INDORIGIN ELECTRIC LTD,WADALA MUMBAI V. ACIT CENTRAL CIRCLE 4 4 MUMBAI , MUMBAI

ITA 4682/MUM/2025

AI Insights

M/s. Indorigin Electric Ltd. appealed against the order of the Additional/Joint Commissioner of Income Tax (Appeals)-1, Visakhapatnam, which upheld the disallowance made under section 14A read with Rule 8D of the Income Tax Rules, 1962, and the computation of long-term capital gains. The Tribunal found that the disallowance under section 14A should not exceed the exempt income, following the precedent set by the Hon'ble Jurisdictional High Court. Regarding the long-term capital gains, the Tribunal noted that the Assessing Officer did not consider the assessee's submissions and evidence, leading to a decision to remand the issue back to the Assessing Officer for a fresh examination.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 835262 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2026
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 23-07-2025
• Other Referred Cases: Nirved Traders Pvt. Ltd. vs. DCIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Matter Remanded
• Court: TRIBUNAL
• Department Lawyers: VIRABHADRA MAHAJAN
• Assessee Lawyers: KALPESH TURALKAR
• Keywords: Set aside; Capital asset; Cost of acquisition; Capital expenditure; Capital Gains; Earning of tax free income; Rule 8D
• Section: 143(3); 142(1); 14A

