DCIT CENTRAL CIRCLE 1(1), MUMBAI vs. ECL FINANCE LIMITED, MUMBAI

INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI BENCH: K BEFORE SHRI ANIKESH BANERJEE, JUDICIAL MEMBER AND MS. RATNA DASGUPTA, ACCOUNTANT MEMBER ITA7610/MUM/2025 िनधा�रणवष�/Assessment Year: 2014-15) ITA 7611/MUM/2025 िनधा�रणवष�/Assessment Year: 2015-16) ITA 7612/MUM/2025 िनधा�रणवष�/Assessment Year: 2016-17) ECL FINANCE LTD DCIT-CC-1(1), MUMBAI 4th Floor, Edelweiss House, Off R.No. 905, 9th Floor, Old CGO CST Road, Kalina Santa Cruz Vs. Buiding, M K Road, Mumbai- (E),Mumbai-400098, Maharashtra 400020, Maharashtra अपीलाथ� Appellant ��थ� Respondent ITA 7978/MUM/2025 िनधा�रणवष�/Assessment Year: 2014-15)

ITA 8162/MUM/2025 िनधा�रणवष�/Assessment Year: 2015-16) ITA 8163/MUM/2025 िनधा�रणवष�/Assessment Year: 2016-17) DCIT-CC-1(1) ECL FINANCE LTD R.No. 905, 9th Floor, Old 4th Floor, Edelweiss House, Off CST CGO Buiding, M K Road, Road, Kalina Santa Cruz (E),Mumbai- Vs. Mumbai-400020, 400098, Maharashtra Maharashtra अपीलाथ� Appellant ��थ� Respondent

ITA 7610-12, 7978, 8162, 8163/MUM/2025 CO 27-29/MUM/2026 ECL FINANCE LTD CO 27/MUM/2026 (Arising out of ITA 7978/MUM/2025) िनधा�रणवष�/Assessment Year: 2014-15) CO 29/MUM/2026 (Arising out of ITA 8162/MUM/2025) िनधा�रणवष�/Assessment Year: 2015-16) CO 28/MUM/2026 (Arising out of ITA 8163/MUM/2025) िनधा�रणवष�/Assessment Year: 2016-17) ECL FINANCE LTD DCIT-CC-1(1) 4th Floor, Edelweiss House, Off R.No. 905, 9th Floor, Old CGO Vs. CST Road, Kalina Santa Cruz Buiding, M K Road, Mumbai- (E),Mumbai-400098, Maharashtra 400020, Maharashtra अपीलाथ� Appellant ��थ� Respondent

Permanent Account Number of Assessee: AABCE4916D

अपीलाथ��ारा/Assessee represented by: Shri Ravikant Pathak ��थ��ारा/Revenue represented by: Shri Ajay Uke, Sr. AR सुनवाईकीतारीख/ Date of conclusion of hearing: 15-Sept-2026 घोषणाकीतारीख/ Date of pronouncement: 21-Sept-2026 आदेश / ORDER PER BENCH: A bunch of appeal and cross objection pertaining to the same assessee filed against the order of the Ld. Commissioner of Income Tax – 56, Mumbai [for brevity “Ld. CIT(A)”], order passed under Section 250 of the Income Tax Act, 1961 (for brevity ‘the Act’), for Assessment Year 2014-15 to 2016-17, date 2

ITA 7610-12, 7978, 8162, 8163/MUM/2025 CO 27-29/MUM/2026 ECL FINANCE LTD of order 02.09.2025. The impugned order emanated from the order of the Ld. ACIT Circle 3(1)(2), Mumbai (for brevity ‘Ld. AO’), order passed under Section 143(3) r.w.s. 144C(3)of the Act, date of order 09.02.2018, 28.01.2019 and 06.02.2020 for Assessment Year 2014-15 to 2016-17.

