NUVAMA WEALTH MANAGEMENT LIMITED,MUMBAI V. DEPUTY COMMISSIONER OF INCOME TAX-1(1), MUMBAI

ITA 6761/MUM/2025

AI Insights

Nuvama Wealth Management Limited appealed against the orders of the Commissioner of Income Tax (Appeals) which confirmed the disallowances made by the Deputy Commissioner of Income Tax under Section 14A read with Rule 8D. The primary contention was that the disallowances exceeded the amounts voluntarily disallowed by the assessee. The Tribunal considered the precedents and the specific circumstances of the case, including the scale of investments and the administrative resources involved in managing these investments. The Tribunal upheld the disallowances, noting that the Assessing Officer had recorded dissatisfaction with the assessee's claims, which justified the application of Rule 8D.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 840272 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2026
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2015-2016
• Appeal Filed On: 24-10-2025
• Other Referred Cases: ACIT vs. Vireet Investments Pvt. Ltd., Cheminvest Ltd. vs. CIT, State Bank of Patiala vs. CIT, Holcim India (P) Ltd. vs. CIT, Bombay Oxygen Corporation Ltd. vs. DCIT, Tata Power Co Ltd. vs. PCIT, Sajjan India Ltd. vs. Addl.CIT, Asha Lalit Kanodia vs Additional Commissioner of Income-tax, Range-12, Mumbai
• Laws Referred To: Income Tax Act, 1961, Income Tax Rules, 1962
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: LEYAQAT ALI AAFAQUI
• Assessee Lawyers: RAVIKANT PATHAK
• Keywords: Question of law; Earning of tax free income; Wholly owned subsidiary; Rule 8D; CHAPTER IV
• Section: 144; 11; 6; 12; 2; 14A

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “B” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNT MEMBER) AND MS. KAVITHA RAJAGOPAL (JUDICIAL MEMBER) ITA Nos.6760/MUM/2025 & 6761/MUM/2025 Assessment Years: 2014-15 & 2015-16 Nuvama Wealth Management Limited, 801 to 804 Wing A Building No.3 Inspire BKC, G Block, BKC Bandra East Mumbai-400051 Vs. Deputy Commissioner of Income Tax-1(1), CGO Building, M.K Road, New Marine Lines, Mumbai-400020 PAN NO- AAACK3792N Appellant Respondent Assessee by : Shri Ravikant Pathak Department by : Shri Leyaqat Ali Aafaqui, Sr. DR Date of Hearing : 23/12/2025 Date of pronouncement : 27/02/2026 ORDER PER OM PRAKASH KANT, AM These two appeals by the assessee are directed against two separate orders, both dated 20th August, 2025 passed by the Ld. Commissioner of Income Tax (Appeals) 47, Mumbai [in short, “the Ld. CIT(A)] for assessment years 2014-15 and 2015-16 respectively. 2. In both these appeals, identical issue in dispute of disallowance u/s 14A of the Act is involved and, therefore, both Printed from counselvise.com these appeals were heard together and disposed of consolidated order for the sake of convenience. 3. Now, we take up the appeal of the assessee for A.Y. 2014 15. The sole ground raised by the assessee is reproduced as under: “1. The Commissioner of Income Tax (Appeals) referred as CIT(A)] erred in confirming the action of the Deputy Commissi of Income Tax Circle disallowance u/s 14A of the Income Tax Act, 1961 (Act) r.w. Rule 8D of the Income Tax Rules, 1962 (Rules) without recording his dissatisfaction having regard to its books of The Appellant submits that it has made suo moto disallowance of u/s 14A r.w.r 8D of the Rules, hence, the disallowance in excess of Rs.65,793/- made by the AO shall be deleted. 4. We have considered the rival submission of the perused the material on record. In the case assessee was engaged in the business of share broking and dealing in shares, securities and derivative investments. 5. During the year assessee had earned exempt income of Rs.7,46,429/- and had volunt 14A of the Income Tax Act, 1961 (in short, “the Act”) salary of an employee and administrative expenses. The Assessing Officer, how especially given the scale of investment involved in managing such investments. The Assessing Officer held that assessee’s claim of minimum expenditure towards earning exempt was not acceptable. Accordingly judicial precedents invoking Rule 8D of the Income T Nuvama Wealth Management ITA No heard together and disposed off by way of this consolidated order for the sake of convenience. ke up the appeal of the assessee for A.Y. 2014 15. The sole ground raised by the assessee is reproduced as “1. The Commissioner of Income Tax (Appeals)-47, Mumbai [hereinafter referred as CIT(A)] erred in confirming the action of the Deputy Commissi of Income Tax Circle – 4(1)(1), Mumbai [hereinafter referred as AO] in making disallowance u/s 14A of the Income Tax Act, 1961 (Act) r.w. Rule 8D of the Income Tax Rules, 1962 (Rules) without recording his dissatisfaction having regard to its books of accounts. The Appellant submits that it has made suo moto disallowance of u/s 14A r.w.r 8D of the Rules, hence, the disallowance in excess of made by the AO shall be deleted.” We have considered the rival submission of the perused the material on record. In the case assessee was engaged in the business of share broking and dealing in shares, securities and derivative investments. 5. During the year assessee had earned exempt income of and had voluntarily disallowed Rs.65,793 14A of the Income Tax Act, 1961 (in short, “the Act”) salary of an employee and administrative expenses. The Assessing Officer, however, found the disallowance inadequate, especially given the scale of investments and the resources involved in managing such investments. The Assessing Officer held that assessee’s claim of minimum expenditure towards earning exempt was not acceptable. Accordingly, he relied on the judicial precedents invoking Rule 8D of the Income T Nuvama Wealth Management Limited 2 s. 6760/MUM/2025 & 6761/MUM/2025 by way of this ke up the appeal of the assessee for A.Y. 2014- 15. The sole ground raised by the assessee is reproduced as 47, Mumbai [hereinafter referred as CIT(A)] erred in confirming the action of the Deputy Commissioner 4(1)(1), Mumbai [hereinafter referred as AO] in making disallowance u/s 14A of the Income Tax Act, 1961 (Act) r.w. Rule 8D of the Income Tax Rules, 1962 (Rules) without recording his dissatisfaction having The Appellant submits that it has made suo moto disallowance of Rs. 65,793/- u/s 14A r.w.r 8D of the Rules, hence, the disallowance in excess of We have considered the rival submission of the parties and perused the material on record. In the case assessee was engaged in the business of share broking and dealing in shares, securities 5. During the year assessee had earned exempt income of arily disallowed Rs.65,793/- u/s 14A of the Income Tax Act, 1961 (in short, “the Act”) comprising salary of an employee and administrative expenses. The ever, found the disallowance inadequate, s and the resources involved in managing such investments. The Assessing Officer held that assessee’s claim of minimum expenditure towards he relied on the judicial precedents invoking Rule 8D of the Income Tax Rules Printed from counselvise.com and computed the disallowance u/s 14A at Rs.99,23,192/ after reducing the suo motu net disallowance of Rs.98,57,399/ The income under the MAT provisions was also accordingly recomputed by the Assessing Officer including disallowance u/s 14A of the Act. On further appeal, the Ld. CIT(A) restricted the disallowance to the extent of exempted income following various precedents. The relevant finding of Ld. CIT(A) is reproduced as under: “10. The issue involved in these grounds relates to disallowance U/s 14A of the Act. During the relevant previous year, the appellant had claimed exempt income u/s 10(34) of the Act of Rs. 7,46,429/ offered disallowance u/s 1 disallowance U/s 14A of the Act r.w.r. 8D at Rs. 99,23,192/ disallowance already offered by the appellant, the net disallowance of Rs. 98,57,399/- was made to the returned income u/s 14A r.w.r. 8D The appellant has contended that no further disallowance u/s 14A of the Act is required in the facts of its case. Further, as an alternate argument, the appellant has stated that disallowance cannot exceed the claim of exempt income claimed in judicial decisions. The appellant has also argued that the AO has not recorded satisfaction regarding the correctness of claim of the assessee in respect of expenditure related to earning of exempt i requirement for invoking provisions of section 14A(2) r.w.r. 8D of the Act. The appellant as also stated that the computation of disallowance under Rule 8D(2)(iii) should be limited to the investments which income. 