J.M FINANCIAL AND INVESTMENT CONSULTANCY SERVICE PRIVATE LIMITED ,MUMBAI vs. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 3(2)(1), MUMBAI

PER OM PRAKASH KANT, AM

This appeal by the assessee is directed against order dated
11.07.2025 passed by the Ld. Commissioner of Income-tax
(Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld.
CIT(A)’] for assessment year 2015-16, raising following grounds:
A) Additional Disallowance u/s. 14A read with Rule 8D,
Rs.1,46,29,110/-.

Recording of s
1) The learne had made th considering d recorded prop the appellant.
u/s. 14A app directed to be 2) Without p dividend war directly credi which was a deleted.
3) Without p confirming the the ratio of th are referred in Disallowance
4) The learne the disallowa while computi
5) The learne had sufficient and borrowed hence no dis
8D(2)(ii)
6) The learn appellant had from interest for on accou prejudice, no dividend rece
7) Without pr facts and in appellant and on which n disallowance
J.M. Financial and satisfaction ed CIT(A) failed to appreciate that the a he disallowance u/s. 14A on a scientif direct and indirect expenses and the AO per satisfaction having regard to the acc
. Hence, additional disallowance made b plying Rule 8D was contrary to law hence e deleted.
prejudice to above during the year on rrants were received and the balance amo ited to the bank account hence, disa affirmed by the CIT(A) may be directe prejudice to above the Learned CIT(A) e disallowance made by the AO without f he Apex court and Juri ictional High Cou n the submission made before the CIT(A) of interest under Rule 8D(2)(ii) ed CIT(A) erred on facts and in law in co ance on account of interest of Rs. 64,4
ing the additional disallowance u/s. 14A ed CIT(A) failed to appreciate that the a t own funds out of which investments we d funds were utilized for funding activi sallowance of interest was required und ed CIT(A) further failed to appreciate d received net interest (i.e. reducing inter received) and hence no disallowance wa unt of interest under Rule 8D(2)(ii).
ot reducing the value of shares on w ived rejudice to the above, the learned CIT(A) law in not dealing with the contentio d directing the AO to reduce the value o no dividend was received, while co as per Rule 8D.
d Investment Consultancy
Services Pvt. Ltd.
2
appellant fic basis had not counts of y the AO e may be nly three ount was llowance ed to be erred in following urt which onfirming
42,764/-
.
appellant ere made ities and der Rule that the rest paid as called
Without which no erred on n of the of shares omputing