ITA 7610-12, 7978, 8162, 8163/MUM/2025 CO 27-29/MUM/2026 ECL FINANCE LTD 2. "Whether on the facts and in the circumstances of the case and in law, the Learned CIT(A) erred in law and on facts in holding that the assessee derived tangible benefit on account of higher credit ratings due to inclusion of EFSLs consolidated financials, without appreciating that no functions were performed, assets employed, or risks assumed by the AE to justify such payment?" 3. "Whether on the facts and in the circumstances of the case and in law, the Learned CIT(A) failed to appreciate that the assessee did not furnish any cost or activity based evidence to demonstrate services actually rendered or benefit derived from EFSL in relation to the Rating Support arrangement, as required under Rule 10B(1)(a) of the Income tax Rules, 1962?" 4. "Whether on the facts and in the circumstances of the case and in law, the Learned CIT(A) erred in disregarding the detailed functional analysis carried out by the TPO, wherein the TPO had allowed payment of Rating Support Fees in respect of borrowings where explicit corporate guarantees were provided by EFSL and determined the arm's length price of the residual payment as Nil, on the ground of absence of services?" 5. "Whether on the facts and in the circumstances of the case and in law, the Learned CIT(A) erred in relying upon the CBIC Circular No. 225/19/2024-GST dated 11.07.2024 (issued under the GST law) which is inapplicable to the present case, as the circular deals with a defined taxable service of "corporate guarantee" involving an identifiable provision of service and risk assumption, whereas in the assessee's case, the TPO has categorically observed that no such activity or service was performed by EFSL?" 6. "Whether on the facts and in the circumstances of the case and in law, the Learned CIT(A) erred in holding that the payment of Rating Support Fees calculated at 0.30% of the estimated total borrowings, was allowable, without appreciating that the fees was computed merely on estimated future loans and had no nexus with actual services rendered during the year?" 7. "Whether on the facts and in the circumstances of the case and in law, the Learned CIT(A) erred in deleting the Transfer Pricing adjustment of Rs. 4,60,00,000/- made by the Assessing Officer pursuant to the order of the Transfer Pricing Officer (TPO) under section 92CA(3) of the Income-tax Act, 1961, in respect of payment of Episodic Support Fees paid to its AE, EFSL, without verifying the actual rendition of any guarantee or meaningful service by the AE to warrant such payment?" 8. "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to appreciate the finding of the TPO that no explicit guarantee or comfort was provided by the AE for the issuance of commercial papers for which the Episodic Support Fees was paid, nor any risk was assumed or asset utilised in relation to this transaction?" 9. "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in relying on the improvement in the credit rating and eligibility for issuance of commercial paper by the assessee without establishing that the said

ITA 7610-12, 7978, 8162, 8163/MUM/2025 CO 27-29/MUM/2026 ECL FINANCE LTD improvement was on account of any specific service rendered or guarantee provided by the AE?" 10. "Whether on the facts and in the circumstances of the case and in law, the order of the Ld. CIT(A) allowing the deduction of Episodic Support Fees without verifying the actual performance of functions or assumption of risk by the AE is contrary to the provisions of transfer pricing and liable to be reversed?" 11. "Whether on the facts and circumstances of the case and in the law, the Ld. CIT(A) was justified in deleting the disallowance of Rs. 3,75,042/ made on account of Mark to Market loss claimed on account of trading in equity and currency futures, without appreciating that the loss claimed on the basis of value of equity and currency futures as on 31st March is merely notional loss and the actual loss or the profit in respect of such equity and currency futures would get crystallized only at the time of settlement of such transaction?" 12. "Whether, on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the disallowance of Rs. 10,23,60,742/ made under Rule 8D(2)(ii) by holding that the assessee's own funds were sufficient to cover the investments, without theassessee furnishing any fund-flow statements or documentary evidence establishing direct nexus between own funds and investments?" 13. "Whether, on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the disallowance under Rule 8D(2)(i) by relying on judicial precedents which are distinguishable on facts, ignoring that mixed funds comprising both interest bearing and non-interest-bearing components were evident from the records?" 14. "Whether, on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in restricting the disallowance under Rule 8D(2)(ii) to investments that yielded exempt income during the year, contrary to the ratio laid down by the Hon'ble Supreme Court in Maxopp Investment Ltd. v. CIT (402 ITR 640), which held that Section 14A applies to all investments capable of generating exempt income?" 15. "Whether, on the facts and circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the Assessing Officer had duly recorded satisfaction under Section 14A(2) regarding the incorrectness of the assessee's claim, thereby fully justifying the invocation of Rule 8D for computation of disallowance?" 16. "Whether, on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the disallowance of Rs. 12,57,57,103/- under Section 14A read with Rule 8D(2)(i) and restricting the addition to Rs. 36,70,228/-, resulting in substantial revenue loss, even though the assessee had not furnished credible reconciliation or evidence regarding the source of investments?"