10.1 The AO has noted that the appellant has claimed salary of a mid employee handling investment to the extent of Rs. 50,000/ on account of administrative and other miscellaneous expenses, as expenses related to earning of quantification of considering the quantum of exempt investments. The AO has also noted that the investment decisions require the involvement of Sr the company and also other resources of the company for decision regarding utilization of funds. On this premise, the AO has rejected the correctness of claim of the assessee in respect of expenditure in relation to income which does not form part of total income. Therefore, the appellant's contention that the AO has invoked provisions of 14A r.w satisfaction is not correct. Nuvama Wealth Management ITA No and computed the disallowance u/s 14A at Rs.99,23,192/ suo motu disallowance made by the assessee, a net disallowance of Rs.98,57,399/- was made u/s 14A of the Act. The income under the MAT provisions was also accordingly ecomputed by the Assessing Officer including disallowance u/s On further appeal, the Ld. CIT(A) restricted the disallowance to the extent of exempted income following various precedents. The relevant finding of Ld. CIT(A) is reproduced as 10. The issue involved in these grounds relates to disallowance U/s 14A of the Act. During the relevant previous year, the appellant had claimed exempt income u/s 10(34) of the Act of Rs. 7,46,429/- and the appellant had suo motu offered disallowance u/s 14A of Rs. 65,793/-. The AO has worked out disallowance U/s 14A of the Act r.w.r. 8D at Rs. 99,23,192/ disallowance already offered by the appellant, the net disallowance of Rs. was made to the returned income u/s 14A r.w.r. 8D The appellant has contended that no further disallowance u/s 14A of the Act is required in the facts of its case. Further, as an alternate argument, the appellant has stated that disallowance cannot exceed the claim of exempt income claimed in the return of income for which it has relied on various judicial decisions. The appellant has also argued that the AO has not recorded satisfaction regarding the correctness of claim of the assessee in respect of expenditure related to earning of exempt income which is mandatory requirement for invoking provisions of section 14A(2) r.w.r. 8D of the Act. The appellant as also stated that the computation of disallowance under Rule 8D(2)(iii) should be limited to the investments which actually yielded exempt 10.1 The AO has noted that the appellant has claimed salary of a mid employee handling investment to the extent of Rs. 50,000/ on account of administrative and other miscellaneous expenses, as expenses related to earning of exempt Income. The AO held that the appellant's quantification of expenses related to earning of exempt income is not justified considering the quantum of exempt investments. The AO has also noted that the investment decisions require the involvement of Sr. level management of the company and also other resources of the company for decision regarding utilization of funds. On this premise, the AO has rejected the correctness of claim of the assessee in respect of expenditure in relation to h does not form part of total income. Therefore, the appellant's contention that the AO has invoked provisions of 14A r.w 8D without recordi satisfaction is not correct. Nuvama Wealth Management Limited 3 s. 6760/MUM/2025 & 6761/MUM/2025 and computed the disallowance u/s 14A at Rs.99,23,192/- and disallowance made by the assessee, a was made u/s 14A of the Act. The income under the MAT provisions was also accordingly ecomputed by the Assessing Officer including disallowance u/s On further appeal, the Ld. CIT(A) restricted the disallowance to the extent of exempted income following various precedents. The relevant finding of Ld. CIT(A) is reproduced as 10. The issue involved in these grounds relates to disallowance U/s 14A of the Act. During the relevant previous year, the appellant had claimed exempt and the appellant had suo motu . The AO has worked out disallowance U/s 14A of the Act r.w.r. 8D at Rs. 99,23,192/-. Considering the disallowance already offered by the appellant, the net disallowance of Rs. was made to the returned income u/s 14A r.w.r. 8D of the Act. The appellant has contended that no further disallowance u/s 14A of the Act is required in the facts of its case. Further, as an alternate argument, the appellant has stated that disallowance cannot exceed the claim of exempt the return of income for which it has relied on various judicial decisions. The appellant has also argued that the AO has not recorded satisfaction regarding the correctness of claim of the assessee in respect of ncome which is mandatory requirement for invoking provisions of section 14A(2) r.w.r. 8D of the Act. The appellant as also stated that the computation of disallowance under Rule actually yielded exempt 10.1 The AO has noted that the appellant has claimed salary of a mid-level employee handling investment to the extent of Rs. 50,000/- and Rs. 15,793/- on account of administrative and other miscellaneous expenses, as expenses exempt Income. The AO held that the appellant's empt income is not justified considering the quantum of exempt investments. The AO has also noted that . level management of the company and also other resources of the company for decision-making regarding utilization of funds. On this premise, the AO has rejected the correctness of claim of the assessee in respect of expenditure in relation to h does not form part of total income. Therefore, the appellant's D without recording Printed from counselvise.com 10.2 The Hon'ble Special Bench of Delhi Tribunal in the case of ACIT vs. Vireet Investments Pvt. Ltd. ITA No.502/Del/2012, have held that for the purposes of calculating disallowance as per Rule considered for computing average value o income during the year. Fur number of other judgements such as (i 89 Taxmann.com 21 (Mum Tribunal), (ii) DCIT vs. Bombay Oxygen Corporation Ltd. (2017) 86 Taxmann 88 (Mum Tribunal), (iii) Tata Mumbai (2020), 121 10.3 With the Spl. Bench decision in the case of Vireet Investment Ltd. (supra), law with respect to computation of disallowance under Rule 8D(2)(ii is settled and the qu investments yielding exempt income. Further, the Spl Bench decision has been followed in several cases by the jurisdictional Mumbai Tribunal in several cases quoted in the previous paragraph. Hence, Spl Bench Delhi Tribunal and jurisdictional Tribunal, disallowance u/ yielding exempt income. 10.4 Further, the extent of disallowance u/s 14A in a dividend income earned during the relevant year is either nil or less than the amount of disallowance computed under section 14A, has been subjected to substantial debate. However, this issue is settled by the recent decision of the Hon'ble Supreme Court dated 02.07.2018 in the case of Chettinad Logistics P. Ltd. (95 taxmann.com 250) wherein the Revenue SLP against the decision of the Hon'ble Madras High Court (80 taxmann.com 221) has been dismissed. In this case, the Hon'ble Madras High C the provisions of sec. 14 sec 14A itself are not applicable, then there is no question of invoking Rule and computing the disallowance. It was noted by the Hon the language used in the provisions of sec. 14A makes it abundantly clear that the same is triggered only when there is an income which does not form part of the total income under the Act. It was held by the Hon'ble High Court that th provisions of sec. 14A cannot be invoked if no exempt income has been ear for the relevant year. The Hon'ble High Court granted relief to the said assessee on the disallowance made by the AO u/s 1 exempt/dividend income was ear portion of the decision of the Hon'ble Madras High Court in the case of Chettinad Logistics \"8. According to us, this exercise, in the given facts which emerge from the record, was finding of fact that no dividend had been ea assessment year, with which, we are concerned, in the present appeal. 9. In our opinion Section 14 A of the Act, can only be triggered, if Assessee seek not form part of the total income under the Act. 9.1 The legislature, in order to do away with the pernicious practice adopted by the Assessees', to claim expenditure, against income exempt from tax, introduced the said provision Nuvama Wealth Management ITA No 2 The Hon'ble Special Bench of Delhi Tribunal in the case of ACIT vs. Vireet stments Pvt. Ltd. ITA No.502/Del/2012, have held that for the purposes of calculating disallowance as per Rule 8D(2)(iii), only those investments are to be considered for computing average value of investments which yield exemp income during the year. Further, the Spl Bench decision has been followed in a r of other judgements such as (i) Sajjan India Ltd. vs. Addi.CIT (2018) 89 Taxmann.com 21 (Mum Tribunal), (ii) DCIT vs. Bombay Oxygen Corporation Ltd. (2017) 86 Taxmann 88 (Mum Tribunal), (iii) Tata Power Co Ltd. vs PCIT, Mumbai (2020), 121 Taxmann.com 127 (Mum Tribunal) e Spl. Bench decision in the case of Vireet Investment Ltd. (supra), law with respect to computation of disallowance under Rule 8D(2)(ii is settled and the quantum of disallowance has to be limited to the extent of investments yielding exempt income. Further, the Spl Bench decision has been followed in several cases by the jurisdictional Mumbai Tribunal in several cases quoted in the previous paragraph. Hence, following the judgement of the Spl Bench Delhi Tribunal and jurisdictional Tribunal, disallowance u/s 14A of the Act has to be limited to the value of inve yielding exempt income. 