HPL MERCANTILE PVT LTD,DELHI V. ITO WARD 11(1), DELHI

ITA 5759/DEL/2025

AI Insights

The case involves HPL Mercantile Pvt. Ltd., which appealed against the disallowance of Rs.36,84,834 related to exempt income from dividends amounting to Rs.23,67,926 for the assessment year 2017-18. The disallowance was initially made by the Income Tax Officer under section 143(3) of the Income-tax Act, 1961, and was upheld by the Commissioner of Income Tax (Appeals). The primary legal contention by the assessee was the lack of specific satisfaction recorded by the tax authorities and the claim that no expenditure was incurred to earn the exempt income. However, the Tribunal found no merit in these arguments, citing relevant case law that supports the disallowance of administrative expenses related to exempt income.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 786014 (ITAT-DELHI)
• Duration Of Justice: 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-10-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2017-2018
• Appeal Filed On: 18-09-2025
• Other Referred Cases: Maxopp Investment Ltd. Vs. CIT (2018) 402 ITR 640 (SC), Joint Investment Pvt. Ltd. Vs. CIT (2015) 372 ITR 694 (Del)
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANOJ KUMAR
• Assessee Lawyers: MANISH KUMAR
• Keywords: Earning of tax free income; Rule 8D
• Section: 143(3); 14A

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: “SMC” NEW DELHI BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER ITA No.5759/Del/2025 Assessment Year: 2017-18 HPL Mercantile Pvt. Ltd., 803, Vishal Bhawan, 95 Nehru Place, New Delhi Vs. Income Tax Officer, Ward-11(1), New Delhi PAN: AAACH0109G (Appellant) (Respondent) ORDER This assessee’s appeal for assessment year 2017-18, arises against the Commissioner of Income Tax (Appeals)/Addl./JCIT(A)- 1, Nashik’s DIN and order no. ITBA/APL/S/250/2025- 26/1078724561(1), dated 21.07.2025 involving proceedings under section 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’). Heard both the parties. Case file perused. 2. Learned counsel vehemently submits during the course of hearing that both the learned lower authorities have erred in law and on facts in invoking section 14A r.w. rule 8D(2)(iii) Assessee by Sh. Manish Kumar, Adv. Department by Sh. Manoj Kumar, Sr. DR Date of hearing 29.10.2025 Date of pronouncement 29.10.2025 Printed from counselvise.com ITA No.5759/Del/2025 2 | P a g e disallowances of Rs.36,84,834/- relating to the assessee’s exempt income from dividends amounting to Rs.23,67,926/-; in assessment order dated 20.12.2019 as upheld in the lower appellate discussion. 3. Learned counsel’s first and foremost argument in this factual backdrop is that both the lower authorities have nowhere recorded any specific satisfaction qua the assessee’s books of account which is mandatory in nature under section 14A(2) of the Act. He could hardly dispute that the assessee had not declared any expenditure in its books of account so as to justify the same before the learned lower authorities. The assessee’s instant first and foremost legal argument is rejected therefore. 4. Learned counsel’s second legal argument is that the assessee has not incurred any expenditure for the purposes of deriving the impugned exempt income; and, therefore, the administrative expenditure amount disallowed herein is not sustainable in law. This tribunal finds no merit in the assessee’s instant second argument as well in light of Maxopp Investment Ltd. Vs. CIT (2018) 402 ITR 640 (SC) that the impugned computation comes into play Printed from counselvise.com ITA No.5759/Del/2025 3 | P a g e the moment an assessee declares it’s exempt income. Rejected accordingly. 5. Lastly comes the third important aspect of quantification of the impugned disallowance itself. The Revenue could hardly dispute that the case law Joint Investment Pvt. Ltd. Vs. CIT (2015) 372 ITR 694 (Del) has already settled the issue in the assessee’s favour that the impugned disallowance could not exceed the amount of exempt income itself. That being the case, I hereby direct the learned Assessing Officer to restrict the impugned disallowance to the extent of the assessee’s exempt income of Rs.23,67,926/- only. Necessary computation shall follow as per law. No other ground or argument has been pressed before us. 6. This assessee’s appeal is partly allowed. Order pronounced in the open court on 29th October, 2025 Sd/- (SATBEER SINGH GODARA) JUDICIAL MEMBER Dated: 29th October, 2025. RK/- Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi Printed from counselvise.com "