explanation is reproduced as under: “[Explanation. clarified that notwithstanding anything to the contrary contained in this Act, the provisions of this section shall apply and shall be deemed to h case where the income, not forming part of the total income under this Act, has not accrued or arisen or has not been received during the previous year relevant to an assessment year and the expenditure has been incurred Dice Districts (India) Pvt. Ltd. ITA No. 3506/MUM/2025 supported the view that disallowance under Section 14A can be made irrespective of whether exempt income is earned in the We have heard the rival submissions and carefully perused the material available on record. Before us, learned counsel appearing on behalf of the assessee submitted that no exempt income was earned by the assessee during the relevant assessment year, and herefore, the invocation of Section 14A of the Act was legally unsustainable. In support of this proposition, reliance was placed on the judgment of the Hon’ble Bombay High Court in (ITA No. 51 of 2016) and the judgment of the Hon Chem Investment Ltd. v. CIT [(2015) 378 ITR 33 (Del)]. Per contra, the ld DR referred to Explanation below the section 14A of the Act to support that section 14A is applica even in no exempted income, though it was inserted w.e Said explanation is reproduced as under: “[Explanation.-For the removal of doubts, it is hereby clarified that notwithstanding anything to the contrary contained in this Act, the provisions of this section shall apply and shall be deemed to have always applied in a case where the income, not forming part of the total income under this Act, has not accrued or arisen or has not been received during the previous year relevant to an assessment year and the expenditure has been incurred Dice Districts (India) Pvt. Ltd. 3 ITA No. 3506/MUM/2025 supported the view that disallowance under Section 14A can be whether exempt income is earned in the We have heard the rival submissions and carefully perused the material available on record. Before us, learned counsel appearing on behalf of the assessee submitted that no exempt income was earned by the assessee during the relevant assessment year, and herefore, the invocation of Section 14A of the Act was legally unsustainable. In support of this proposition, reliance was placed on the judgment of the Hon’ble Bombay High Court in Ballarpur (ITA No. 51 of 2016) and the judgment of the Hon’ble [(2015) 378 ITR 33 (Del)]. Per contra, the ld DR referred to Explanation below the section 14A of the Act to support that section 14A is application , though it was inserted w.e.f. 1.4.2022. For the removal of doubts, it is hereby clarified that notwithstanding anything to the contrary contained in this Act, the provisions of this section shall ave always applied in a case where the income, not forming part of the total income under this Act, has not accrued or arisen or has not been received during the previous year relevant to an assessment year and the expenditure has been incurred Printed from counselvise.com during the said previous year in relation to such income not forming part of the total income.]” 3.1 Learned counsel also drew our attention to the judgment of the Hon’ble Delhi High Court in 141 taxmann.com 289 (Del)], wherein examining the scope of the Explanation inserted by the Finance Act, 2022 to Section 14A of the Act, categorically held that the said amendment is prospective in nature and would not apply to assessment years preceding A.Y. 2023 decision is reproduced as under: “8. Consequently, this Court is of the view that the amendment of section 14A, which is \"for removal of doubts\" cannot be presumed to be retrospective even where such language is used, if it alter law as it earlier stood.” 3.2 In view of the foregoing and respectfully following the judgment of the Hon’ble Delhi High Court in (supra), we are of the considered view that for the assessment year under consideration— disallowance under Section 14A of the Act is warranted in the absence of any exempt income earned by the assessee. Accordingl the order passed by the learned CIT(A) is set aside and the disallowance made by the Assessing Officer under Section 14A read Dice Districts (India) Pvt. Ltd. ITA No. 3506/MUM/2025 said previous year in relation to such income not forming part of the total income.]” 3.1 Learned counsel also drew our attention to the judgment of the Hon’ble Delhi High Court in Era Infrastructure (India) Ltd. 141 taxmann.com 289 (Del)], wherein the Hon’ble Court, while examining the scope of the Explanation inserted by the Finance Act, 2022 to Section 14A of the Act, categorically held that the said amendment is prospective in nature and would not apply to assessment years preceding A.Y. 2023–24. The relevant part of the decision is reproduced as under: “8. Consequently, this Court is of the view that the amendment of section 14A, which is \"for removal of doubts\" cannot be presumed to be retrospective even where such language is used, if it alters or changes the law as it earlier stood.” In view of the foregoing and respectfully following the judgment of the Hon’ble Delhi High Court in Era Infrastructure (India) Ltd. (supra), we are of the considered view that for the assessment year —which admittedly precedes A.Y. 2023 disallowance under Section 14A of the Act is warranted in the absence of any exempt income earned by the assessee. Accordingl the order passed by the learned CIT(A) is set aside and the disallowance made by the Assessing Officer under Section 14A read Dice Districts (India) Pvt. Ltd. 4 ITA No. 3506/MUM/2025 said previous year in relation to such income 3.1 Learned counsel also drew our attention to the judgment of the Era Infrastructure (India) Ltd. [(2022) the Hon’ble Court, while examining the scope of the Explanation inserted by the Finance Act, 2022 to Section 14A of the Act, categorically held that the said amendment is prospective in nature and would not apply to relevant part of the “8. Consequently, this Court is of the view that the amendment of section 14A, which is \"for removal of doubts\" cannot be presumed to be retrospective even s or changes the In view of the foregoing and respectfully following the judgment Era Infrastructure (India) Ltd. (supra), we are of the considered view that for the assessment year which admittedly precedes A.Y. 2023–24—no disallowance under Section 14A of the Act is warranted in the absence of any exempt income earned by the assessee. Accordingly, the order passed by the learned CIT(A) is set aside and the disallowance made by the Assessing Officer under Section 14A read Printed from counselvise.com with Rule 8D is directed to be deleted. by the assessee are accordingly allowed. 4. In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on Sd/ (RAHUL CHAUDHARY JUDICIAL MEMBER Mumbai; Dated: 30/07/2025 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// Dice Districts (India) Pvt. Ltd. ITA No. 3506/MUM/2025 with Rule 8D is directed to be deleted. The grounds of appeal raised accordingly allowed. the appeal of the assessee is allowed. nounced in the open Court on 30/07/2025. Sd/- Sd/ (RAHUL CHAUDHARY) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT MEMBER Copy of the Order forwarded to : BY ORDER, (Assistant Registrar) ITAT, Mumbai Dice Districts (India) Pvt. Ltd. 5 ITA No. 3506/MUM/2025 The grounds of appeal raised the appeal of the assessee is allowed. /07/2025. Sd/- OM PRAKASH KANT) ACCOUNTANT MEMBER BY ORDER, (Assistant Registrar) ITAT, Mumbai Printed from counselvise.com "