4 Further, the extent of disallowance u/s 14A in a dividend income earned during the relevant year is either nil or less than the amount of disallowance computed under section 14A, has been subjected to substantial debate. However, this issue is settled by the recent decision of the le Supreme Court dated 02.07.2018 in the case of Chettinad Logistics P. Ltd. (95 taxmann.com 250) wherein the Revenue SLP against the decision of the Hon'ble Madras High Court (80 taxmann.com 221) has been dismissed. In this case, the Hon'ble Madras High Court held that Rule 8 the provisions of sec. 14A. The Hon'ble Madras Court held that if provisions of sec 14A itself are not applicable, then there is no question of invoking Rule and computing the disallowance. It was noted by the Hon'ble High Court that the language used in the provisions of sec. 14A makes it abundantly clear that the same is triggered only when there is an income which does not form part of the total income under the Act. It was held by the Hon'ble High Court that th provisions of sec. 14A cannot be invoked if no exempt income has been ear for the relevant year. The Hon'ble High Court granted relief to the said assessee on the disallowance made by the AO u/s 14A on the ground that no exempt/dividend income was earned during the relevant year. The relevant portion of the decision of the Hon'ble Madras High Court in the case of Chettinad Logistics P. Ltd. is reproduced as under- \"8. According to us, this exercise, in the given facts which emerge from the record, was clearly unnecessary, as the CIT(A) had returned the finding of fact that no dividend had been earned in the relevant assessment year, with which, we are concerned, in the present appeal. 9. In our opinion Section 14 A of the Act, can only be triggered, if Assessee seeks to square off expenditure against income which does not form part of the total income under the Act. 9.1 The legislature, in order to do away with the pernicious practice adopted by the Assessees', to claim expenditure, against income empt from tax, introduced the said provision Nuvama Wealth Management Limited 4 s. 6760/MUM/2025 & 6761/MUM/2025 2 The Hon'ble Special Bench of Delhi Tribunal in the case of ACIT vs. Vireet stments Pvt. Ltd. ITA No.502/Del/2012, have held that for the purposes of ), only those investments are to be f investments which yield exempt ther, the Spl Bench decision has been followed in a ) Sajjan India Ltd. vs. Addi.CIT (2018) 89 Taxmann.com 21 (Mum Tribunal), (ii) DCIT vs. Bombay Oxygen Corporation Power Co Ltd. vs PCIT, e Spl. Bench decision in the case of Vireet Investment Ltd. (supra), law with respect to computation of disallowance under Rule 8D(2)(iii) of the Act antum of disallowance has to be limited to the extent of investments yielding exempt income. Further, the Spl Bench decision has been followed in several cases by the jurisdictional Mumbai Tribunal in several following the judgement of the Spl Bench Delhi Tribunal and jurisdictional Tribunal, it is held that s 14A of the Act has to be limited to the value of investments 4 Further, the extent of disallowance u/s 14A in an instance where, dividend income earned during the relevant year is either nil or less than the amount of disallowance computed under section 14A, has been subjected to substantial debate. However, this issue is settled by the recent decision of the le Supreme Court dated 02.07.2018 in the case of Chettinad Logistics P. Ltd. (95 taxmann.com 250) wherein the Revenue SLP against the decision of the Hon'ble Madras High Court (80 taxmann.com 221) has been dismissed. In 8D cannot over-ride . The Hon'ble Madras Court held that if provisions of sec 14A itself are not applicable, then there is no question of invoking Rule 8D 'ble High Court that the language used in the provisions of sec. 14A makes it abundantly clear that the same is triggered only when there is an income which does not form part of the total income under the Act. It was held by the Hon'ble High Court that the provisions of sec. 14A cannot be invoked if no exempt income has been earned for the relevant year. The Hon'ble High Court granted relief to the said 4A on the ground that no ed during the relevant year. The relevant portion of the decision of the Hon'ble Madras High Court in the case of \"8. According to us, this exercise, in the given facts which emerge from clearly unnecessary, as the CIT(A) had returned the ed in the relevant assessment year, with which, we are concerned, in the present appeal. 9. In our opinion Section 14 A of the Act, can only be triggered, if the to square off expenditure against income which does 9.1 The legislature, in order to do away with the pernicious practice adopted by the Assessees', to claim expenditure, against income Printed from counselvise.com 10. In the instant case, there is no disput which did not form part of total income of the Assessee was earned in the relevant assessment year. 10.1 Therefore, to our minds, the a Officer by relying upon Section 14 A of the Act, was completely contrary to the provisions of the sa 10.2 Mr. Senthil Kumar, who appears for the Revenue, submitted that the Revenue could disallow the expenditure eve circumstance by taking recourse to Rule 8 10.3 According to us, the amount of expenditure incurred in relation to income which does not form part of the total income of the Assessee. 10.4 Rule Section 14 A of the Act. 11. Furthermore, we may note that a similar argument was sought to be advanced by the Revenue in the matter conce (India) Ltd. v. Addl subject matter of T.C.A.No.520 of 2016 11.1 A Co 23.12.2016, rejected the plea of the R 11.2 As a matter of fact, a perusal of the judgment would show the Revenu earned in future years, provisions of Section 144 of the Act, to disallow expenditure. In other words the stand taken by the Revenue was irre whether or not income was ea expenditure under Section 14A could be disallowed against anticipated income. 11.3 Pertinently, the Division Bench in Redington (India) Ltd. (supra) case has repelled th 12. The Division Bench, in our view, quiet co computation of total income, in terms of Section 5 of the Act, is made qua real Income and 12.1 The Division Bench went on to hold that to tax, that The Division Bench, thus, held that where no exempt income is ea in the previous year, relevant to the assessment year in issue, provisions of Section Invoked. 12.2 While coming to this conclusion, the Division Bench also took note of the aforementioned Nuvama Wealth Management ITA No 10. In the instant case, there is no dispute that no income i. which did not form part of total income of the Assessee was earned in the relevant assessment year. 10.1 Therefore, to our minds, the addition made by the Assessing Officer by relying upon Section 14 A of the Act, was completely contrary to the provisions of the said Section. 10.2 Mr. Senthil Kumar, who appears for the Revenue, submitted that the Revenue could disallow the expenditure eve circumstance by taking recourse to Rule 8D. 10.3 According to us, Rule 8D, only provides for a method to determine the amount of expenditure incurred in relation to income which does not form part of the total income of the Assessee. 10.4 Rule 8 D, in our view, cannot go beyond what is provided in Section 14 A of the Act. 11. Furthermore, we may note that a similar argument was sought to be advanced by the Revenue in the matter conce (India) Ltd. v. Addl. CIT (2017) 77 taxmann.com 257 (Mad subject matter of T.C.A.No.520 of 2016 11.1 A Co-ordinate Bench of this Court, vide judgment dated 23.12.2016, rejected the plea of the Revenue advanced in that behalf. 11.2 As a matter of fact, a perusal of the judgment would show the Revenue had sought to argue that because exempt income could be rned in future years, therefore, recourse could be taken to the provisions of Section 144 of the Act, to disallow expenditure. In other words the stand taken by the Revenue was irrespective of the fact whether or not income was earned in the concerned assessment year expenditure under Section 14A could be disallowed against anticipated income. 11.3 Pertinently, the Division Bench in Redington (India) Ltd. (supra) case has repelled this precise argument 12. The Division Bench, in our view, quiet correctly held that, the computation of total income, in terms of Section 5 of the Act, is made qua real Income and not, vis-a-vis, national income 12.1 The Division Bench went on to hold that Section 4 of the Act brings to tax, that income, which is relatable to the assessment year in issue. The Division Bench, thus, held that where no exempt income is ea in the previous year, relevant to the assessment year in issue, provisions of Section 14 A of the Act, read with Rule 8 D could not be Invoked. 12.2 While coming to this conclusion, the Division Bench also took note aforementioned Circular, issued by the Board.\" Nuvama Wealth Management Limited 5 s. 6760/MUM/2025 & 6761/MUM/2025 e that no income i.e., dividend, which did not form part of total income of the Assessee was earned in ddition made by the Assessing Officer by relying upon Section 14 A of the Act, was completely contrary 10.2 Mr. Senthil Kumar, who appears for the Revenue, submitted that the Revenue could disallow the expenditure even in such a y provides for a method to determine the amount of expenditure incurred in relation to income which does not 8 D, in our view, cannot go beyond what is provided in 11. Furthermore, we may note that a similar argument was sought to be advanced by the Revenue in the matter concerning, Redington m 257 (Mad.) which was, ordinate Bench of this Court, vide judgment dated evenue advanced in that behalf. 