a.
Net investm
(current + n b.
Net investm year
Average Inv
(C)
Total assets
+ Current a a.
Total assets b.
Total assets year
Average Tot
AX B/C
(iii)
0.5% of the investment, does not for Total disallo
(ii) + (iii)
3. On further appe assessee and upheld respect of disallowan
115JB of the Act.
4. Aggrieved by t preferred the present reproduced hereinab
Paper Book running the assessee drew o
Bench of the Tribu
5454/Mum/2018 for that, in the year un
Rule 8D without regarding the correc relatable to exempt i absence of such reco
J.M. Financial and ment at the end of the year non-current investment)
1674950606/- ment at the beginning of the 1488894216/- vestment = (a+b)/2
1581922411/ (B) s (Fixed assets + Investment assets) s at the end of the year
2315955906/- s at the beginning of the 2100601225/- tal Assets (a+b)/2
2208278565/- (C)
64
average value of , the income from which rm part of total income
79
owance is aggregate of (i) +
1,6
eal, the Ld. CIT(A) rejected the c the disallowance however allow nce u/s 14A while computing the aforesaid assessment, the t appeal and has raised grounds bove. The assessee has also pla from pages 1 to 110. The lear our attention to the order of t unal in the assessee’s own ca r the assessment year 2012-13, der appeal, the Assessing Offic first recording the requisite ctness of the assessee’s claim income. According to the learn orded dissatisfaction renders th d Investment Consultancy
Services Pvt. Ltd.
5
4,42,764/-
9,09,612/-
66,08,254/- contention of the wed part relief in book profit u/s e assessee has s of challenge as ced on record a rned counsel for the Co-ordinate ase in ITA No.
, and submitted cer had invoked dissatisfaction of expenditure ned counsel, the he application of Rule 8D unsustainab our attention to the disallowance furnish
Paper Book, and als before the Assessing the said suo-motu dis
5. On the contrar relied on the order of Ground No. 1: No Section 14A
6. We have given ou wherein the assessee invoking Rule 8D w contemplated under has dealt with this returned findings in t
“Ground no B not recorded down by var deleted. How
Assessing off
"4.9 The fact assessee. The has to be wo per section 1
19,79, 144/
J.M. Financial and ble in law. The learned counsel e computation and working o hed by the assessee, placed at so relied upon the detailed sub g Officer explaining the basis a sallowance.
ry, the Ld. Departmental Repr f the lower authorities.
on-recording of Proper Satis ur thoughtful consideration to e assails the action of the Asse without recording the requisite section 14A(2) of the Act. The s objection in considerable d the following terms:
B. the first and foremost objection is that satisfaction and therefore as per prin rious judicial decisions, the addition is l wever, it noted from the assessment ord ficer has duly recorded the reasons:
of the above case are applicable in the e assessee has also admitted that the di orked out regarding exempt income in th
4A. The same is evident from disallowa offered by them in the computation of in d Investment Consultancy
Services Pvt. Ltd.
6
l further invited of the suo-motu page 45 of the bmissions made and rationale of resentative (DR) sfaction under Ground No. 1, essing Officer in satisfaction as e learned CIT(A) detail and has the AO has nciples laid liable to be der that the case of the isallowance heir case as ance of Rs.
ncome. The said disallow employce's expenses. Fu assessee vid assessment,
Rs.22,55,878
Rs.2,36,036/
expenses wh proves that th which is to b quantum of proceedings.
worked out validity of wh
Court in the c such a scenar per scientific m
4.10 The as assessee's ow the A.O. to investment. H appeal before of the Hon'ble
Karnataka H
DCIT(72 taxm that section assessee in e in a company deciding the section 14A, correctly follo
Daga Capital held that sec acquiring the companies.
4.11 Further, attributable t any submissi show cause n it is seen tha tune of Rs.8
2013-14 & Α
borrowings ha
J.M. Financial and wance is worked out by only estim benefit expenses and general adm urther, it is seen from the submissio de letter dated
19.12.2017
that d assessee has himself produced a w
8/- after including security transacti
- and demat charges of Rs.40,698
ich directly attributable to the exempt in he assessee is himself not sure of the di be made u/s 14A and hence, furnishe disallowance in ITR and during a This clearly goes on to show that assess the disallowance as per Rule8D. Co hich has been upheld by the Hon'ble Bo case of Godrej & Boyce Mfg. Co. Ltd. (Sup rio, the claim of assessee of making disal method, sound rather hollow.
ssessee in his reply has also submitt wn case for A.Y. 2008-09, Hon'ble ITAT h re-compute the disallowance excludin
However, the department has already e the Hon'ble High Court, Mumbai against e ITAT especially in the light of judgemen
High Court in the case of United Breweri mann.com 102 dated 31.05.2016), where
14A is applicable even where the mo enquiring the shares is to obtain controll y and not to earn dividends. In the said appeal of the assessee against appl
Hon'ble High court mentioned that owed the judgement of Special Bench l Management Pvt. Ltd. (2009) 310 ITR ction 14A is applicable even where the e shares was to obtain controlling inte on the issue of disallowance of interes to the exempt income, the assessee has ion despite the fact that assessee was giv notice on the issue of disallowance u/s 14
at the assessee has debited interest exp
9,93,753/-in P&L which was at Rs. 'N
Α.Υ. 2012-13. Also, during the year ave increased from Rs. 'NIL' to Rs. 11,00, d Investment Consultancy
Services Pvt. Ltd.
7
mating the ministrative on filed by during the working of on tax of /- as the ncome. This isallowance ed different assessment see has not onstitutional ombay High pra), and in llowance as ted that in has directed ng strategic y filed the t judgement nt of Hon'ble es Ltd v/s.
in it is held otive of the ling interest case, while licability of ITAT has in ITO v/s
(AR) 1 and e motive in erest in the st expenses s not given ven specific
4A. Further, ense to the NIL' in A.Y.
short term
00,000/-

