ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 6-1-1 MUMBAI, AAYAKAR BHAVAN, CHURCHGATE MUMBAI vs. M/S. CYQUATOR MEDIA SERVICES PVT. LTD., MUMBAI

आयकरअपीलीयअिधकरण�ायपीठमुंबईम�। IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, MUMBAI BEFORE SHRI AMIT SHUKLA, JM & SHRI ARUN KHODPIA, AM I.T.A. No.4069/Mum/2025 (Assessment Year: 2016-17) Assistant Commissioner of M/s. Cyquator Media Services Pvt. Income Tax Circle 6-1-1, Ltd. 18th Floor, Marathon Futurex N M Mumbai Vs. Room No.504, 5th floor, Aayakar Joshi Marg, Delisle Road, Mumbai- Bhavan, Churchgate, Mumbai- 400013 400020 PAN: AAECP0069P Revenue- अपीलाथ� / Appellant Assessee-��थ�/ Respondent :

: Mr. Jay Bhansali Assesseeby : Shri R. A. Dhyani (CIT – DR) Revenueby : 18.03.2026 Date of Hearing Date of Pronouncement : 15.06.2026

O R D E R Per Arun Khodpia, AM: This appeal is preferred by the Revenue, against the order of the Commissioner of Income Tax Appeals, National Faceless Appeal Centre (NFAC), Delhi [in short, “the Ld. CIT(A)”], dated 11.03.2025 for the Assessment Year (AY) 2016-17, arises from the assessment order under section 143(3) of the Income Tax Act, 1961 [in short, “the Act”] dated 24.12.2018, passed byAssistant Commissioner of Income Tax Circle 6(2)(1), Mumbai [in short, “the Ld.AO”]. The grounds of appeal raised by the Revenue are as under:

. “1. Whether in facts and circumstances of the case and in law, Ld. CIT(A) erred in deleting the addition made by AO to the tune of Rs.50,15,26,346/ made u/s 14A read with Rule 8D without pointing out any specific discrepancy in the detailed working made by the AO. The deletion also included the suo motu disallowance of Rs. 16,15,468/-made by the appellant. 2. Whether in facts and circumstances of the case and in law, Ld. CIT(A) erred in ignoring the fact that assessee had earned exempt income of Rs. 59,37,12,543/-during the year under consideration by way of Dividend income which is claimed as exempt u/s 10(34) of the Act, while adjudicating the issue of disallowance u/s 14A of the Act merely placing reliance on the earlier order of Hon'ble ITAT 'C' Bench, Mumbai in case of the appellant for A.Y. 2014-15. 3. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition made to book profit on account of disallowance u/s 14A holding that section 14A is not applicable in the case of MAT provision u/s 115JB of the Act, when clause (f) of Explanation to Sec 115JB clearly mention that the amount relatable to any income to which section 10 (except clause 38) or section 11 or section 12 has to be added to the book profit which is applicable from A.Y. 2007-08 and decisions quoted by the Tribunal pertain prior to the introduction of the said clause?" 4 The Appellant prays that the order of the CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored.”

. 3. Ld. AO also referred to the provisions of section 14A and observed that the intention of legislature is to disallow the explanation in relation to income not forming part of total income. Contextual interpretation of section 14A clearly suggests that expenditure in relation to exempt income has to be disallowed, any other interpretation would render the provision otiose which is not permissible in law.The Ld. AO also relied upon CBDT’s Circular No.5/2014,wherein it is clarified that even if there is no exempt income earned by assessee, disallowance u/s 14A can still be made. Reliance was placed on the judgment of ITAT, Delhi in the case of Cheminvest Ltd. vs. ITO [(2009) 121 ITD 318 (Delhi)(SB)],wherein it has been decided that the disallowance u/s 14A can be made, even if no exempt income has been earned or received.

. 1. The Ld. AO has erred in facts and law in making mechanical disallowance of Rs. 50,15,26,346/- u/s 14A of the Act. The reasons given by him for doing so are wrong, contrary to the facts of the case and provisions of law. 2. The Ld. AO, on the facts of the case and in law, failed to appreciate that the Appellanthas sufficient interest free funds available to cover its investments and hence, relying upon the decision in Reliance Utilities and Power Limited (313 ITR 340), по disallowance out of interest is required. 1. Without prejudice to above, the Ld. AO ought to have netted off the interest expenses against the interest income and considered the net interest expenses for the purpose of calculation of disallowance out of interest. 1. The Ld. AO erred in law and facts in disallowing additionally Rs. 8,05,38,884/- out of expenses without proving nexus with the investments/ exempt income earned and none of the business expenses of the company are proved to have been incurred for the purposes other than business by the Ld. AO. The disallowance of expenses u/s 14A is required to be deleted. 1. The Ld. AO erred in law and facts in making the addition of notional expenses of Rs. 50,15,26,346/-being disallowance made u/s 14A of the Act, for calculating book profits u/s 115 JB of the Act even when no expenses are incurred/or related to earning such income. The reasons given by her for doing so are wrong, contrary to the facts of the case and against the provision of law: 7.1 In this case the assessing officer in his assessment order has disallowed an amount of Rs. 50,31,41,814/- u/s 14A and Rule 8D of the Act and added to the income of the appellant assessee. In the replies, the appellant assessee has submitted that similar issues have already been covered and decided in favour of appellant's own case by the Hon'ble ITAT "C" Bench Mumbai. 7.2 Further on perusal of Hon'ble ITAT "C" Bench Mumbai in appellant's own case for the A.Y 2014-15 on the same issue has allowed the ground”