11.2 As a matter of fact, a perusal of the judgment would show that had sought to argue that because exempt income could be therefore, recourse could be taken to the provisions of Section 144 of the Act, to disallow expenditure. In other spective of the fact ed assessment year expenditure under Section 14A could be disallowed against anticipated 11.3 Pertinently, the Division Bench in Redington (India) Ltd. (supra) ectly held that, the computation of total income, in terms of Section 5 of the Act, is made Section 4 of the Act brings ome, which is relatable to the assessment year in issue. The Division Bench, thus, held that where no exempt income is earned in the previous year, relevant to the assessment year in issue, Rule 8 D could not be 12.2 While coming to this conclusion, the Division Bench also took note Circular, issued by the Board.\" Printed from counselvise.com 10.5 The Hon'ble Bom Ltd. (ITA No. 149 of 2017) in their decision dated 23.04.201 claim that the disallowance under section 14A was to be restricted to the tax exempt income earned during the year. The High Court observed that 3. This Appeal is filed by the the income Tax Appellate Tribunal ( ITXA 149 company and a non Year 2008 6,87,57,951. During the same period relevant to the Assessment Year in question, the Assessee was exempt from tax. The Assessing Officer disa expenditure of Rs.3,79,83,539. He further disallowed administrative expenditure and made a total disallowance of Rs 4.22,72,425/ Section 14A of the Income Tax Act, 1961 (the Act, for short) read with Rule 8D confirmed such disallowance upon which, the Appeal. 4. At the outset, lea that several 14A of the Act read exempt income ea submitted that if such disallowance, therefore, is restricted to Rs. 1,13,72,545/ which is exempt income ea Assessee wo 5. Having heard the lea perused the documents on record, consistently different High Courts in the country have taken a view that the disallowance under Section 14 of the Act read with Rule exempt income. The Delhi Vs. Commissioner of income Tax 1, has held that when the Assessee has not ea of the expenditu not be permissi 10.6 The Hon'ble Ka Bank Vs Joint Commissioner of Income relation to income not includable income. It was observed as under. \"14. We make it clear that the expenditure for earning exempted income has to have a reasonable proportion to the income, so ea the common financial prudence. Therefore, such an expenditure incurred to ea rational nexus with the amount of income ea under Section 14A of Rs 2,48,85, Nuvama Wealth Management ITA No 10.5 The Hon'ble Bombay High Court in the case of M/s. Nirved Traders Ltd. (ITA No. 149 of 2017) in their decision dated 23.04.201 claim that the disallowance under section 14A was to be restricted to the tax exempt income earned during the year. The High Court observed that 3. This Appeal is filed by the Assessee to challenge the Judgment of the income Tax Appellate Tribunal (‘the Tribunal’, for URS 1 of 7 2 3 ITXA 149-17.odt short). The Appellant Assessee is a private limited company and a non-banking financial company. In the Assessment Year 2008-2009, the Assessee had claimed interest expenditure of Rs 6,87,57,951. During the same period relevant to the Assessment Year in question, the Assessee had earned dividend income of Rs. 1,13,72,545 which was exempt from tax. The Assessing Officer disall expenditure of Rs.3,79,83,539. He further disallowed administrative expenditure and made a total disallowance of Rs 4.22,72,425/ Section 14A of the Income Tax Act, 1961 (the Act, for short) read with D of the Rules. The Tribunal, by the impugned Judgment, confirmed such disallowance upon which, the Assessee has filled this Appeal. 4. At the outset, learned Counsel for the Appellant-Assessee submitted that several High Courts have held that disallowance under Section 14A of the Act read with Rule 8D of the Rules, cannot exceed the exempt income earned by the Assessee during the relevant year. She submitted that if such disallowance, therefore, is restricted to Rs. 1,13,72,545/ which is exempt income earned by the Assessee, the Assessee would accept the same. 5. Having heard the learned Counsel for the parties and having perused the documents on record, consistently different High Courts in the country have taken a view that the disallowance under Section 14 of the Act read with Rule 8D of the Rules cannot exceed the Assessee's exempt income. The Delhi High Court, in the case of Cheminvest Ltd. Vs. Commissioner of income Tax 1, has held that when the Assessee has not earned any income which was exempt from tax, disal of the expenditure under Section 14A read with 8D of the Rules would not be permissible. The Hon'ble Karnataka High Court, in the case of Pragati Krishna Gramin Bank Vs Joint Commissioner of Income-tax2, has held that expenditure in lation to income not includable in the total income cannot exceed such come. It was observed as under. \"14. We make it clear that the expenditure for earning exempted income has to have a reasonable proportion to the income, so ea the common financial prudence. Therefore, even if the Assessing Authority has to make an estimate of such an expenditure incurred to earn exempted income, it has to have a rational nexus with the amount of income earned itself. Disallowan under Section 14A of Rs 2,48,85,000/-as expenses to earn Nuvama Wealth Management Limited 6 s. 6760/MUM/2025 & 6761/MUM/2025 s. Nirved Traders Pvt. Ltd. (ITA No. 149 of 2017) in their decision dated 23.04.2019 approved the claim that the disallowance under section 14A was to be restricted to the tax- exempt income earned during the year. The High Court observed that: Assessee to challenge the Judgment of , for URS 1 of 7 2 3- short). The Appellant Assessee is a private limited banking financial company. In the Assessment the Assessee had claimed interest expenditure of Rs During the same period relevant to the Assessment Year in question, ed dividend income of Rs. 1,13,72,545 which was exempt from tax. The Assessing Officer disallowed the interest expenditure of Rs.3,79,83,539. He further disallowed administrative expenditure and made a total disallowance of Rs 4.22,72,425/-under Section 14A of the Income Tax Act, 1961 (the Act, for short) read with e impugned Judgment, Assessee has filled this Assessee submitted owance under Section D of the Rules, cannot exceed the ed by the Assessee during the relevant year. She submitted that if such disallowance, therefore, is restricted to Rs. ed by the Assessee, the ed Counsel for the parties and having perused the documents on record, consistently different High Courts in the country have taken a view that the disallowance under Section 14A the Rules cannot exceed the Assessee's High Court, in the case of Cheminvest Ltd. Vs. Commissioner of income Tax 1, has held that when the Assessee ed any income which was exempt from tax, disallowance D of the Rules would ataka High Court, in the case of Pragati Krishna Gramin tax2, has held that expenditure in in the total income cannot exceed such \"14. We make it clear that the expenditure for earning exempted income has to have a reasonable proportion to the income, so earned, going by even if the Assessing Authority has to make an estimate of exempted income, it has to have a ed itself. Disallowance as expenses to earn exempted Printed from counselvise.com Dividend income of Rs. 1. hypothetical. The disallowance under Section 8 expenses claimed by assessee under the Proviso to Rule where the assessee c expenditure during the year in question to ea 1,80,30,965 compute the interest on such borrowed funds which were dedicatedly used for investment in securities to ea income. The disallowance under Section 14A cannot be wild guesswork bereft of ground realities. It has to have a reasonable and close nexus with the factually incurred expenses. it is not deemed disallowance under Section 14A of the act but a authority to compute the same on the given facts and figures in the regularly maintained Books of Accounts. The assessing authority also could not have called upon the Assessee himself to undertake the exercise of computi Such abdication of duty is not permissible in law. Since no such exercise has been undertaken by the assessing authority, the case calls for a remand.\" 10.7 The Hon'ble Gujarat High Court, in the case of C tax-I Vs. Corrtech Energy (P) Ltd.3, has held and observed as under “4. Counsel for the Revenue submitted that the Assessin well as CIT (Appeal Rules, since this case Since in the present case, we are the Revenue. We however, notice that sub-section (1) of section 14A provides that for the purpose of computing total income under chapter IV of 3 (2015) 372 ITR 97 URS 4 of 7 5 3 respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act. In the present case, the tribunal has recorded the finding of fact assessee did not make any claim for exemption of any income from payment of tax. It was on this basis that the tribunal held that disallowance under section 14A of the Act could not be made. In the process tribunal relied on the decision of Divisi Haryana High Court in case of CIT v Winsome Textile Industries Ltd. [2009] 319 ITR 204 in which also the Court had observed as under “7. We do not find any me court in Abhishek Industries allowability of interest paid on loans given to sister conce interest. It was loan was taken for business purpose and not for diverting the same to sister conce observations made therein have to be read in that context. In the present case, admittedly the assessee did not make any claim for exemption. In such a situation section 14A could have no applicat 5. We do not find any question of law arising. dismissed.