ACIT, MUMBAI vs. K RAHEJA CORPORATE SERVICES PRIVATE LIMITED, MUMBAI

ITA 5350/MUM/2025Status: DisposedITAT Mumbai31 October 2025AY 2015-1613 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the issue of disallowance under Section 14A read with Rule 8D in the absence of any exempt income earned during the year has been decided in favour of the assessee by various decisions of the Hon'ble Jurisdictional High Court and Co-ordinate Benches, including the assessee's own case for earlier years. The Tribunal noted that the amendment brought by the Finance Act, 2022, inserting an Explanation to Section 14A, is effective from April 1, 2022, and thus not applicable to the assessment years under consideration. The Tribunal found no justification to deviate from the consistent view taken in the assessee's own case for earlier years, upholding the principle of consistency. Therefore, the grounds of appeal raised by the Revenue were dismissed.

What were the facts?

The Revenue has filed appeals against the orders of the CIT(A) for Assessment Years (AY) 2014-15 and 2015-16. The assessee, K Raheja Corporate Services Pvt. Ltd., engaged in real estate development, filed returns declaring losses. The Assessing Officer (AO) disallowed expenses amounting to Rs. 3,14,55,653/- under Section 14A read with Rule 8D, citing the assessee's fresh investments and claiming expenses without suo moto disallowance. The CIT(A) deleted this disallowance, holding that no disallowance under Section 14A is warranted when the assessee has not earned any exempt income during the year. The Revenue is aggrieved by this deletion.

What were the issues?

1. Whether the disallowance under Section 14A of the Income Tax Act, 1961, read with Rule 8D, is warranted when the assessee has not earned any exempt income during the assessment year? Assessee's contentions: The assessee argued that it is a settled proposition of law that no disallowance under Section 14A is warranted if no exempt income is earned. They relied on the jurisdictional High Court's decision in Pr. CIT vs. Tata Industries Ltd. and their own case for earlier years. Revenue's contentions: The Revenue contended that the CIT(A) failed to consider CBDT Circular No. 5/2014, which allows disallowance even without earning exempt income. They also cited the jurisdictional Bombay High Court's decision in Godrej Boycee Mfg. Co. Ltd. vs. DCIT & Anor. and prayed for the AO's order to be upheld.

Which sections of the Income-tax Act were involved?

Section 14A,Section 143(3),Section 115JB,Section 250

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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI

Before: SHRI VIKRAM SINGH YADAV, AM AND

For Appellant: Shri Madhur Agrawal
For Respondent: Shri Hemanshu Joshi, SR DR
Hearing: 27.10.2025Pronounced: 31.10.2025

Per Kavitha Rajagopal, J M: The captioned appeals have been filed by the revenue, challenging the order of the learned Commissioner of Income Tax (Appeals) 52, Mumbai (‘ld.CIT(A)' for short), passed u/s.250 of the Income Tax Act, 1961 (‘the Act'), pertaining to the Assessment Year (‘A.Y.' for short) 2014-15 & 2015-16. 2. As the facts are identical, we hereby pass a consolidated order by taking ITA No. 5349/Mum/2025, relevant to A.Y. 2014-15 as a lead case.

3.

The solitary ground of appeal pertains to the disallowance u/s.14A of the Act which was deleted by the ld. CIT(A) on the ground that no disallowance u/s.14A is warranted when the assessee has not earned any exempt income during th

The order continues below.

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