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, MUMBAI BEFORE SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER ITA No.4682/MUM/2025 (Assessment Year :2014-15) M/s. Indorigin Electric Ltd. Rectifier House, 570, Naigum Cross Road, Wadala, Mumbai- 400 031. PAN: AAACI1040B ............... Appellant v/s ACIT, Central Circle-4(4), Mumbai R. No. 424, 4th Floor, Kautilya Bhavan, C-41 to C-43, G Block, Bandra Kurla Complex, Bandra (East), Mumbai- 400 051 ……………… Respondent Assessee by : Shri Kalpesh Turalkar, Adv. Revenue by :Shri Virabhadra Mahajan, Sr. DR Date of Hearing – 02/02/2026 Date of Order - 10/02/2026 O R D E R PER SANDEEP SINGH KARHAIL, J.M. The assessee has filed the present appeal against the impugned order dated 30/05/2025, passed under section 250 of the Income Tax Act, 1961 (“the Act”) by the learned Additional/Joint Commissioner of Income Tax (Appeals)-1, Visakhapatnam, [“learned Addl./Joint CIT(A)”], for the assessment year 2014-15. 2. Ground No.1, raised in the assessee’s appeal, pertains to the disallowance under section 14A of the Act. Printed from counselvise.com ITA No. 4682/Mum/2025 (A.Y. 2014/15) 2 3. The brief facts of the case are that the assessee is engaged in the manufacturing and trading of industrial and electrical products. For the year under consideration, the assessee filed its return of income on 30/11/2014, declaring a total income of INR 1,78,59,320. The return filed by the assessee was selected for scrutiny, and statutory notices under section 143(2) and section 142(1) of the Act were issued and served on the assessee. During the year under consideration, the assessee received dividend income of INR 1,26,250 and claimed the same as exempt under section 10(34) of the Act. During the assessment proceedings, upon perusal of the balance-sheet, it was observed that the assessee has made long-term investments of INR 2,89,49,850. Further, the assessee has claimed expenses towards salary, rent, rates and taxes, printing and stationery, communication expenses and many other expenses, along with expenses towards interest of INR 5,10,52,766. Accordingly, the assessee was asked to justify why the disallowance under section 14A, read with Rule 8D of the Rules, should not be made. In response, the assessee furnished the working of the disallowance under section 14A read with Rule 8D of the Rules to the tune of INR 1,74,442. 4. The AO, vide order dated 27/12/2016 passed under section 143(3) of the Act, disagreed with the submissions of the assessee and computed the disallowance of INR 16,74,868 under section 14A read with Rule 8D of the Rules. The learned Addl./Joint CIT(A), vide impugned order, upheld the disallowance made by the AO. Being aggrieved, the assessee is in appeal before us. Printed from counselvise.com ITA No. 4682/Mum/2025 (A.Y. 2014/15) 3 5. Having considered the submissions of both sides and perused the material available on record, we find that there is no dispute regarding the fact that during the year under consideration, the assessee earned dividend income of INR 1,26,250, which was claimed as exempt under section 10(34) of the Act. The Hon’ble Jurisdictional High Court in the case of Nirved Traders Pvt. Ltd. vs. DCIT, in ITA NO.149 of 2017, vide judgment dated 23/04/2019, has held that disallowance under section 14A of the Act cannot be more than the exempt income. Thus, respectfully following the decision of the Hon’ble Jurisdictional High Court cited supra, we direct the AO to restrict the disallowance made under section 14A of the Act to the exempt income earned by the assessee. Accordingly, Ground No.1 raised in assessee’s appeal is allowed for statistical purposes. 6. Ground No.2, raised in assessee’s appeal, pertains to the computation of long-term capital gains. 7. We have considered the submissions of both sides and perused the material available on record. During the assessment proceedings, the assessee was asked to justify the long-term capital loss of INR 13,79,942 and submitted bills/invoices for the claim of the cost of acquisition. In response, the assessee furnished the details of the cost of acquisition and improvement along with documentary evidence. The assessee further submitted that the long-term capital loss is on account of the sale of land purchased from the Gujarat Industrial Development Corporation on 13/03/2008 for INR 99,83,423, which was sold later to M/s Nagindas Hiralal Printed from counselvise.com ITA No. 4682/Mum/2025 (A.Y. 2014/15) 4 Bhayani, vide agreement dated 16/03/2013, at INR 2,25,67,587. As per the assessee, it incurred various costs towards the improvement of the plot aggregating to INR 21,57,631. 8. The AO, vide order passed under section 143(3) of the Act, held that the assessee has not submitted any documentary evidence for payment of expenses incurred in cash amounting to INR 24,853. Accordingly, the cost of acquisition was taken at INR 99,58,572, as against the claim of the assessee at INR 99,83,425. Further, it was observed that the assessee has submitted expenses to the tune of INR 62,91,583. Accordingly, the assessee was asked to produce proof of such payments. Upon perusal of the details filed by the assessee, it was observed that the assessee has not submitted any proof with respect to the payments amounting to INR 3,62,520. Further INR 41,34,052 was paid as transfer charges, which is to be adjusted from the sale proceeds and does not form part of the cost of improvement. With respect to the balance amount of INR 17,95,011, it was observed that the expenses are on account of lease rate, tax paid, utilisation charges, revised plan fee, foreclosure charges, etc., and none of these expenses are of a capital nature incurred in making any additions or alterations to the capital asset. Accordingly, the AO computed the long-term capital gains at INR 30,34,800. 9. The learned Addl./Joint CIT(A), vide impugned order, partly allowed the ground raised by the assessee on this issue, observing as follows: – “6.2.3. I have carefully considered the facts of the case. In this case, the appellant has not submitted the proof of expenses with documentary evidences for improvement to the property either during the scrutiny Printed from counselvise.com ITA No. 4682/Mum/2025 (A.Y. 2014/15) 5 proceedings or during the appellant proceedings. Further, The appellant also claimed expenses of Rs. 17,95,011/-related to lease rent, tax paid, utilization fee, plan fee. As per provisions of the section 55 of the IT Act, these expenses are not capital in nature and thus cannot form part of cost of improvement as none of these expenses are incurred for making any improvement, addition or alteration to the said land. The assessee it self submitted during assessment proceedings that nothing was constructed on the land and it was transferred in same stat as it was received from GIDC. In view of the above, the appellant cannot claim above expenses as cost of improvement to the property. Hence, the ground of the appellant on this issue is dismissed. However, the AO has applied cost inflation index for F. Y.2012-13 instead of F.Y. 2013-14 while computing the capital gain. In this regard, AO is directed to take cost inflation index for F.Y. 2013-14 and directed to re compute the capital gain. Hence, this ground of the appellant is partly allowed.” 10. During the hearing, the learned Authorised Representative (“learned AR”) submitted that the assessee filed the appeal before the learned CIT(A) on 30/01/2017 and before its migration to the faceless appellate mechanism, the assessee filed various submissions during the physical hearing along with necessary documentary evidence in support of its claim of cost of improvement. In this regard, the learned AR made a specific reference to the written submission dated 19/12/2018 filed before the learned CIT(A)-12, Mumbai, in support of its submission that the expenditure is in the nature of capital expenditure along with necessary documentary evidence. 11. From the perusal of the paper book filed by the assessee before us, we find that the assessee also filed written submissions before the learned CIT(A) on 16/07/2018, 25/07/2018, 21/08/2018, 25/09/2018 and 08/10/2018. However, from the perusal of the impugned order, it is evident that none of these submissions or the documentary evidence filed by the assessee were taken into consideration by the learned Addl./Joint CIT(A), Printed from counselvise.com ITA No. 4682/Mum/2025 (A.Y. 2014/15) 6 while affirming the findings of the AO regarding the cost of improvement to the property. 12. On the other hand, the learned Departmental Representative (“learned DR”) submitted that these evidences were furnished by the assessee for the first time before the learned CIT(A), and the same have not been examined by the AO. 13. Thus, having considered the submissions of both sides and perused the material available on record, we deem it appropriate to restore this issue to the file of the AO for de novo adjudication after examination/verification of the details submitted by the assessee in support of its claim of incurring the cost towards the improvement of the plot. We order accordingly. As a result, the impugned order on this issue is set aside, and Ground No.2, raised in assessee’s appeal, is allowed for statistical purposes. 14. Ground No. 3, raised in assessee’s appeal, was not pressed during the hearing. Accordingly, the said ground is dismissed as not pressed. 15. In the result, the appeal by the assessee is partly allowed for statistical purposes. Order pronounced in the open Court on 10/02/2026 Sd/- VIKRAM SINGH YADAV ACCOUNTANT MEMBER Sd/- SANDEEP SINGH KARHAIL JUDICIAL MEMBER MUMBAI, DATED: 10/02/2026 Disha Raut, Stenographer Printed from counselvise.com ITA No. 4682/Mum/2025 (A.Y. 2014/15) 7 Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Mumbai; and (5) Guard file. By Order Assistant Registrar ITAT, Mumbai. Printed from counselvise.com "