ACIT , MUMBAI vs. RELIANCE POWER LTD , MUMBAI

ITA 3989/MUM/2025Status: DisposedITAT Mumbai17 December 2025AY 2016-1715 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the decision of the CIT(A). The Tribunal noted that the CIT(A) had partly sustained the disallowance under Section 14A read with Rule 8D. The Tribunal found merit in the assessee's argument that the mechanism for calculating disallowance under Section 14A read with Rule 8D cannot be automatically imported for disallowances under Section 36(1)(iii), Section 37, and Section 38 of the Act. Furthermore, the Tribunal concurred with the CIT(A)'s decision, which was based on the ITAT's findings in the assessee's own case and relied on the principle laid down in ACIT vs. Vireet Investment Pvt. Ltd. (Delhi Special Bench). The Tribunal found no contradicting facts, evidence, or decisions presented by the Revenue to overturn the CIT(A)'s order. Therefore, the Revenue's appeal was dismissed.

What were the facts?

The Revenue filed an appeal against the order of the CIT(A)-57, Mumbai, which had reduced the disallowance made by the AO under Section 14A read with Rule 8D of the Income Tax Act, 1961. The AO had made a disallowance of Rs. 99,00,71,593/- (net of suo-motu disallowance of Rs. 36,91,162/-) for AY 2016-17. The assessee, Reliance Power Ltd., had declared a business loss of Rs. 89,56,67,127/- and a book loss of Rs. 5,08,80,699/-. The CIT(A) restricted the disallowance to Rs. 7,33,01,500/-. The Revenue's appeal challenges the CIT(A)'s reduction of this disallowance and its reasoning.

What were the issues?

1. Whether the CIT(A) erred in reducing the disallowance made by the AO under Section 14A read with Rule 8D, Section 36(1)(iii), and Section 37(1) of the Act? The Revenue argued that the AO rightly made the disallowance, which should cover all expenses related to earning exempt income, and that the CIT(A) failed to appreciate Board Circular No. 5/2014. The Revenue also contended that the CIT(A) was not justified in directing the AO to re-compute the disallowance, as the issue was covered by ITAT decisions in ITO vs. RBK Share Broking Pvt. Ltd. and D.C.L.T. Cen. Cir. vs. Viraj Profiles Ltd. The Assessee argued that the issue is covered by ITAT orders in its own case for previous AYs, which held that the average value of investment for Rule 8D computation should consider only investments yielding dividend income, relying on ACIT vs. Vireet Investment Pvt. Ltd. (Delhi Special Bench).

Which sections of the Income-tax Act were involved?

Section 14A,Section 36(1)(iii),Section 37(1),Section 143(3),Section 144C(3),Section 115JB,Section 38

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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI

Before: SHRI AMIT SHUKLA, JM & SHRI ARUN KHODPIA, AM

Per Arun Khodpia, AM: The captioned appeal is filed by the revenue, directed against the order of Commissioner of Income Tax (Appeals)-57, Mumbai [for short "ld. CIT(A)"], which in turn arises from the assessment order passed under section 143(3) r.w.s. 144C(3) of the Income Tax Act, 1961 (the Act) dated 30.01.2020 for Assessment Year (AY) 2016-17, passed by the DCIT, Circle-15(3)(1), Mumbai. The grounds of appeal raised by the revenue in the present appeal are culled out as under:

“1. On the facts and in the circumstances of the case and in law, the Id.CIT(A) failed to appre

The order continues below.

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