MOTILAL OSWAL FINANCIAL SERVICES LIMITED (SUCCESSOR OF MOPE INVESTMENT ADVISORS PRIVATE LIMITED),MUMBAI vs. DCIT, CIRCLE 7(1)(1), MUMBAI
Income Tax Appellate Tribunal, “F” BENCH, MUMBAI
Before: SHRI OM PRAKASH KANTMs SUCHITRA KAMBLEM/s. Motilal Oswal Financial Services Limited (Successor Of Mope Investment Advisors Private Limited), Motilal Oswal Tower, Prabhadevi S.O, Mumbai-400025. [PAN :AAECM6354 L]
PER SUCHITRA KAMBLE, JUDICIAL MEMBER:
This appeal is filed by the Assessee against the appellate order dated 30.05.2025 passed by the Commissioner of Income Tax (Appeals)-
3 Chennai, relating to the Assessment Year 2016-17. 2. The assessee has raised the following grounds of appeal:
Disallowance under section 14A in accordance with Rule 8D is bad in law
1. Disallowance under section 14A read with Rule 8D(2)(iii) amounting to Rs 15,50,607/- ignoring the rule of consistency Asst. Year : 2016-17
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On the facts and circumstances of the case and in law, the learned A/J CIT(A) erred in hot following the appellate order of CIT(A) passed for the AY 2012-13 in appellant's own case wherein the suo motu disallowance under section 14A made by the Appellant was accepted. Further, learned A/J CIT(A) also erred in ignoring Hon'ble Mumbai ITAT decision in case of the holding company and as well as the other group companies wherein the method of suo moto disallowance under section 14A which is identical in case of the Appellant was accepted. Thus, the disallowance under section 14A by invoking Rule BD is against the settled appellate decisions and therefore, bad in law and needs to be deleted.
2. Disallowance in accordance with Rule 8D without providing cogent reasons
On the facts and circumstances of the case and in law, the learned A/J CIT(A) erred in confirming the resort made by learned Assessing Officer to Rule 80(2)(iii) without providing any cogent reasons for not accepting the suo motu disallowance of Rs. 64,529/- made by the Appellant. Thus, the disallowance under section 14A by resorting to the method laid down under Rule 8D(2)(iii) is bad-in-law and needs to be deleted.
3. Disallowance under section 14A cannot exceed exempt income
Without prejudice to the above, on the facts and circumstances of the case and in law, the learned CIT(A) erred in not restricting the disallowance under section 14A read with Rule 8D to the amount of exempt dividend received of Rs 3,33,037/-.
The appellant craves leave to add, to amend, alter/delete and/or modify the above grounds of appeal on or before the final hearing.
The assesse has filed its return of income for the Assessment Year 2016-17 on 29.11.2016, declaring total income at Rs.10,27,07,730/-. The assessment was completed u/s.143(3) of the Act on 28.12.2019, thereby Asst. Year : 2016-17
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assessing total income at Rs.10,81,60,646/-. The Assessing made disallowance u/s.14A of the Act for a sum of Rs.33,92,916/- and u/s.80G for a sum of Rs.20,60,000/-.
Being aggrieved by the Assessment Order, the assesse filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee.
The Ld.AR submitted that the Revenue in assessee’s own case for the Assessment Year 2012-13 has accepted assessee’s suo moto disallowance u/s.14A of the Act. The Ld.AR further submitted that the CIT(A) has not taken into account the decision of the Tribunal in case of the holding company of the assessee as well as other group companies wherein the method of suo moto disallowance u/s.14A of the Act which is identical in the case of the assessee and the same was accepted by the Revenue. Thus, the Ld.AR submitted that the disallowance u/s.14A of the Act by invoking Rule 8D is against the settled appellate decision and therefore, bad in law. As regard to ground no.1.2 the Ld.AR submitted that the CIT(A) has not taken into account that the Assessing Officer while applying Rule 8D(2)(iii)of the Act has not recorded any cogent reason/satisfaction for not accepting suo moto disallowance of Rs.64,529/- made by the assesse. Thus, the disallowance u/s.14A of the Act by resorting to the method laid down under Rule 8D(2)(iii). The Ld.AR relied upon the following decisions of the Co-ordinate Bench of ITAT Mumbai. Asst. Year : 2016-17
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In the case of M/s. Motilal Oswal Securities Vs. DCIT in ITA
Nos.7328/Mum/2012,No.6204/Mum/2013,No.4581/Mum/2012
for the Assessment Years 2008-09, 2009,10 & 2010-11 respectively vide order dated 19.12.2016. In the case of M/s. Motilal Oswal Securities Vs. Add.CIT, in ITA
No.3010/Mum/2012 for the Assessment Year 2008-09 vide order dated 12.08.2014)
As regard to ground no.1.3, the Ld.AR submitted that it is without prejudice ground in case the earlier two grounds are not accepted. The Ld.AR submitted that the CIT(A) erred in not restricting the disallowance u/s.14A r.w Rule 8Dto the amount of exempt dividend income receive at Rs.3,33,037/-.
