TATA CONSUMER PRODUCTS LIMITED,KOLKATA vs. A.C.I.T., CIRCLE - 4(1), KOLKATA, KOLKATA

ITA 1604/KOL/2024Status: DisposedITAT Kolkata07 October 2026AY 2020-202129 pages
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What were the facts?

The assessee, Tata Consumer Products Limited, filed an appeal against the assessment order dated 27.06.2024 for assessment year 2020-21. The primary dispute concerns the disallowance of ₹ 8,82,00,000 under Section 14A read with Rule 8D. The assessee had claimed dividend income of ₹ 19.36 crores as exempt under Section 10(34) and suo motu disallowed ₹ 62,16,000. The Assessing Officer (AO), however, applied Rule 8D(2)(ii) and proposed a further disallowance of ₹ 8,82,00,000. The Dispute Resolution Panel (DRP) upheld the AO's approach, stating the amended Rule 8D was mandatory. The assessee argued its investments were strategic and not for earning dividend income, and its apportionment of expenses was reasonable. The appeal also involves a claim for depreciation on intangibles arising from a demerger and a deduction under Section 80G.

What did the Tribunal hold?

On the first issue concerning Section 14A, the Tribunal held that Section 14A(2) and Rule 8D(1) mandate that the AO must be dissatisfied with the assessee's claim before resorting to the method prescribed by the Rules. The amendment to Rule 8D in 2016 altered the formula for computation but did not remove the prerequisite of the AO recording his dissatisfaction with cogent reasons. The AO's observation that the assessee's disallowance was unsatisfactory because it was not as per Rule 8D was insufficient. The Tribunal found that the AO had not recorded any cogent reasons for not accepting the assessee's apportionment and therefore could not have resorted to Rule 8D. The disallowance under Section 14A was limited to the amount suo motu offered by the assessee. This ground was allowed in favour of the assessee, referencing previous ITAT orders. On the second issue, the Tribunal held that the assessee is entitled to depreciation in respect of goodwill, brands, and distribution network arising on demerger. The intangible assets were acquired for a consideration based on valuation reports. The Tribunal rejected the revenue's contention of tax evasion raised for the first time during the appeal, noting that the AO had not invoked relevant provisions if such was the concern. The amendments by the Finance Act, 2021, discontinuing depreciation on goodwill, were not applicable to the assessment year in question. This issue was allowed. On the third issue regarding Section 80G deduction, the Tribunal noted that the assessee had made eligible donations and the admissible deduction was mentioned in the Tax Audit Report and computation of total income. Although no amount was claimed in Schedule Part B-TI due to losses, the assessment resulted in positive gross total income due to disallowances. Therefore, it was incumbent upon the AO to consider the claim. The matter was remanded to the AO for consideration in accordance with law. This issue was allowed for statistical purposes.

What were the issues?

1. Whether the Assessing Officer erred in disallowing ₹ 8,82,00,000 under Section 14A read with Rule 8D, by not recording his dissatisfaction with the assessee's suo motu disallowance and by mandatorily applying Rule 8D without proper justification? - Assessee's Contention: The AO erred by not recording his dissatisfaction with the assessee's apportionment of expenses. The amendment to Rule 8D in 2016 did not remove the requirement for the AO to record dissatisfaction before applying Rule 8D. Reliance was placed on PCIT v West Bengal Infrastructure Development Finance Corporation Ltd. and previous ITAT decisions for AY 2009-10, 2012-13, and 2013-14. - Revenue's Contention: The AO duly recorded his dissatisfaction and correctly applied Rule 8D(2)(ii). Decisions relied upon by the assessee pertained to the pre-amendment period of Rule 8D and were therefore not applicable. 2. Whether the assessee is entitled to depreciation allowance on intangibles (goodwill, brands, and distribution network) arising on demerger? - Assessee's Contention: The demerger was a legitimate business restructuring, and the intangible assets were acquired for a fair value, entitling the assessee to depreciation. The rationale of the demerger was to expand business and achieve synergies. - Revenue's Contention: The revenue argued for the first time during the appeal that the demerger was for tax evasion/leakage. (Not explicitly stated as a contention, but implied by the Tribunal's discussion). 3. Whether the assessee's claim for deduction under Section 80G was correctly considered?

Which sections of the Income-tax Act were involved?

Section 14A,Section 10(34),Section 112A,Section 43(1),Section 80G

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “C” BENCH, KOLKATA

Before: SHRI RAJESH KUMAR, AM & SHRI PRADIP KUMAR CHOUBEY, JM

For Appellant: Shri J.P. Khaitan &
For Respondent: Shri Md. Gayasuddin Ansari &
Hearing: 14.07.2026Pronounced: 07.10.2026

Per Rajesh Kumar, AM:

This is an appeal preferred by the assessee against the assessment order dated 27.06.2024 for assessment year 2020- 21 passed under section 143(3) read with section 144C(13) of the Income Tax Act, 1961 (hereafter referred to as “the Act”) passed after directions of the Ld. DRP dated 19.06.2024 under section 144C(5) of the Act. Tata Consumer Products Limited; A.Y. 2020-21

2.

The first issue is against the disallowance of ₹ 8,82,00,000 under section 14A read with rule 8D of the Income Tax Rules, 1962 (“Rules”).

3.

The facts in brief are that in the impugned financial year 2019-20, the assessee had earned dividend income of Rs

The order continues below.

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