DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 3(4), MUMBAI, MUMBAI vs. NIPPON LIFE INDIA ASSET MANAGEMENT LIMITED, MUMBAI

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ITA 3887/MUM/2025Status: DisposedITAT Mumbai28 August 2025AY 2020-21Bench: SHRI AMIT SHUKLA, JUDICIAL MEMBER\n&\nSHRI GIRISH AGRAWAL (Accountant Member)4 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the disallowance under section 14A read with Rule 8D must be confined to investments that have actually generated exempt income during the year. The legislative intent is to disallow expenditure incurred "in relation to" earning income not includible in total income, not expenditure relatable to the entire portfolio. This position has been affirmed by the Delhi High Court in Cargo Motors (P) Ltd. vs. DCIT [453 ITR 554], which held that only investments yielding exempt income are to be considered for Rule 8D. The Tribunal also referred to several coordinate bench rulings supporting this view. Therefore, the Tribunal found no infirmity in the CIT(A)'s order to restrict the disallowance to investments that actually yielded exempt income. The grounds raised by the Revenue were dismissed. The issue regarding the pending appeal before the High Court was implicitly addressed by the Tribunal following established jurisprudence.

What were the facts?

The Revenue appealed the order dated 02.04.2025 passed by the CIT(A), National Faceless Appeal Centre, Delhi, which arose from an assessment framed under section 143(3) for assessment year 2020-21. The assessee, Nippon Life India Asset Management Limited, earned exempt income of Rs.20,21,83,391/-, comprising dividend and tax-free interest. The assessee suo motu disallowed Rs.2,71,94,731/-. The Assessing Officer applied Rule 8D to the entire investment portfolio, resulting in a disallowance of Rs.15,75,18,500/-. After reducing the assessee's disallowance, the net addition was Rs.13,03,23,769/-. The CIT(A) directed the Assessing Officer to restrict the disallowance to investments that actually yielded exempt income.

What were the issues?

1. Whether the learned CIT(A) erred in directing to recompute the disallowance under section 14A by considering only those investments which yielded exempt income, without considering the provision of section 14A read with Rule 8D. - Assessee's contention: Not recorded. - Revenue's contention: The CIT(A) erred in ignoring that the Department has filed an appeal before the Hon'ble High Court against a similar decision of the ITAT, Delhi Special Bench in ACIT vs. Vireet Investments Pvt. Ltd. [165 ITD 27 (Del)(SB)], and the matter has not reached finality. 2. Whether the learned CIT(A) erred in ignoring the fact that against a similar decision of the Hon'ble Special Bench of the ITAT, Delhi on the issue of disallowance under section 14A in the case of ACIT vs. Vireet Investments Pvt. Ltd. [165 ITD 27 (Del)(SB)], the Department has filed further appeal before the Hon'ble High Court and the matter has not reached finality. - Assessee's contention: Not recorded. - Revenue's contention: The CIT(A) erred in ignoring the pending appeal before the High Court.

Which sections of the Income-tax Act were involved?

Section 14A,Section 143(3)

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, ‘B’ BENCH

Before: SHRI AMIT SHUKLA & SHRI GIRISH AGRAWAL

For Appellant: Shri Jitendra Sanghavi &, Shri Amit Khatiwala
For Respondent: Shri Satyaprakash R Singh
Hearing: 05/08/2025Pronounced: 28/08/2025

आदेश / O R D E R PER AMIT SHUKLA (J.M): This appeal by the Revenue is directed against the order dated 02.04.2025 passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [“CIT(A)”], arising from the assessment framed under section 143(3) of the Income Tax Act, 1961 (“the Act”) for the assessment year 2020-21. 2. The Revenue has assailed the impugned order on the following grounds:

1.

1. “1. On the facts and in the circumstances of the case, the learned CIT(A) erred in directing to recompute the disallowance under section 14A of the Income Tax Act, 1961 by considering only those investments which yielded exempt income, without considering the provision of section 14A of the Income Tax Act, 1961 read with Rule 8D of the Income Tax Rules.”

2. On the facts and in the circumstances of the case, the learned CIT(A) erred in ignoring the fact that against a similar decision of the Hon’ble Special Bench of the ITAT, Delhi on the issue of disallowance under section 14A in the case of ACIT vs. Vireet Investments Pvt. Ltd. [165 ITD 27 (Del)(SB)], the Department has filed further appeal before the Hon’ble High Court and the matter has not reached finality.

3. The brief facts relevant for adjudication are that the assessee, Nippon Life India Asset Management Limited, earned exempt income aggregating to Rs.20,21,83,391/- during the year under consideration, comprising dividend income of Rs.9,61,33,879/- and tax-free interest of Rs. 10,60,49,512/-. In its return of income, the assessee made a suo motu disallowance under section 14A of Rs. 2,71,94,731/-, by restricting the computation to those investments capable of yielding exempt income, amounting to Rs. 1,61,34,95,110/- out of a total investment portfolio of Rs. 1,848,43,49,395/-. 3.1. The Assessing Officer, however, applied Rule 8D mechanically on the entire corpus of investments, without distinction between income-yielding and non-yielding assets, thereby computing disallowance at Rs. 15,75,18,500/-. After reducing the assessee’s self-disallowance, the net addition stood at Rs. 13,03,23,769/-. The learned CIT(A), upon appeal, Nippon Life India Asset Management Limited directed the Assessing Officer to restrict the disallowance to only those investments which had actually yielded exempt income during the relevant year.

4.

We have heard the rival submissions, carefully perused the record, and examined the applicable law. It is by now trite that disallowance under section 14A read with Rule 8D must be confined to investments which have in fact generated exempt income during the year. The legislative intent of section 14A is not to disallow every expenditure relatable to the entire portfolio, but only such expenditure as is incurred “in relation to” earning income not includible in the total income. 4.1. This position has been affirmed by the Hon’ble Delhi High Court in Cargo Motors (P) Ltd. vs. DCIT [453 ITR 554], wherein it was categorically held that, for Rule 8D purposes, only those investments that yield exempt income during the relevant year are to be considered. The Tribunal has consistently echoed this view in a series of coordinate bench rulings, inter alia: • Cricket Club of India Ltd. vs. PCIT [165 taxmann.com 376 (Mum.)] • HDFC Bank Ltd. vs. Addl. CIT/ACIT/DCIT [171 taxmann.com 47 (Mum.)] • Geecee Ventures Ltd. vs. DCIT [174 taxmann.com 1285 (Mum.)] • Kotak Mahindra Bank Ltd. vs. DCIT [171 taxmann.com 420 (Mum.)] • Sicom Ltd. vs. DCIT [173 taxmann.com 927 (Mum.)] • Jubilant Enpro (P) Ltd. vs. CIT [172 taxmann.com 740 (Del.)] Nippon Life India Asset Management Limited • Air India Ltd. vs. ACIT [173 taxmann.com 90 (Mum.)] 5. In light of the above settled jurisprudence, we find no infirmity in the order of the learned CIT(A) in directing that disallowance under section 14A be confined only to those investments which actually yielded exempt income during the year. The grounds raised

by the Revenue, therefore, fail to persuade us and stand dismissed.

6. In the result, appeal of the Revenue is dismissed. Order pronounced on 28th August, 2025.

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