\" Nuvama Wealth Management ITA No Dividend income of Rs. 1.80,30,965/- is per se absur hypothetical. The disallowance under Section 8D expenses claimed by assessee under the Proviso to Rule where the assessee claimed that assessee did not inc expenditure during the year in question to earn 1,80,30,965/- the burden was upon the assessing authority to compute the interest on such borrowed funds which were dedicatedly used for investment in securities to earn such exem income. The disallowance under Section 14A cannot be wild guesswork bereft of ground realities. It has to have a reasonable and close nexus with the factually incurred expenses. it is not deemed disallowance under Section 14A of the act but an enabling provision for assessing authority to compute the same on the given facts and figures in the regularly maintained Books of Accounts. The assessing authority also could not have called upon the Assessee himself to undertake the exercise of computing the disallowance under Section 80 of the Rules. Such abdication of duty is not permissible in law. Since no such exercise has been undertaken by the assessing authority, the case calls for a remand.\" 10.7 The Hon'ble Gujarat High Court, in the case of Commissioner of Income Vs. Corrtech Energy (P) Ltd.3, has held and observed as under 4. Counsel for the Revenue submitted that the Assessin well as CIT (Appeals) had applied formula of rule 8D of the Income Tax Rules, since this case arose after the assessment year 2009 Since in the present case, we are the Revenue. We however, notice that section (1) of section 14A provides that for the purpose of computing total income under chapter IV of 3 (2015) 372 ITR 97 URS 4 of 7 5 3-ITXA 149-17. odt the Act, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act. In the present case, the tribunal has recorded the finding of fact assessee did not make any claim for exemption of any income from payment of tax. It was on this basis that the tribunal held that disallowance under section 14A of the Act could not be made. In the process tribunal relied on the decision of Division Bench of Punjab and Haryana High Court in case of CIT v Winsome Textile Industries Ltd. [2009] 319 ITR 204 in which also the Court had observed as under 7. We do not find any merit in this submission. The judgement of this court in Abhishek Industries Ltd. (2006) 286 ITR 1 was on the issue of allowability of interest paid on loans given to sister conce interest. It was held that deduction for interest was permissible when loan was taken for business purpose and not for diverting the same to sister concern without having nexus with the business. The observations made therein have to be read in that context. In the present case, admittedly the assessee did not make any claim for exemption. In such a situation section 14A could have no applicat 5. We do not find any question of law arising. Appeal is therefore dismissed.\" Nuvama Wealth Management Limited 7 s. 6760/MUM/2025 & 6761/MUM/2025 is per se absurd and cannot exceed the expenses claimed by assessee under the Proviso to Rule 8D. Therefore, laimed that assessee did not incur any such rn Dividends of Rs. the burden was upon the assessing authority to compute the interest on such borrowed funds which were dedicatedly such exempted Dividend income. The disallowance under Section 14A cannot be wild guesswork bereft of ground realities. It has to have a reasonable and close nexus with the factually incurred expenses. it is not deemed disallowance n enabling provision for assessing authority to compute the same on the given facts and figures in the regularly maintained Books of Accounts. The assessing authority also could not have called upon the Assessee himself to undertake the ng the disallowance under Section 80 of the Rules. Such abdication of duty is not permissible in law. Since no such exercise has been undertaken by the assessing authority, the case ommissioner of Income- Vs. Corrtech Energy (P) Ltd.3, has held and observed as under: 4. Counsel for the Revenue submitted that the Assessing Officer as D of the Income Tax arose after the assessment year 2009-2010. Since in the present case, we are the Revenue. We however, notice that section (1) of section 14A provides that for the purpose of computing total income under chapter IV of 3 (2015) 372 ITR 97 URS 4 17. odt the Act, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act. In the present case, the tribunal has recorded the finding of fact that the assessee did not make any claim for exemption of any income from payment of tax. It was on this basis that the tribunal held that disallowance under section 14A of the Act could not be made. In the on Bench of Punjab and Haryana High Court in case of CIT v Winsome Textile Industries Ltd. [2009] 319 ITR 204 in which also the Court had observed as under: t in this submission. The judgement of this Ltd. (2006) 286 ITR 1 was on the issue of allowability of interest paid on loans given to sister concerns, without that deduction for interest was permissible when loan was taken for business purpose and not for diverting the same to without having nexus with the business. The observations made therein have to be read in that context. In the present case, admittedly the assessee did not make any claim for exemption. In such a situation section 14A could have no application. Appeal is therefore Printed from counselvise.com 10.8 The Hon'ble Bombay High Court, in a decision dated 4th February, 2019, in the case of The Pr. Commissioner of Income Tax (India) Ltd. had obs \"4. Having heard learned Counsel for the parties and perused documents on record, we notice that in Cheminvest Ltd. (supra) Delhi High Court had referred to and reli case of CIT Vs. Holcim India (P) Ltd. ( 5 th September 2014). we further notice that this Court in Income Tax Appeal No.693 of 2015 by an order dated 21 st November, 2017 while dismissing decision of Delh adopted the same principles. In the present case, Counsel for the Revenue however, points out that this is not a case where the assessee had ea opinion the ratio of the above noted decisions in the cases of Cheminvest Ltd. and Holcim India (P) Ltd. (supra) would include a facet where the assessee's income exempt from tax is not Nil, but has ea exempt income which is larger than the expendit assessee in order to ea disallowance cannot exceed the exempt income so earned by the assessee during the year under consideration. We do not find any error in the view of the T voluntary disallowance of expenditure of Rs.1.30 crores, which is not been disturbed by the Tribunal. 5. The tax appeal is dismissed.\" 10.9 The Hon'ble Punjab & Haryana High Court (CIT vs. State Bank of Patiala, 393 ITR 476) h income, a view also supported by the Hon'ble Delhi High Court (Cheminvest Limited vs. CIT, 378 ITR 33). The Revenue's SLP before the Hon'ble Apex Court against the decision of Punjab & Haryana Hi State Bank of Patiala has been dismissed on merits vide order dated 08/10/2018. Based on legal precedent's, disallowance u/s 14A r.w.s. 8D is restricted to the exempt income claimed i.e. Rs 7,46,429/ appeal is Partly Allowed. 6. Before us, the assessee has challenged that no dissatisfaction was recorded by the Assessing Officer before invoking Rule 8D of the Income Tax Rules, 1962. contention of the assessee is not justified as the Assessing Officer has duly rejected t disallowance of Rs. 65,793 Nuvama Wealth Management ITA No 10.8 The Hon'ble Bombay High Court, in a decision dated 4th February, 2019, in the case of The Pr. Commissioner of Income Tax-10 Vs. HSBC Invest Direct ia) Ltd. had observed as under. \"4. Having heard learned Counsel for the parties and perused documents on record, we notice that in Cheminvest Ltd. (supra) Delhi h Court had referred to and relied upon its earlier decision in the case of CIT Vs. Holcim India (P) Ltd. (I.T.A. No. 486 of 2014, decided on 5 th September 2014). we further notice that this Court in Income Tax Appeal No.693 of 2015 by an order dated 21 st November, 2017 while dismissing the Revenue's appeal on similar issue had noted that the decision of Delhi High Court in case of Holcim India (P) Ltd. (supra) had adopted the same principles. In the present case, Counsel for the Revenue however, points out that this is not a case where the assessee had earned no income which was exempt from tax. However, in o opinion the ratio of the above noted decisions in the cases of Cheminvest Ltd. and Holcim India (P) Ltd. (supra) would include a facet where the assessee's income exempt from tax is not Nil, but has ea exempt income which is larger than the expenditure incu assessee in order to earn such income. In such a situation that disallowance cannot exceed the exempt income so earned by the assessee during the year under consideration. We do not find any error in the view of the Tribunal. We record that the assessee had offered voluntary disallowance of expenditure of Rs.1.30 crores, which is not been disturbed by the Tribunal. 