INCOME TAX OFFICER - 3(1)(1), MUMBAI V. AKSHAYA HOLDING PVT. LTD., MUMBAI

ITA 3369/MUM/2025

AI Insights

The case involves two cross appeals by Akshaya Holdings Pvt Ltd and the Income Tax Officer, Ward 3(1)(1), Mumbai, against the order of the Learned Commissioner of Income Tax (Ld. CIT(A)). The primary contention was regarding the disallowance made under section 14A read with rule 8D of the Income Tax Act, 1961, amounting to Rs. 1,22,89,690, which the assessee challenged. The revenue, on the other hand, contested the deletion of enhancement of book profit computed under section 115JB by an amount of Rs. 4,57,00,370, which was related to the same disallowance under section 14A. The Tribunal's decision was influenced by precedents that disallowances under section 14A should not exceed the exempt income and that such disallowances should not be added to the book profit under section 115JB.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 780760 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-10-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2013-2014
• Appeal Filed On: 13-05-2025
• Other Referred Cases: DCIT Vs Welspun Steel Ltd, ACIT V/s. Vireet Investment Pvt. Ltd., Cam investment limited vs. CIT, CIT Vs Bhushan Steel Ltd
• Laws Referred To: Income Tax Act, Income Tax Rules 1962
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PRAVIN SALUNKHE
• Assessee Lawyers: PRATEEK JAIN
• Keywords: Earning of tax free income; Rule 8D
• Section: 14A; 115JB