ITA 7610-12, 7978, 8162, 8163/MUM/2025 CO 27-29/MUM/2026 ECL FINANCE LTD The assessee has taken the following grounds: “1.1 The Hon'ble Commissioner of Income Tax-56, Mumbai (hereinafter referred as CIT(A)] erred in holding that the assessment order dated 09/02/2018 passed u/s 144C r.w.s. 143(3) of the Income Tax Act, 1961 (Act) was passed within the limitation provided u/s 153 of the Act. The Appellant submits that the assessment order passed u/s 144C r.w.s. 143(3) of the Act is barred by limitation as per section 153(3) of the Act; hence, the assessment order shall be quashed. 1.2 The CIT(A) erred in holding that issuing fresh notice u/s 143(2) of the Act on the basis of validly filed revised return was not required; hence, assessment was completed properly without issuing notice u/s 143(2) of the Act on the basis of revised return. The Appellant submits that action of the AO in completing the assessment without issuing the notice u/s 143(2) of the Act on the basis of revised return is against the provision of the Act; hence, the assessment passed in present case shall be quashed. 2. The CIT(A) erred in confirming the action of the AO in making the transfer pricing adjustments by invoking section 92BA(i) of the Act without appreciating the fact that clause (i) of section 92BA of the Act has been omitted vide Finance Act, 2017. 3. The CIT(A) erred in confirming the action of the AO in making transfer pricing adjustments without applying any Most Appropriate Method (MAM) as required u/s 92 r.w.s. 92C of the Act. The Appellant crave leaves to amend, alter, delete, modify above grounds of cross objections.” 6. The assessee is an RBI-registered Non-Banking Financial Company engaged, inter alia, in financing and corporate lending against securities and also in trading in securities, commodities and derivatives. For A.Y. 2014-15, the assessee filed its original return of income on 30.11.2014 declaring total income of Rs.2,45,33,62,380/- and thereafter filed a revised return on 31.03.2016 declaring total income of Rs.2,44,51,06,470/-. The case was selected for scrutiny and a reference was made to the Ld. TPO. The Ld. TPO, vide order dated 30.10.2017 passed u/s 92CA(3) of the Act, proposed an aggregate transfer-pricing adjustment of Rs.10,25,00,000/-. The assessment was ultimately completed u/s 143(3) r.w.s. 144C(3) of the Act on 09.02.2018 at total income of Rs.267,37,38,615/-, which, inter alia, included TP adjustment of

ITA 7610-12, 7978, 8162, 8163/MUM/2025 CO 27-29/MUM/2026 ECL FINANCE LTD Rs.10,25,00,000/-, disallowance u/s 14A and disallowance of mark-to-market loss of Rs.3,75,042/-. The Ld. CIT(A), by the impugned order dated 02.09.2025, granted relief to the assessee on various issues. The Revenue is in appeal against the relief so granted, whereas the assessee has filed CO No.27/Mum/2026 raising, inter alia, the legal issue regarding validity of the TP adjustment made by invoking clause (i) of section 92BA of the Act, which stood omitted by the Finance Act, 2017.