5. The tax appeal is dismissed.\" 10.9 The Hon'ble Punjab & Haryana High Court (CIT vs. State Bank of Patiala, 393 ITR 476) held that disallowance under section 14A cannot exceed exempt income, a view also supported by the Hon'ble Delhi High Court (Cheminvest Limited vs. CIT, 378 ITR 33). The Revenue's SLP before the Hon'ble Apex Court against the decision of Punjab & Haryana High Court in the case of CIT vs. State Bank of Patiala has been dismissed on merits vide order dated 08/10/2018. Based on legal precedent's, disallowance u/s 14A r.w.s. 8D is restricted to the exempt income claimed i.e. Rs 7,46,429/ s Partly Allowed.” Before us, the assessee has challenged that no dissatisfaction was recorded by the Assessing Officer before Rule 8D of the Income Tax Rules, 1962. However, this contention of the assessee is not justified as the Assessing Officer has duly rejected the claim of the assessee of Rs. 65,793/- observing as under: Nuvama Wealth Management Limited 8 s. 6760/MUM/2025 & 6761/MUM/2025 10.8 The Hon'ble Bombay High Court, in a decision dated 4th February, 2019, 10 Vs. HSBC Invest Direct \"4. Having heard learned Counsel for the parties and perused documents on record, we notice that in Cheminvest Ltd. (supra) Delhi ed upon its earlier decision in the I.T.A. No. 486 of 2014, decided on 5 th September 2014). we further notice that this Court in Income Tax Appeal No.693 of 2015 by an order dated 21 st November, 2017 while the Revenue's appeal on similar issue had noted that the i High Court in case of Holcim India (P) Ltd. (supra) had adopted the same principles. In the present case, Counsel for the Revenue however, points out that this is not a case where the assessee ed no income which was exempt from tax. However, in our opinion the ratio of the above noted decisions in the cases of Cheminvest Ltd. and Holcim India (P) Ltd. (supra) would include a facet where the assessee's income exempt from tax is not Nil, but has earned ure incurred by the such income. In such a situation that disallowance cannot exceed the exempt income so earned by the assessee during the year under consideration. We do not find any error assessee had offered voluntary disallowance of expenditure of Rs.1.30 crores, which is not 10.9 The Hon'ble Punjab & Haryana High Court (CIT vs. State Bank of Patiala, eld that disallowance under section 14A cannot exceed exempt income, a view also supported by the Hon'ble Delhi High Court (Cheminvest Limited vs. CIT, 378 ITR 33). The Revenue's SLP before the Hon'ble Apex Court gh Court in the case of CIT vs. State Bank of Patiala has been dismissed on merits vide order dated 08/10/2018. Based on legal precedent's, disallowance u/s 14A r.w.s. 8D is restricted to the exempt income claimed i.e. Rs 7,46,429/-. The ground of Before us, the assessee has challenged that no dissatisfaction was recorded by the Assessing Officer before However, this contention of the assessee is not justified as the Assessing Officer he claim of the assessee of suo-motu Printed from counselvise.com “4.2 The assessee was asked to submit working of the disallowance o expenses incurred in relation to exempt income earned. The assessee has submitted the same vide submission dated 12.12.2016, but the same is not found to be acceptable. The assessee has contended that the investments trade in the w solely for the business assessee has made the disallowance u/s 14A as under (i) Rs.50000/ investments. (ii) Rs.15793/ expenses It must be noted that in the case of Un (Karnataka Hig the motive of the and not to earn dividends concerns also need to be considered while wo of the Act. When it comes to s taken at a very senior level of management of the company, Not on manpower, skill and resource but a other resources of the company are used for making for the 4.3 In view of the above, in no scenario it can be deduced that an employee with a monthly salary of Rs.4167/ capable of yielding exempt income. Further, an allocation of expenses of Rs.1397/- per month for handling such huge investments is not air and reasonable. As per section 1 of expenditure part of total income satisfied with the expenditure, assessing officer shall determine incurred in relation to such income which does not form part of the total income per method prescribed in rule 8D of the IT Rules. 4.4 It must be noted that the CBDT has 45/2008 dated Income Tax Rules 19 following situations (a) Where the AO i expenditure made by the assessee; or (b) Where relation to income which does not form part of the total income In view of the above discussion, the case of the assessee squarely falls under the provisions of the above notification.” Nuvama Wealth Management ITA No The assessee was asked to submit working of the disallowance o expenses incurred in relation to exempt income earned. The assessee has submitted the same vide submission dated 12.12.2016, but the same is not found to be acceptable. The assessee has contended that the investments wholly owned subsidiary/associate companies business purpose and in the nature of strategic investment. The has made the disallowance u/s 14A as under: Rs.50000/- on account of salary of a mid level employee handling investments. s.15793/- on account of administrative, statutory and expenses incurred on account of earning of exempt income. It must be noted that in the case of United Breweries High Court), it was held that Section 14A applies to a ca of the assessee is to the acquire controlling interest in a company and not to earn dividends. Hence, the investments of the assessee in its sister concerns also need to be considered while working out disallowance u hen it comes to such huge investments, the decisions have to be taken at a very senior level of management of the company, Not on manpower, skill and resource but also the office premise, resources of the company are used for the management and decision making for the be disallowed in view of provisions of Section 14A of the Act. In view of the above, in no scenario it can be deduced that an employee with a monthly salary of Rs.4167/- has been handling all the investments capable of yielding exempt income. Further, an allocation of expenses of per month for handling such huge investments is not air and As per section 14A of the IT Act, 1961 no deduction shall be allowed in expenditure incurred by the assessee in relation to income income under the IT Act 1961. Further, if assessing officer with the correctness of claim of assessee in respect of such expenditure, assessing officer shall determine the amount of expenditure incurred in relation to such income which does not form part of the total income per method prescribed in rule 8D of the IT Rules. It must be noted that the CBDT has issued Notification No. /2008 dated March 24, 2008, which provides for insertion of Tax Rules 1962. The said Rule 8D would apply in eith following situations- Where the AO is not satisfied with the correctness of the claim of expenditure made by the assessee; or the assessee claims that no expenditure ha me which does not form part of the total income In view of the above discussion, the case of the assessee squarely falls under the provisions of the above notification.” Nuvama Wealth Management Limited 9 s. 6760/MUM/2025 & 6761/MUM/2025 The assessee was asked to submit working of the disallowance of expenses incurred in relation to exempt income earned. The assessee has submitted the same vide submission dated 12.12.2016, but the same is not found to be acceptable. The assessee has contended that the investments anies is purely and purpose and in the nature of strategic investment. The on account of salary of a mid level employee handling on account of administrative, statutory and miscellaneous ing of exempt income. ed Breweries Limited vs. DCIT , it was held that Section 14A applies to a case where quire controlling interest in a company Hence, the investments of the assessee in its sister ng out disallowance u/s 14A the decisions have to be taken at a very senior level of management of the company, Not only the the office premise, infrastructure and the management and decision be disallowed in view of provisions of Section 14A of the Act. In view of the above, in no scenario it can be deduced that an employee has been handling all the investments capable of yielding exempt income. Further, an allocation of expenses of per month for handling such huge investments is not air and shall be allowed in respect assessee in relation to income which does form 1. Further, if assessing officer is not correctness of claim of assessee in respect of such the amount of expenditure incurred in relation to such income which does not form part of the total income Notification No. Nos ich provides for insertion of Rule 8D in the would apply in either of the correctness of the claim of as been incurred in me which does not form part of the total income. In view of the above discussion, the case of the assessee squarely falls under Printed from counselvise.com 7. Having considered the above finding of the Assessing Officer, we are of the opinion that Assessing Officer has expressly recorded dissatisfaction to the claim of the assessee. Further we note that Hon’ble Delhi High Court in the case of Financial Services Ltd. v. DCIT even implied dissatisfaction on the claim of the assessee is also sufficient to invoke the provisions of the Tax Rules, 1962. Accordingly, assessee that no dissatisfaction was recorded by the Assessing Officer before invoking Rule 8D of Income Tax Rules, 1962. ground of the appeal of the assessee is accordingly dismissed. 