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL, ‘H (SMC)’ BENCH MUMBAI BEFORE: SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA No. 3117/MUM/2025(AY: 2013–14) Akshaya Holdings Pvt ltd. C-9, Elder House, Dalia Ind Estate, Andheri (W) off Veera Desai Road, Mumbai- 400053 Vs Income Tax officer Ward 3(1)(1), Mumbai, Aayakar Bhawan,Mumbai- 400020 PAN: AABCA 0224 E (Appellant) .. (Respondent) ITA No. 3369/MUM/2025(AY: 2013–14) Income Tax officer Ward 3(1)(1), Aayakar Bhawan, 6th Floor, Room No. 666, M.K. Road, Churchgate, Mumbai- 400020 Vs. Akshaya Holdings Pvt ltd. C-9, Elder House, Dalia IND. Estate, Andheri (W) off Veera Desai Road, Mumbai- 400053 PAN: AABCA 0224 E (Appellant) .. (Respondent) Assessee by Shri. Prateek Jain CA Revenue by Shri. Pravin Salunkhe, Sr. DR Date of Hearing 07/10/2025 Date of Pronouncement 08/10/2025 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. These two cross appeal by the assessee as well as revenue are directed against the order of Learned Commissioner of Income Tax (Ld. CIT(A)) dated 30.03.2025. The assessee in its appeal has raised following ground of appeal:- “The following grounds of appeal are without prejudice to each other:- 1. On the facts and circumstances of the appellant's case in law the Ld. CIT(A) erred in confirming the action of Ld. AO in making disallowance u/s 14A r.w.r 8D of Rs. 1,22,89,690/- as per the grounds stated in the order or otherwise. 2. The appellant craves leaves to alter, amend, withdraw or substitute any ground or grounds of appeal on or before the hearing. Printed from counselvise.com ITA nos. 3117 & 3369/MUM/2025 Akshaya Holdings Pvt Ltd. 2 The appellant prays Your Honour to direct the Learned Assessing Officer to delete the additions/disallowance made in the impugned order.” 2. Revenue in its cross-objection has raised following grounds of appeal. “i) \"On the facts and circumstances of the case and law, whether the Ld. Addl./JCIT (A) was justified in deleting the enhancement of book profit computed u/s 115JB by an amount of Rs. 4,57,00,370/-, being disallowance made u/s 14A r.w.Rule 8D of the I.T. Act, 1961, without appreciating the facts that Explanation (1) of clause (f) specifically provides for such adjustment being disallowance of expenditure related to exempt income.\" 3. Rival submissions of both the parties have been heard and record perused. The learned Authorized Representative (Ld.AR) of the assessee submits that during the relevant financial year the assessee earned dividend income of Rs. 23,79,600/-only. The assessee received such exempt income in the form of dividend from investment in Mutual Funds. Such dividend is exempt under section 10(35) of Income Tax Act. During the assessment proceedings the assessing officer invoked the provisions of Rule 8D of Income Tax Rules 1962 and computed disallowance under section 14A of Rs. 4.57 crore, such disallowances consist of disallowances under Rule 80D(i)of Rs. 4.54 crore and disallowances in Rule 8D(iii) of Rs. 2.39 Lakhs. The assessee disallowed interest paid of Rs. 3.34 crore in its computation of income. The assessing officer allowed set off of such interest disallowances and worked out the figure of disallowance in 14A of Rs. 1.22 crore and also added to the book profit under section 115JB. On appeal the Ld. CIT(A) upheld the action of assessing officer on disallowances of 14A, however, allowed relief for making adjustment of such addition in book profit under section 115JB. Now, the assessee has challenged the order of Ld. CIT(A) in confirming the disallowances under section 14A. On the other hand, revenue has challenged the action of Ld. CIT(A) in allowing relief for deleting such addition to book profit under section 115JB. The ld.AR of the Printed from counselvise.com ITA nos. 3117 & 3369/MUM/2025 Akshaya Holdings Pvt Ltd. 3 assessee further submits that in the series of decision various benches of Tribunal as well as Higher Courts have taken a consistent view that disallowance under section 14A cannot be exceed to the figure of exempt income. Thus, the disallowance under section 14A may be restricted to the exemption income. To support his submissions he relied on the decision of Mumbai Tribunal in DCIT Vs Welspun Steel Ltd (2024) 167 taxmann.com 720(Mum). Against the grounds of appeal in revenue appeal the Ld.AR of the assessee submits that ground of the appeal as raised by the revenue is covered against revenue by decision of special Bench of Delhi Tribunal in ACIT V/s. Vireet Investment Pvt. Ltd. reported in [2017] 82 taxmann.com 415. 4. On the other hand, Learned Senior Departmental Representative (Ld. Sr. DR) for the revenue supported the order of assessing officer. The ld. Sr. DR submits that assessing officer made disallowances under section 14A by applying the formula prescribed in Rule 80D. So far as revenue appeal is concerned, he also supported the order of assessing officer. 5. We have considered the rival submission of both the parties and have gone through the orders to lower authorities carefully. We have also deliberated on various case laws relied by lower authorities as well as by ld. AR of the assessee. We find that very limited controversy is involved in both the appeals. So far as appeal of assessee is concerned, we find that exempt income is only of Rs. 23,79,600/-. The assessing officer made disallowance of Rs. 4.57 crore by invoking the procedure of Rule 8D. We find that settled position under law is that disallowance under section 14A cannot exceed the figure of exempt income Printed from counselvise.com ITA nos. 3117 & 3369/MUM/2025 Akshaya Holdings Pvt Ltd. 4 as has been held by Delhi High Court in Cam investment limited vs. CIT (2015) 61 taxmann.com 118 (Delhi). Similar view was taken by coordinate bench of Mumbai Tribunal in DCIT Vs Welspun Steel Ltd (2024) 167 taxmann.com 720(Mum). Thus, the assessing officer is directed to restrict the disallowances under section 14A of the extent of exempt income. In the result, the ground of appeal raised by the assessee is partly allowed. In the result, the appeal of the assessee is partly allowed. 6. So far as grievance raised by revenue in their cross appeal we find that such ground of appeal is squarely covered by the special bench in case of ACIT V/s. Vireet Investment Pvt. Ltd. (Supra), wherein it was held that disallowances made under section 14A cannot be applied while computing book profit under clause (f) of explanation (1) to section 115 JB. Similarly view was taken by coordinate bench of Mumbai DCIT vs Welspun Steel Ltd. [2024] 167 taxmann.com 720 (Mumbai-Trib.). The ld CIT(A) while allowing relief to the assessee held that Delhi High Court in CIT Vs Bhushan Steel Ltd (2013) 66 Taxman 117 (Delhi) held that the expense disallowed under section 14A cannot be added to book profit under section 115JB. Thus, we affirm the order of ld CIT(A). I the result, the ground of appeal raise by the revenue is dismissed. 7. In the result the appeal of assessee is allowed and appeal of revenue is dismissed. Order pronounced on 08/10/2025 in open court. Sd/- (GIRISH AGRAWAL) Sd/- (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 08/10/2025 Disha Raut, Steno Printed from counselvise.com ITA nos. 3117 & 3369/MUM/2025 Akshaya Holdings Pvt Ltd. 5 Copy of the Order forwarded to: BY ORDER, (Asstt. Registrar) ITAT, Mumbai 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. Printed from counselvise.com "