The Ld. DR submitted that the CIT(A) in para 7.5 has categorically mentioned that the computation under Rule 8D(2)(iii) at Rs.15,50,607/- being 0.5 % of average investment and assessee claimed that it has already disallowed proportionate personnel and admin cost at Rs.64,59,529/- in the return of income and also the disclosure to that effect was given in the tax audit report. Thus, the CIT(A) in para 7.6, has categorically mentioned that the sum of Rs.64,529/- was arose by the assessee stating that 5% of the time devoted by the employee is consider for proportionate disallowance of personnel admin cost. This claim of the assesse do not have any notional value. Therefore, the Ld. DR relied upon the assessment order as well as the order of the CIT(A). As regard Asst. Year : 2016-17
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no.1.2 related to satisfaction the Ld. DR submitted that the AO in para 4.3
has categorically elaborated the reasons on which Rule 8D and section 14A of the Act comes into picture in respect of assessee’s suo moto disallowance and the administrative expenses which should have been taken into account. Thus, the Assessing Officer has recorded the satisfaction and contention of the Ld.AR does not survive.
We have heard both the parties and perused the materials available on record. As regard to ground no. 1.2, the Assessing Officer has given his satisfaction during the assessment thereby observing that the assessee company was paying substantial amounts as interest expenditure and was using those interest bearing funds for investments yielding exempt income. Therefore, there is satisfaction noted in para 4.3 of the assessment order by the Assessing Officer. Hence, the contention of the Ld. AR that there is not satisfaction recorder is not tenable. Ground no. 1.2 is dismissed.
As regard to ground nos 1.1 and 1.3, the computation under Rule 8D(2)(iii) at Rs.15,50,607/- being 0.5% of the average investment, as per the calculation given by the Assessing Officer at page no.6, which itself shows that the interest paid is that of Rs.31,13,978/-. Therefore, the Assessing Officer calculated the disallowance at Rs.33,92,916/- which is more than the exempt income. The assessee made suo motu disallowance of Rs. 64,529/- which was taken into account by the Assessing Officer. But the contention of the Ld.AR that disallowance Asst. Year : 2016-17
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u/s.14A cannot exceed exempt income is justified in view of various judicial precedents. Therefore, direct the Assessing Officer to limit the disallowance u/s.14A Rule 8D to the extent of exempted income. Thus, the ground no.1.1 and 1.3 is partly allowed.
In the result, the appeal of the assesse is partly allowed.
The order is pronounced in the open Court on 16.09.2025. (OM PRAKASH KANT)
JUDICIAL MEMBER
Mumbai; Dated 16.09.2025
MV
आदेश की Ůितिलिप अŤेिषत/Copy of the Order forwarded to :
अपीलाथŎ / The Appellant 2. ŮȑथŎ / The Respondent. 3. संबंिधतआयकरआयुƅ / Concerned CIT 4. आयकरआयुƅ(अपील) / The CIT(A)- 5. िवभागीयŮितिनिध, आयकरअपीलीयअिधकरण, मुंबई / DR, ITAT, मुंबई 6. गाडŊ फाईल/ Guard file.
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आदेशानुसार/ BY ORDER,सहायक पंजीकार (Dy./Asstt.