8. Now, we take up the appeal of the assessee for assessment year 2015-16. The sole ground of the assessee is reproduced as under: “1. The Commissioner of Income Tax (Appeals) referred as CIT(A)] erred in confirming the action of the Deputy Commissioner of Income Tax Circle disallowance u/s 14A of the Income Tax Act, 1961 (Act) r.w. Rule 8D of the Income Tax Rules, 1962 (Rules) without recording his dissatisfaction having regard to its books of accounts. The Appellant submits that it has made suo mot Rs.13,18,665/- excess of Rs. 13,18,665/ 9. In the year under consideration also the assessee had claimed exempt income of Rs. disallowance of Rs.13,18,665/ worked out the disallowance invoking Rule 8D of the Income Tax Rules at Rs.1,27,02,451/ Nuvama Wealth Management ITA No Having considered the above finding of the Assessing Officer, we are of the opinion that Assessing Officer has expressly recorded dissatisfaction to the claim of the assessee. Further we note that Hon’ble Delhi High Court in the case of l Services Ltd. v. DCIT, ITA No. 470/2016 has held that even implied dissatisfaction on the claim of the assessee is also sufficient to invoke the provisions of the Rule 8D of the Income Accordingly, we reject the contention of the e that no dissatisfaction was recorded by the Assessing ing Rule 8D of Income Tax Rules, 1962. ground of the appeal of the assessee is accordingly dismissed. we take up the appeal of the assessee for assessment The sole ground of the assessee is reproduced as “1. The Commissioner of Income Tax (Appeals)-47, Mumbai [hereinafter referred as CIT(A)] erred in confirming the action of the Deputy Commissioner of Income Tax Circle – 4(1)(1), Mumbai [hereinafter referred as AO] in making disallowance u/s 14A of the Income Tax Act, 1961 (Act) r.w. Rule 8D of the Income Tax Rules, 1962 (Rules) without recording his dissatisfaction having regard to its books of accounts. The Appellant submits that it has made suo moto disallowance of - u/s 14A r.w.r 8D of the Rules, hence, the disallowance in 13,18,665/- made by the AO shall be deleted.” In the year under consideration also the assessee had claimed exempt income of Rs.19,16,42,793/- and m disallowance of Rs.13,18,665/-. The Assessing Officer however, worked out the disallowance invoking Rule 8D of the Income Tax Rules at Rs.1,27,02,451/-. The Ld. CIT(A), following his Nuvama Wealth Management Limited 10 s. 6760/MUM/2025 & 6761/MUM/2025 Having considered the above finding of the Assessing Officer, we are of the opinion that Assessing Officer has expressly recorded dissatisfaction to the claim of the assessee. Further we note that Hon’ble Delhi High Court in the case of Indiabulls has held that even implied dissatisfaction on the claim of the assessee is also Rule 8D of the Income the contention of the e that no dissatisfaction was recorded by the Assessing ing Rule 8D of Income Tax Rules, 1962. The ground of the appeal of the assessee is accordingly dismissed. we take up the appeal of the assessee for assessment The sole ground of the assessee is reproduced as 47, Mumbai [hereinafter referred as CIT(A)] erred in confirming the action of the Deputy Commissioner referred as AO] in making disallowance u/s 14A of the Income Tax Act, 1961 (Act) r.w. Rule 8D of the Income Tax Rules, 1962 (Rules) without recording his dissatisfaction having o disallowance of u/s 14A r.w.r 8D of the Rules, hence, the disallowance in made by the AO shall be deleted.” In the year under consideration also the assessee had and made suo-motu . The Assessing Officer however, worked out the disallowance invoking Rule 8D of the Income Tax . The Ld. CIT(A), following his Printed from counselvise.com consistent finding, restricted the disallowance to the exten exempted income but since the computation under Rule 8D was less than the exempted income, made by the A.O. The relevant finding of the Ld. CIT(A) is reproduced as under: “10.7 The Hon'ble Punjab & Patiala, 393 ITR 476) held that disallowance under section 14A cannot exceed exempt income, a view also supported by the Hon'ble Delhi High Court (Cheminvest Limited vs. CIT, 378 ITR 33). The Revenue's SLP before Hon'ble Apex Court against the decision of Punjab & Haryana High Court in the case of CIT vs. State Bank of Patiala has been dismissed on merits vide order dated 08/10/2018. Based on legal precedent's, the disallowance u/s 14A r.w.r. 8D is restricted t quantum of exempt income claimed by the appellant is Rs. 19,09,42,793/ the disallowance computed by the AO invoking provisions of section 14A r.w.r. 8D is Rs. 1,13,83,786/ computed by the AO is less than the claim of exempt income for the previous year relevant to AY 2015 comments in the succeeding paragraphs. 10.8 The appellant has also contested that 14A r.w.r 8D(2)(iii) should be made considering only those investments which have actually yielded exempt income. The Hon'ble Special Bench of Delhi Tribunal in the case of ACIT vs. Vireet Investments Pvt. Ltd. ITA No.502/Del/2012, have held that for the purposes of calculating disallowance as per Rule 8D(2)(iii), only those investments are to be considered for computing average value of investments which yield exempt income during the year. Further, the Spl Bench decision ha judgements such as (i) Sajjan India Ltd. vs. Addl.CIT (2018) 89 Taxmanın.com 21 (Mum Tribunal), (ii) DCIT vs. Bombay Oxygen Corporation Ltd. (2017) 86 Taxmanın 88 (Mum Tribunal), (iii) Tata Power Co Ltd. vs PCIT, Mumbai 121 Taxmann.com 127 (Mum Tribunal). Nuvama Wealth Management ITA No consistent finding, restricted the disallowance to the exten exempted income but since the computation under Rule 8D was less than the exempted income, and sustained the disallowance made by the A.O. The relevant finding of the Ld. CIT(A) is reproduced as under: The Hon'ble Punjab & Haryana High Court (CIT vs. State Bank of Patiala, 393 ITR 476) held that disallowance under section 14A cannot exceed exempt income, a view also supported by the Hon'ble Delhi High Court (Cheminvest Limited vs. CIT, 378 ITR 33). The Revenue's SLP before Hon'ble Apex Court against the decision of Punjab & Haryana High Court in the case of CIT vs. State Bank of Patiala has been dismissed on merits vide order dated 08/10/2018. Based on legal precedent's, the disallowance u/s 14A r.w.r. 8D is restricted to the exempt income claimed. In this case, the quantum of exempt income claimed by the appellant is Rs. 19,09,42,793/ the disallowance computed by the AO invoking provisions of section 14A r.w.r. D is Rs. 1,13,83,786/-. Since, the quantum of disallowance u/s 14A r.w.r. 8D computed by the AO is less than the claim of exempt income for the previous year relevant to AY 2015-16, the disallowance is justified, subject to the s in the succeeding paragraphs. The appellant has also contested that computation of disallowance u/s 14A r.w.r 8D(2)(iii) should be made considering only those investments which have actually yielded exempt income. The Hon'ble Special Bench of Delhi Tribunal in the case of ACIT vs. Vireet Investments Pvt. Ltd. ITA l/2012, have held that for the purposes of calculating disallowance as per Rule 8D(2)(iii), only those investments are to be considered for computing average value of investments which yield exempt income during the year. Further, the Spl Bench decision has been followed in a number of other judgements such as (i) Sajjan India Ltd. vs. Addl.CIT (2018) 89 Taxmanın.com 21 (Mum Tribunal), (ii) DCIT vs. Bombay Oxygen Corporation Ltd. (2017) 86 Taxmanın 88 (Mum Tribunal), (iii) Tata Power Co Ltd. vs PCIT, Mumbai Taxmann.com 127 (Mum Tribunal). Nuvama Wealth Management Limited 11 s. 6760/MUM/2025 & 6761/MUM/2025 consistent finding, restricted the disallowance to the extent of exempted income but since the computation under Rule 8D was sustained the disallowance made by the A.O. The relevant finding of the Ld. CIT(A) is Haryana High Court (CIT vs. State Bank of Patiala, 393 ITR 476) held that disallowance under section 14A cannot exceed exempt income, a view also supported by the Hon'ble Delhi High Court (Cheminvest Limited vs. CIT, 378 ITR 33). The Revenue's SLP before the Hon'ble Apex Court against the decision of Punjab & Haryana High Court in the case of CIT vs. State Bank of Patiala has been dismissed on merits vide order dated 08/10/2018. Based on legal precedent's, the disallowance u/s o the exempt income claimed. In this case, the quantum of exempt income claimed by the appellant is Rs. 19,09,42,793/- and the disallowance computed by the AO invoking provisions of section 14A r.w.r. ance u/s 14A r.w.r. 8D computed by the AO is less than the claim of exempt income for the previous 16, the disallowance is justified, subject to the computation of disallowance u/s 14A r.w.r 8D(2)(iii) should be made considering only those investments which have actually yielded exempt income. The Hon'ble Special Bench of Delhi Tribunal in the case of ACIT vs. Vireet Investments Pvt. Ltd. ITA l/2012, have held that for the purposes of calculating disallowance as per Rule 8D(2)(iii), only those investments are to be considered for computing average value of investments which yield exempt income during the s been followed in a number of other judgements such as (i) Sajjan India Ltd. vs. Addl.CIT (2018) 89 Taxmanın.com 21 (Mum Tribunal), (ii) DCIT vs. Bombay Oxygen Corporation Ltd. (2017) 86 Taxmanın 88 (Mum Tribunal), (iii) Tata Power Co Ltd. vs PCIT, Mumbai (2020), Printed from counselvise.com 10.9 With the Spl. Bench decision in the case of Vireet Investment Ltd. (supra), law with respect to computation of disallowance under Rule 8D(2)(iii) of the Act is settled and the quantum of disallowance has t extent of investments yielding exempt income. Further, the Spl Bench decision has been followed in several cases by the jurisdictional Mumbai Tribunal in several cases quoted in the previous paragraph. Hence, following the judgement of the Spl Bench Delhi Tribunal and jurisdictional Tribunal, it is held that disallowance u/s. 14A of the Act has to be limited to the value of investments yielding exempt income. Therefore, the AO is directed to considering those investments which have actua the assessee for the purpose of working out disallowance u/s 14A r.w.r. BD(2)(iii). The grounds of appeal are partly allowed. 