Assessee’s , CO No.27/Mum/2026 – A.Y. 2014-15

ITA 7610-12, 7978, 8162, 8163/MUM/2025 CO 27-29/MUM/2026 ECL FINANCE LTD deletion of the TP adjustment, while separately restoring the examination under section 40A(2)(a) in that case.

“25.2. We note that there is no dispute in respect of impugned transactions falling within the definition of SDT under clause (i) of section 92BA, prior to its omission. Since the said provision has been omitted by the Finance Act, 2017, it has to be treated as if it never existed on the statute. This position stands accepted by the Hon'ble Court of Karnataka in the case of Texport Overseas Pvt. Ltd. [2020] 114 taxmann.com 568 (Kar). Similar view has been taken by various Co-ordinate Benches, some of which are listed below: i. Shree Sai Smelters (1) Ltd. vs. ACIT [2020] 118 taxmann.com 350 (Gau) ii. Raipur Steel Casting India (P) Ltd. vs. PCIT [2020] 117 taxmann.com 944 (Kol) iii. Ammann India (P.) Ltd. vs. ACIT [2022] 134 taxmann.com 10 (Ahd) iv. Softel Overseas Pvt. Ltd. vs. ACIT (ITA No. 1942/Kol/2019) 25.3. Considering the facts on record and the judicial precedents listed above, we find no infirmity in the findings arrived at by the ld. CIT(A) on this issue. Accordingly, grounds taken by the Revenue are dismissed.” 10. Per contra, the Ld. DR strongly relied upon the orders of the Revenue authorities. The Ld. DR submitted that the issue relating to the omission of clause (i) of section 92BA has been raised by the assessee in the Cross Objection before the Tribunal. According to the Ld. DR, the omission brought about by the Finance Act, 2017 could not be applied to the transaction pertaining to the assessment year under consideration. Accordingly, the Ld. DR

ITA 7610-12, 7978, 8162, 8163/MUM/2025 CO 27-29/MUM/2026 ECL FINANCE LTD supported the action of the Ld. AO/Ld. TPO and the finding of the Ld. CIT(A) on this issue.

ITA 7610-12, 7978, 8162, 8163/MUM/2025 CO 27-29/MUM/2026 ECL FINANCE LTD application of a Most Appropriate Method becomes academic and is kept open. Ground Nos.1.1 and 1.2 stand dismissed as not pressed.

Accordingly, CO No.27/Mum/2026 is allowed in the terms indicated above.

ITA No.7978/Mum/2025 – Revenue's Appeal, A.Y. 2014-15

Ground No.11 – Mark-to-Market Loss

ITA 7610-12, 7978, 8162, 8163/MUM/2025 CO 27-29/MUM/2026 ECL FINANCE LTD anticipated loss arising from fall in value below cost may be recognised even though it has not actually been realised. The ld. AR invited our attention on the relevant paragraph of the order of the Coordinate bench in ECL Finance Ltd (supra) which is reproduced as below:-

“9. The only objection raised by Ld. DR is that in the Instruction No.3/2010 dated 23/3/2010 CBDT has instructed Income Tax authorities to add back such amount while computing taxable income of an assessee. Such contention of Ld. DR cannot be accepted firstly on the ground that Instructions issued by CBDT though may be binding upon Income Tax authorities but are not binding on appellate authorities. The date of assessment order in the present case is 31/12/2009 when such instructions were not even existed. Further, when Tribunal had decided the issue in the case of Edelweiss Capital Ltd. (supra) the instructions were existing but not pleaded by the department. The Tribunal has considered each and every aspect in details which is clear from the observations reproduced in the earlier part of this order. Taking the consistent view as taken by the Co-ordinate Bench, we see no infirmity in the granted by Ld. CIT(A). We decline to interfere in the relief granted by him and departmental appeal is dismissed.” 16. We have considered the rival submissions. The issue arising in the present year is identical to the issue considered by the Coordinate Bench in the assessee's own case for A.Y. 2007-08. The Ld. CIT(A) has also recorded that similar relief was granted in the assessee's own cases for A.Ys. 2007-08, 2010- 11, 2011-12, 2012-13 and 2013-14. No material distinction in facts or change in the applicable legal position has been demonstrated before us. We, therefore, respectfully follow the Coordinate Bench decision in the assessee's own case and find no infirmity in the order of the Ld. CIT(A) deleting the disallowance of Rs.3,75,042/- towards mark-to-market loss.