. annual report of the assessee for the financial year 2011-12, we find that the scheme of amalgamation between Essel Business Process Ltd and the assessee was sanctioned by the Hon'ble Bombay High Court on 02/12/2011, w.e.f. 15/10/2011. We further find that as on 31/03/2011 the value of investment in the books of account of the assessee was nil. However, as on 31/03/2012, i.e. after the aforesaid amalgamation, the value of the investment was increased to Rs.164308.70 lakhs. From the balance sheet of Essel Business Process Ltd, we find that as on 15/10/2011, i.e. on the date of the amalgamation, the total value of the investment was Rs.27 only in the 130,888,822 shares of Zee Entertainment Enterprises Ltd. As per the assessee, Essel Business Process Ltd acquired the shares by way of gift at nil consideration, however, the same was recorded at Rs.27 for accounting purposes. We find from the annual report of the assessee for the financial year 2011-12 that after the amalgamation, the assessee valued the aforesaid investment in shares of Zee Entertainment Enterprises Ltd. at Rs.146660.93 lacs, i.e. the fair value of the investment as on 15/10/2011, and recorded the same in its books of accounts. Thus, it is clearly evident that the investment to the extent of Rs. 146660.93 lacs in the books of the assessee is nothing but the shares transferred to the assessee pursuant to the aforesaid scheme of amalgamation with Essel Business Process Ltd. The Revenue has not brought any material to controvert the aforesaidfacts as emanating from the material placed on record. Therefore, we are of the considered view that the investment to the extent of Rs. 146660.93 lacs cannot be considered for computation of disallowance under section 14A read with Rule BD(2)(ii), since no interest-bearing funds were utilised for the acquisition of the aforesaid investment. 7. As regards the balance investment of Rs.17647.77 lacs (i.e. investment of Rs.164308.70 lacs as on 31/03/2014 minus investment of Rs. 146660.93 acquired by way of aforesaid amalgamation), we find that the assessee had a share capital of Rs. 95.00 lacs and reserves & surplus of Rs.88,294.94 lacs as on 31/03/2014. We further find that there is no change in the value of investment since 31/03/2012. However, even on 31/03/2012, the assessee had a share capital of Rs. 95.00 lacs and reserves & surplus of Rs.98,054.37 lacs, i.e. more than the value of balance investment of Rs.17647.77 lacs. Therefore, it is sufficiently evident that the assessee's own funds are more than investments, including the investments for earning exempt income. We find that the Hon'ble Jurisdictional High Court in CIT vs HDFC Bank Ltd., [2014] 366 ITR 505 (Bom.) held that where assessee's own funds and other non-interest bearing funds were more than the investment in tax-free securities, no disallowance under section 14A of the Act can be made. We further find that the Hon'ble Supreme Court in South Indian Bank Ltd. vs CIT, [2021] 438 ITR 001 (SC) held that disallowance under section 14A of the Act would not be warranted where interest-free own funds exceed the investment in tax-free securities and in such a case the investment would be presumed to be made out of assessee's own funds. Therefore, respectfully following the lawlaid down by the Hon'ble Supreme Court and the Hon'ble jurisdictional High Court in cases cited supra, we find no merit in disallowance of Rs.80,08,92,309 made by the AO and upheld by the learned CIT(A) under section 14A read with Rule 8D(2)(ii). As regards the disallowance computed under section 14A read with Rule 8D(2)(iii) is concerned, it is undisputed that the assessee had suo moto disallowed Rs. 8,21,54,351 under section 14A read with Rule 8D, while filing its return of income. Therefore, in view of the aforesaid findings, the disallowance of Rs. 80,08,92,309 made by the AO and upheld by the learned CIT(A) is deleted. Accordingly, the grounds raised by the assessee are allowed.”

. Authorities. We, therefore, find it appropriate to restore this issue back to the file of Ld. AO for fresh adjudication in terms of our observations hereinabove.

Order pronounced in the open court on 15-06-2026.

Sd/- Sd/- (AMIT SHUKLA) (ARUN KHODPIA) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated : 15-06-2026. Ankit K., Sr. PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. DR, ITAT, Mumbai 4. Guard File 5. CIT

BY ORDER,

(Dy./Asstt. Registrar) ITAT, Mumbai