Also, the inve
1,48,88,94,21
Statement file the net cash flow from inve flow in from F term borrowi assessee dur material on r funds were n
Therefore, by assessee has 14A r.w.r. 8D
14A related to 14 could not interest expen years.
4.12 In view o of the asses
Though the as worked out f disallowance
1961. In vie assessee is n worked as un
After citing al
4.12 that he by the appell not correct. Th disallowance therefore, rej
6.1 Upon a careful p
Assessing Officer h dissatisfaction with Assessing Officer ha furnished differing f income and thereaft that the assessee fa
J.M. Financial and estments during the year have increase
16/- to Rs.1,67,49,50,606/. As per the ed by assessee as part of the financial s flow from operating activities as well a estment activities is negative. The only Po
Financial Activities, wherein the proceeds ing are the main source of funding.
ring the assessment proceeding has not b record to prove that the borrowed/intere not used for the purpose of making in not making a disallowance on the intere s failed to follow the provision of disallo
D. It is also to be noted that the disallo o interest part in case of A.Y. 2012-13 &
be done only because of the fact that th nses claimed by the assessee for those a of the above, I am not satisfied with the c ssee for working out of disallowance ssessee has agreed that the disallowanc for exempt income but they have not fo as per section 14A r.w.r. 8D(2) of Incom ew of the above the disallowance ma not acceptable and disallowance as per nder."
ll the reasons, the AO has clearly specif is not satisfied. Therefore, the discussio lant that the satisfaction has not been herefore, the application of rule 8D in com is correct. This ground of the ap jected.”
perusal of the above reasoning, has, in unmistakable terms, the correctness of the assess as, inter-alia, noted that the figures of disallowance—first in fter during the assessment pr ailed to demonstrate that its w d Investment Consultancy
Services Pvt. Ltd.
8
ed from Rs.
Cash Flow statements, as net cash ositive cash s from short
Also, the brought any est bearing nvestments.
est part, the owance u/s owance u/s & A.Y. 2013- here was no assessment computation u/s. 14A.
ce has to be ollowed the me Tax Act, ade by the r rule 8D is fied in Para on at length recorded is mputing the ppellant is, we find that the , recorded his see’s claim. The assessee itself n the return of roceedings—and working was in conformity with Rul that the assessee ne employee cost and explanation regardin despite a substantia investments during t in paragraph 4.12 of reasoned satisfaction
6.12 We have exam material placed on r specifically called up only 25% of the com
Committee had been assessee, however, w
Even before us, when
Book containing the learned counsel cou assertion that the c investment-related ac hoc and devoid of e was furnished for res or for apportioning the basis of salary r
J.M. Financial and e 8D. The Assessing Officer fu either substantiated the basis d administrative expenditure ng the non-disallowance of inter al increase in interest-bearing he relevant year. These findings f the assessment order, constit n as required under the statute.
mined the assessment order a record. It is evident that the A pon the assessee to justify the mmission paid to members of n included in the suo-motu dis was unable to furnish any coge n attention was drawn to page e details of the suo-motu dis uld not place any evidence concerned employee had devot ctivity. The allocation, therefore evidentiary foundation. Similar stricting the disallowance of com general administrative expendi ratios. In these circumstances d Investment Consultancy
Services Pvt. Ltd.
9
urther recorded of allocation of nor gave any rest expenditure borrowings and s, duly extracted tute a clear and as well as the Assessing Officer basis on which the Investment sallowance. The ent explanation.
45 of the Paper sallowance, the to support the ted 60 days to e, was purely ad ly, no rationale mmission to 25%
iture merely on s, the Assessing