Accordingly, Ground No.11 raised by the Revenue is dismissed.

Ground Nos.12 to 16 – Disallowance u/s 14A r.w. Rule 8D

ITA 7610-12, 7978, 8162, 8163/MUM/2025 CO 27-29/MUM/2026 ECL FINANCE LTD DR contended that the Ld. CIT(A) was not justified in deleting the interest disallowance of Rs.10,23,60,742/- and in restricting the balance disallowance by considering only the relevant investments yielding exempt income. The Ld. DR accordingly prayed for restoration of the computation made by the Ld. AO. The precise challenges raised by the Revenue in Ground Nos.12 to 16 are recorded in the memorandum of appeal.

ITA 7610-12, 7978, 8162, 8163/MUM/2025 CO 27-29/MUM/2026 ECL FINANCE LTD Rs.6,64,886/-, sustained the balance amount of Rs.36,70,228/-. The Ld. DR has relied upon the assessment order but has not brought before us any specific material to controvert the factual finding recorded by the Ld. CIT(A) regarding availability of sufficient own funds or to demonstrate any factual infirmity in the computation sustained by the first appellate authority. In these circumstances, we find no reason to interfere with the findings of the Ld. CIT(A) on these issues.

Accordingly, Ground Nos.12 to 16 raised by the Revenue are dismissed.

ITA No.7610/Mum/2025 – Assessee's Appeal

Accordingly, ITA No.7610/Mum/2025 filed by the assessee is dismissed.

Result for A.Y. 2014-15

ITA 7610-12, 7978, 8162, 8163/MUM/2025 CO 27-29/MUM/2026 ECL FINANCE LTD 23. In the net result:- SL ASSESSMENT APPEAL/ CO NO. APPEAL/CO GROUNDS GROUNDS RESULT NO YEARS FILED BY ALLOWED DISMISSED 1 CO 27/Mum/2026 Assessee 2 1(a) & (b), 3 allowed 2 2014-15 ITA 7978/Mum/2025 Revenue Nil 1 to 16 dismissed 3 ITA 7610/Mum/2026 Assessee Nil 1 dismissed 4 CO 29/Mum/2026 Assessee 2 1(a) & (b), 3 allowed 5 2015-16 ITA 8162/Mum/2025 Revenue Nil 1 to 22 dismissed 6 ITA 7611/Mum/2025 Assessee Nil 1 dismissed 7 CO 28/Mum/2026 Assessee 2 1(a) & (b), 3 allowed 8 2016-17 ITA 8163/Mum/2025 Revenue Nil 1 to 22 dismissed 9 ITA 7612/Mum/2025 Assessee Nil 1 dismissed

Order pronounced in the open court on 21st day of September 2026. Sd/- Sd/- (RATNA DASGUPTA) (ANIKESH BANERJEE) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, िदनांक/Dated: 21/09/2026 Soumili, PS Copy of the Order forwarded to: 1. अपीलाथ�/The Appellant , 2. �ितवादी/ The Respondent. 3. आयकरआयु� CIT 4. िवभागीय�ितिनिध, आय.अपी.अिध., मुंबई/DR, ITAT, Mumbai 5. गाड�फाइल/Guard file. BY ORDER, //True Copy// (Asstt. Registrar), ITAT, MUMBAI