JOINT COMMISIONER OF INCOME TAX(OSD) CIRCLE 3(1)(1) AHMEDABAD, AHMEDABAD V. NIRMA CHEMICAL WORKS PRIVATE LIMITED, AHMEDABAD

ITA 164/AHD/2026

AI Insights

The case involves an appeal by the Joint Commissioner of Income-tax (OSD), Circle 3(1)(1), Ahmedabad against Nirma Chemical Works Pvt Ltd concerning the assessment year 2020-21. The primary issue was the disallowance made under section 14A of the Income-tax Act, 1961, amounting to Rs. 7,50,65,938, which was later deleted by the CIT(A). The CIT(A) based his decision on various precedents from the Gujarat High Court and previous orders in the assessee's own case, which indicated that there was no nexus with borrowed funds and no exempt income was earned. The Revenue challenged this decision, leading to the present appeal before the Tribunal.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 840487 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2026
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2020-2021
• Appeal Filed On: 23-01-2026
• Other Referred Cases: UTI Bank Ltd. (32 taxmann.com 370)(Guj.), CIT Vs. Gujarat State Fertilizers & Chemicals Ltd. (217 Taxman 229)(Guj. HC), CIT Vs. Suzlon Energy Ltd. (354 ITR 630) (Guj. HC), CIT Vs. Gujarat Power Corporation Ltd. (325 ITR 583) (Guj. HC)
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Rule 8D
• Section: 143(3); 14A

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, AHMEDABAD BEFORE DR. B.R.R. KUMAR, VICE-PRESIDENT SHRI T.R. SENTHIL KUMAR, JUDICIAL MEMBER I.T.A. No. 164/Ahd/2026 (Assessment Year: 2020-21) Joint Commissioner of Income-tax (OSD), Circle 3(1)(1), Ahmedabad Vs. Nirma Chemical Works Private Limited, Nirma House, Near Income Tax Circle, Ashram Road, Ahmedabad-38009 [PAN : AAACN 5353 L] (Appellant) .. (Respondent) Assessee represented by : Shri Hemanshu Shah, CA Revenue represented by: Shri Alpesh Parmar, CIT (DR) Date of Hearing 25.02.2026 Date of Pronouncement 26.02.2026 O R D E R PER DR. B.R.R. KUMAR, VICE-PRESIDENT : This appeal has been filed by the Revenue against the order of the Ld. Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as \"CIT(A)\" for short) dated 07.11.2025, passed under Section 250 of the Income-tax Act, 1961 [hereinafter referred to as \"the Act\" for short], for Assessment Year (AY) 2020-21. 2. The solitary ground raised by the Revenue reads as under:- “Ld. CIT(A) has erred in deleting the addition of Rs. 7,50,65,938 under section 14A computed as per Rule 8D applicable during AY 2020-21, without appreciating CBDT's Circular 05/2014 and the clarificatory Explanation to Section 14A, by relying upon decisions applicable for the period before insertion of Explanation to Section 14A and amendment of Rule 8D w.e.f. 02/06/2016.” 3. In this case, the Assessing Officer completed assessment under section 143(3) r.w.s. 144B on 16.09.2022 and made disallowance under section 14A of Rs. 7,50,65,938/-, observing that the assessee had investments of Rs. 750.64 crores. The assessee contended that no exempt income was earned during the year and that own funds i.e. Rs. 910.74 crores, exceeded investments. Printed from counselvise.com ITA No. 164/Ahd/2026 JCIT Vs. Nirma Chemical Works Pvt Ltd Asst. Year : 2020-21 - 2– 4. Aggrieved by the order of the Assessing Officer, the assessee filed appeal before the Ld. CIT(A). The Ld. CIT(A), following various decisions of the Hon’ble Gujarat High Court, including in the case UTI Bank Ltd. (32 taxmann.com 370)(Guj.), CIT Vs. Gujarat State Fertilizers & Chemicals Ltd. (217 Taxman 229)(Guj. HC), CIT Vs. Suzlon Energy Ltd. (354 ITR 630) (Guj. HC), CIT Vs. Gujarat Power Corporation Ltd. (325 ITR 583) (Guj. HC), as also relying on his predecessor’s orders in assessee’s own case for preceding assessment years i.e. AY 2015-16, 2017-18, 2018-19, deleted the disallowance holding that no nexus with borrowed funds was established and no exempt income was earned. 5. Aggrieved by the order of the Ld. CIT(A), the Revenue is now in appeal before the Tribunal. 6. We have heard the rival contentions of both the parties and perused the material available on record. It is undisputed that the assessee did not earn any exempt income during the year. Further, own funds were substantially higher than investments and no direct nexus of borrowed funds with investments has been shown by the Assessing Officer. Therefore, in view of binding judicial precedents of the jurisdictional High Court (supra), we find no infirmity in the order of the Ld. CIT(A) deleting the disallowance of Rs. 7,50,65,938/- u/s 14A of the Act. The ground raised by the Revenue is thus dismissed. 7. In the result, the appeal of the Revenue is dismissed. The order is pronounced in the open Court on 26.02.2026 Sd/- Sd/- (T.R. SENTHIL KUMAR) (DR. B.R.R. KUMAR) JUDICIAL MEMBER VICE-PRESIDENT Ahmedabad; Dated 26/02/2026 **btk Printed from counselvise.com ITA No. 164/Ahd/2026 JCIT Vs. Nirma Chemical Works Pvt Ltd Asst. Year : 2020-21 - 3– आदेश की \bितिलिप अ\u000eेिषत/Copy of the Order forwarded to : 1. अपीलाथ\u0007 / The Appellant 2. \b थ\u0007 / The Respondent. 3. संबंिधत आयकर आयु\u0015 / Concerned CIT 4. आयकर आयु\u0015(अपील) / The CIT(A)- 5. िवभागीय \bितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड फाईल / Guard file. आदेशानुसार/ BY ORDER, True Copy उप/ / / /सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, , , , अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation ……….words processed by the Hon’ble VP on his PC on….25.02.2026….. 2. Date on which the typed draft is placed before the Dictating Member …….25.02.2026….. 3. Other Member……….25.02.2026………… 4. Date on which the approved draft comes to the Sr.P.S./P.S ……..25.02.2026….………. 5. Date on which the fair order is placed before the Dictating Member for pronouncement …….26.02.2026…. 6. Date on which the fair order comes back to the Sr.P.S./P.S ……..2602.2026………………. 7. Date on which the file goes to the Bench Clerk …….26.02.2026…. 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order 10. Date of Dispatch of the Order…………………………………… Printed from counselvise.com "