Officer was justifie unsatisfactory and in 6.13 The learned cou the Hon’ble Bombay
559), to contend tha cannot be applied.
enunciated therein.
necessarily depends has in fact been reco clarified by the Hon’b
Pvt. Ltd. v. Dy. CI
Officer undertakes a procedure in comput express recital of dis such dissatisfaction i itself.
6.14 Having regard t error in the order of t
Officer had duly rec section 14A and wa
Ground No. 1 raised
7. In Ground No.
dividend warrants we
J.M. Financial and ed in treating the assessee n consequently invoking Rule 8D unsel has placed reliance on t
High Court in Tata Chemicals at in the absence of proper satis
We respectfully affirm the Nonetheless, the application o upon the facts of each case. H orded, and recorded with reason ble Delhi High Court in Indiabu
T [2017] 395 ITR 242, where a detailed analysis and follow ting the disallowance, the mere ssatisfaction cannot vitiate the is otherwise evident from the as to the totality of the circumstan the learned CIT(A) in holding tha corded his dissatisfaction for t s justified in invoking Rule 8D d by the assessee stands dismi
2, the assessee contends that, ere received by way of physical c d Investment Consultancy
Services Pvt. Ltd.
10
e’s working as D.
the judgment of s Ltd. (475 ITR sfaction Rule 8D legal principle of that principle ere, satisfaction ns. Moreover, as ulls Investment e the Assessing ws the statutory e absence of an disallowance, if ssessment order nces, we find no at the Assessing the purposes of D. Accordingly, issed.
since only three cheques and the balance dividend in account, no further d
7.1 Having regard t
1, and in view of th invoked Rule 8D for under section 14A, w present contention d
Rule 8D has been val be determined strictly and the nature or m or by direct credit—d
8D. Accordingly, thi merit and is dismisse
8. In Ground No.
merely urged that th the Juri ictional Hi legal principles eman been taken into acc
Ground No. 1 of th survives for adjudica
No. 3 stands dismiss
J.M. Financial and ncome stood directly credited disallowance was warranted.
to our findings while adjudicat he fact that the Assessing Offic r the purpose of computing th we are of the considered view tha oes not survive for separate adj lidly applied, the quantum of di y in accordance with the statut mode of receipt of dividend—whe does not, in law, obviate the appl s ground raised by the assess ed.
3, the learned counsel for th he decisions of the Hon’ble Supr gh Court be duly considered. W nating from the said authoritie count and applied by us whi he appeal. In view thereof, no ation under this ground. Accor sed.
d Investment Consultancy
Services Pvt. Ltd.
11
d to the bank ting Ground No.
cer has already he disallowance at the assessee’s udication. Once isallowance is to ory mechanism, ether by cheque licability of Rule see is devoid of he assessee has reme Court and We note that the es have already ile adjudicating separate issue dingly, Ground

Appellant
Nirma Credit a (p) Ltd.