10. Before us, the assessee has only challenged dissatisfaction was recorded to the claim of however, we note that in the year under consideration also, the Assessing Officer duly recorded the dissatisfaction on the claim of the assessee. The relevant part of the assessment order is reproduced as under: “G) For the purpose of making as well as purchase/sale of shares/mutual funds, assessee has used its office and incurred expenses such as Transport charges, Office expenses Telephones expenses Travelling expenses. All these expenses are extent related to investment in Mutual funds. Moreover, the assessee has to keep track of various dividend incomes declared by the invested companies and also to keep track of the dividend income having been regularly received by the assessee. T assessee. H) In the absence of separate accounts by way of which the management and administrative expenditure could be segregated, there is no dispute and there cannot be any doubt that some expe the income from dividend. In case of mixed accounting, the expenditure is not identifiable as such, which directly related to earning of dividend but that cannot be a ground to say that no expenditure is incurred income or that no expenditure could be related to that income. I) I’m relying on the judgment of the jurisdictional tribunal in Asha Lalit Kanodia vs Additional Commissioner of Income Nuvama Wealth Management ITA No With the Spl. Bench decision in the case of Vireet Investment Ltd. (supra), law with respect to computation of disallowance under Rule 8D(2)(iii) of the Act is settled and the quantum of disallowance has t extent of investments yielding exempt income. Further, the Spl Bench decision has been followed in several cases by the jurisdictional Mumbai Tribunal in several cases quoted in the previous paragraph. Hence, following the the Spl Bench Delhi Tribunal and jurisdictional Tribunal, it is held that disallowance u/s. 14A of the Act has to be limited to the value of investments yielding exempt income. Therefore, the AO is directed to considering those investments which have actually yielded exempt income to the assessee for the purpose of working out disallowance u/s 14A r.w.r. BD(2)(iii). The grounds of appeal are partly allowed.” Before us, the assessee has only challenged dissatisfaction was recorded to the claim of the assessee, however, we note that in the year under consideration also, the Assessing Officer duly recorded the dissatisfaction on the claim of the assessee. The relevant part of the assessment order is reproduced as under: For the purpose of making investment and thereafter control of investment as well as purchase/sale of shares/mutual funds, assessee has used its office and incurred expenses such as Transport charges, Office expenses Telephones expenses Travelling expenses. All these expenses are extent related to investment in Mutual funds. Moreover, the assessee has to keep track of various dividend incomes declared by the invested companies and also to keep track of the dividend income having been regularly received by the assessee. This activity itself calls for considerable attention of the In the absence of separate accounts by way of which the management and administrative expenditure could be segregated, there is no dispute and there cannot be any doubt that some expenditure is incurred for making or earning, the income from dividend. In case of mixed accounting, the expenditure is not identifiable as such, which directly related to earning of dividend but that cannot be a ground to say that no expenditure is incurred for earning dividend income or that no expenditure could be related to that income. I’m relying on the judgment of the jurisdictional tribunal in Asha Lalit Kanodia vs Additional Commissioner of Income-tax, Range- Nuvama Wealth Management Limited 12 s. 6760/MUM/2025 & 6761/MUM/2025 With the Spl. Bench decision in the case of Vireet Investment Ltd. (supra), law with respect to computation of disallowance under Rule 8D(2)(iii) of the Act is settled and the quantum of disallowance has to be limited to the extent of investments yielding exempt income. Further, the Spl Bench decision has been followed in several cases by the jurisdictional Mumbai Tribunal in several cases quoted in the previous paragraph. Hence, following the the Spl Bench Delhi Tribunal and jurisdictional Tribunal, it is held that disallowance u/s. 14A of the Act has to be limited to the value of investments yielding exempt income. Therefore, the AO is directed to lly yielded exempt income to the assessee for the purpose of working out disallowance u/s 14A r.w.r. Before us, the assessee has only challenged that no the assessee, however, we note that in the year under consideration also, the Assessing Officer duly recorded the dissatisfaction on the claim of the assessee. The relevant part of the assessment order is investment and thereafter control of investment as well as purchase/sale of shares/mutual funds, assessee has used its office and incurred expenses such as Transport charges, Office expenses Telephones expenses Travelling expenses. All these expenses are to certain extent related to investment in Mutual funds. Moreover, the assessee has to keep track of various dividend incomes declared by the invested companies and also to keep track of the dividend income having been regularly received his activity itself calls for considerable attention of the In the absence of separate accounts by way of which the management and administrative expenditure could be segregated, there is no dispute and there nditure is incurred for making or earning, the income from dividend. In case of mixed accounting, the expenditure is not identifiable as such, which directly related to earning of dividend but that for earning dividend income or that no expenditure could be related to that income. I’m relying on the judgment of the jurisdictional tribunal in Asha Lalit -12 (2), Mumbai (71 Printed from counselvise.com taxmann.com 84) where assessee claimed that no expenditure was incurred to earn exempt dividend income, onus was on the assessee to substantiate her claim with her accounts and on failure to do so disallowance is to be made under sec with rule 8D.” 11. In view of the above, it is clear that Assessing Officer has clearly recorded the dissatisfaction on the claim of the assessee and thus the ground of the appeal is accordingly dismissed. 12. In the result, both the appeals dismissed. Order pronounced in the open Court on Sd/- (KAVITHA RAJAGOPAL JUDICIAL MEMBER Mumbai; Dated: 27/02/2026 Ankit, 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// Nuvama Wealth Management ITA No taxmann.com 84) wherein the ITAT Mumbai Bench ‘A’ held that Where assessee claimed that no expenditure was incurred to earn exempt dividend income, onus was on the assessee to substantiate her claim with her accounts and on failure to do so disallowance is to be made under sec In view of the above, it is clear that Assessing Officer has clearly recorded the dissatisfaction on the claim of the assessee and thus the ground of the appeal is accordingly dismissed. In the result, both the appeals of the assessee are ronounced in the open Court on 27/02/2026. (KAVITHA RAJAGOPAL) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT MEMBER Copy of the Order forwarded to : BY ORDER, (Assistant Registrar) ITAT, Mumbai Nuvama Wealth Management Limited 13 s. 6760/MUM/2025 & 6761/MUM/2025 in the ITAT Mumbai Bench ‘A’ held that Where assessee claimed that no expenditure was incurred to earn exempt dividend income, onus was on the assessee to substantiate her claim with her accounts and on failure to do so disallowance is to be made under section 14A, read In view of the above, it is clear that Assessing Officer has clearly recorded the dissatisfaction on the claim of the assessee and thus the ground of the appeal is accordingly dismissed. of the assessee are /02/2026. Sd/- OM PRAKASH KANT) ACCOUNTANT MEMBER BY ORDER, (Assistant Registrar) ITAT, Mumbai Printed from counselvise.com "