The above in of interest exp
(p)ltd was fo investments given the ap correct.
Therefore, it expenditure, exempt invest no further dis ground of app
9.2 The relevant o above, make it abu substantiate its asse towards investments
J.M. Financial and he investments during the year have in ,88,94,216/- to Rs.1,67,49,50,606/. As tatement filed by assessee as part of the f he net cash flow from operating activities flow from investment activities is negat cash flow in from Financial activities, wh m short -term borrowing are the main s
, the assessee during the assessment pr proceedings has not brought any mat ove that these borrowed/interest bearin ed for the purpose of making investme s relied on case laws where net inte red for the purpose of disallowance. The s different and the ratio cannot be un appellant has also relied on PCIT vs Nirm
(p)ltd .The fact of this case vis a vis a een:
Dividend income
Interest income
25.90 crores
81.19 la and capital
25.26
6.83 cro come analysis clearly reveals that majo pense in case of PCIT vs Nirma credit an or earning interest income from ICD an which emphasizes even more on the f ppellant's case rule 8D resorted by th is clear that the assessee incurred but failed to establish that the funds tments were entirely interest-free. The cl sallowance was warranted is not accepta peal is, therefore, rejected.”
observations of the learned C undantly clear that the ass ertion that borrowed funds wer yielding exempt income. The CI d Investment Consultancy
Services Pvt. Ltd.
13
ncreased s per the financial s as well tive. The erein the source of roceeding terial on ng funds ents. The rest has e facts of niversally ma credit appellant acs res r portion d capital nd other fact that he AO is interest used for laim that able. This CIT(A), extracted essee failed to re not deployed
IT(A) also rightly distinguished the ca
PCIT v. Nirma Credi factual matrix of tha the context of intere concluded that the a had not demonstrate out of interest-free fu was, therefore, reject
9.3 We have indep course of hearing, a page 32 of the Pape year. As rightly obse absence of operatio conclusively shows t short-term borrowing the sources of funds the year, the learne explanation or to pl findings of the CIT(A) the clear factual fin infirmity in the concl be considered unde applicable in such ca not discharged the J.M. Financial and ase law relied upon by the asse it and Capital (P) Ltd., pointin at case was materially different est-earning activities. The learn assessee had incurred interest e d that exempt investments were unds. The claim for exclusion o ed.
pendently examined the matt ttention of the learned counsel r Book, being the cash flow st erved by the CIT(A), the statem nal or investment-related cas that the only source of fresh g of ₹11 crores. When specificall utilised for the increase in inve ed counsel was unable to of lace any material on record to ). In these circumstances, and h ndings recorded by the CIT(A lusion that the interest compone er Rule 8D(2)(ii). The statutor ases remains unrebutted, and th onus cast upon it to establish d Investment Consultancy
Services Pvt. Ltd.
14
essee, including ng out that the , particularly in ned CIT(A) thus expenditure and e financed solely of such interest ter. During the l was invited to tatement for the ment reflects an sh inflows, and funds was the ly queried about estments during ffer any cogent o contradict the having regard to A), we find no ent was liable to ry presumption he assessee has h that interest- bearing funds were Accordingly, Groun devoid of merit and 10. Ground No. 6
disallowance of inter earned during the ye
The plea, in essenc considered for the pu
10.1 We are unable under section 14A re use of interest-bearin exempt income. The s interest income agai quantum of disallow and distinct taxabl incurred for purpose mischief of section 1
warrant an adjustme assessee.
10.2 In these circu assessee is contrar necessarily fail. Acc dismissed.
J.M. Financial and not utilised for making exem nd Nos. 4 and 5 raised by th are hereby dismissed.
pertains to the assessee’s con rest ought to be made, as the ear exceeded the interest expen ce, is that only the net inte urposes of section 14A of the Act to accept this contention. Th ead with Rule 8D is attracted b ng funds for making investme statutory scheme does not perm inst interest expenditure for d wance. Interest income constitu le receipt; conversely, intere es of earning exempt income
14A. The two are not interdepe ent or set-off in the manner ca umstances, the argument adv ry to the settled legal posit cordingly, Ground No. 6 of d Investment Consultancy
Services Pvt. Ltd.
15
pt investments.
he assessee are ntention that no interest income diture incurred.
rest should be t.
he disallowance by reason of the nts which yield mit the netting of determining the utes a separate est expenditure falls within the endent so as to anvassed by the vanced by the tion and must the appeal is 11. pertains to the assessee that, while only the average val yielded dividend inco placed on the decis
Vireet Investment P
11.1 We have care evident that the Asse take into account th
Special Bench in Vire governs the method
8D(2)(ii) and 8D(2)(iii)
11.2 In the interests accordance with law it appropriate to re
Assessing Officer. T disallowance under R in conformity with th
Ltd. (supra), after af ground is allowed for J.M. Financial and e submission of the learned c computing the disallowance u lue of those investments which ome ought to be considered. Re sion of the Special Bench of t
Pvt. Ltd., ITA No. 502/Del/201
fully considered the rival sub essing Officer, while applying R he binding ratio laid down by eet Investment Pvt. Ltd. (supra), d of computing the disallowan
).
s of justice, and to ensure a as expounded by the Special B estore this issue to the file
The Assessing Officer shall Rule 8D(2)(ii) and Rule 8D(2)(iii he principles laid down in Vireet ffording due opportunity to the r statistical purposes.
d Investment Consultancy
Services Pvt. Ltd.
16
counsel for the under Rule 8D, h have actually eliance has been the Tribunal in 12. bmissions. It is Rule 8D, did not the Co-ordinate which squarely nce under Rule computation in Bench, we deem of the learned recompute the ) afresh, strictly t Investment Pvt.
e assessee. The 12. In the result, th statistical purposes.
Order pronoun (SANDEEP G
JUDICIAL M
Mumbai;
Dated: 17/11/2025
Rahul Sharma, Sr. P.S.

Copy of the Order forward
1. The Appellant
2. The Respondent.
3. CIT
4. DR, ITAT, Mumbai
5. Guard file.

////

J.M. Financial and he appeal of the assessee is pa ced in the open Court on 17/
GOSAIN)
(OM PRAK
MEMBER
ACCOUNTA ded to :

BY ORDER

(Assistant Re

ITAT, Mu d Investment Consultancy
Services Pvt. Ltd.
17
artly allowed for 11/2025. KASH KANT)
ANT MEMBER
R, gistrar) umbai