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BAJAJ CONSULTANTS PRIVATE LIMITED,MUMBAI vs DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 4(1), MUMBAI | BharatTax

BAJAJ CONSULTANTS PRIVATE LIMITED,MUMBAI vs. DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 4(1), MUMBAI

ITA 2676/MUM/2025Status: DisposedITAT Mumbai09 February 2026AY 2017-18Bench: SHRI OM PRAKASH KANT (Accountant Member), MS. KAVITHA RAJAGOPAL ( (Judicial Member)1 pages

AI SummaryDismissed

Facts

The assessee company, engaged in financial services and investment activities, earned exempt income and made a suo motu disallowance of Rs. 3,60,748/-. The Assessing Officer (AO) was dissatisfied with this disallowance and computed a disallowance of Rs. 36,15,769/- under Section 14A read with Rule 8D. The CIT(A) upheld the AO's action.

Held

The Tribunal held that the AO had recorded a clear and reasoned dissatisfaction for invoking Section 14A(2). The court found that the assessee's infrastructure supported both taxable and exempt income streams and that the suo motu disallowance did not account for common overheads. Rule 8D is mandated when the AO is not satisfied with the assessee's claim.

Key Issues

Whether the Assessing Officer properly recorded dissatisfaction to invoke Section 14A and Rule 8D for disallowing expenses related to exempt income, and if the suo motu disallowance was sufficient.

Sections Cited

Section 14A, Rule 8D, Section 10(34), Section 10(15)(iv)(h), Section 10(38), Section 36(1)(ii)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “B” MUMBAI

Before: SHRI OM PRAKASH KANT & MS. KAVITHA RAJAGOPAL

For Appellant: Ms. Srushti Chawda, Shri Leyaqat Ali Aafaqui, Sr. DR

Pronounced: 09/02/2026

ORDER PER OM PRAKASH KANT, AM

This appeal by the assessee is directed against order, dated 28.03.2025, passed by the Learned Commissioner of Income Tax (Appeals) – 52 Mumbai [in short ‘the Ld. CIT(A)’] for Assessment Year (in short A.Y) 2017 – 18, raising following grounds:

Bajaj Consultants Private Limited, Bajaj Consultants Private Limited, ITA No “The following ground The following grounds of appeal are without prejudice to one another: s of appeal are without prejudice to one another: -

1. On the facts and the circumstances of the appellant company's case and in law,

1. On the facts and the circumstances of the appellant c ompany's case and in law, the Ld. Commissioner of Income Tax (Appeals) d. Commissioner of Income Tax (Appeals) - 52, Mumbai has erred in co 52, Mumbai has erred in confirming the disallowance of Rs.36,15,769/- made by the Assessing Officer u/s 14A read with the disallowance of Rs. by the Assessing Officer u/s 14A read with Rule 8D without appreciating the fact that the appellant company had made suo moto Rule 8D without appreciating the fact that the appellant company had m Rule 8D without appreciating the fact that the appellant company had m disallowance of Rs.3,60,748/ 3,60,748/- which was worked out by taking into account specific which was worked out by taking into account specific expenses incurred for earning exempt income in the form of salary expenses of expenses incurred for earning exempt income in the form of salary expenses of employees involved in earning exempt income and charges paid for the demat employees involved in earning exempt income and charges paid for the demat employees involved in earning exempt income and charges paid for the demat account and accordingly no further disallowance was warranted. account and accordingly no further disallowance was warranted. account and accordingly no further disallowance was warranted.

2. On the facts and the circumstances of the appellant company's case and in law, the Ld. Commissioner of Income Tax (Appeals) erred in confirming the disallowance of d. Commissioner of Income Tax (Appeals) erred in confirming the disallowance of d. Commissioner of Income Tax (Appeals) erred in confirming the disallowance of Rs.36,15,769/- made by the Assessing Officer u/s 14A read with Rule 8D despite made by the Assessing Officer u/s 14A read with Rule 8D despite made by the Assessing Officer u/s 14A read with Rule 8D despite the fact that the appellant has made investments yielding exempt income from its the fact that the appellant has made investments yielding exempt income from its the fact that the appellant has made investments yielding exempt income from its own funds and while ignoring the decision of Ld. Commissioner of Income Tax ile ignoring the decision of Ld. Commissioner of Income Tax ile ignoring the decision of Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi and upheld by the co-ordinate (Appeals), National Faceless Appeal Centre, Delhi and upheld by the co (Appeals), National Faceless Appeal Centre, Delhi and upheld by the co Bench of Hon'ble Income Tax Appellant Tribunal, Mumbai, in the appellant's own case Bench of Hon'ble Income Tax Appellant Tribunal, Mumbai, in the appellant's own case Bench of Hon'ble Income Tax Appellant Tribunal, Mumbai, in the appellant's own case for the assessment year 2018-19 and 2020-21 on the identical facts and for the assessment year 2018 21 on the identical facts and circumstances of the case and the legal grounds wherein it was held that the circumstances of the case and the legal grounds wherein it was held that the circumstances of the case and the legal grounds wherein it was held that the provision of Rule 8D cannot be invoked by the Assessing Officer as it is clear from the provision of Rule 8D cannot be invoked by the Assessing Officer as it is clear from the provision of Rule 8D cannot be invoked by the Assessing Officer as it is clear from the record of appellant that no borrowed funds were util of appellant that no borrowed funds were utilized and investment was made ized and investment was made by appellant from its own funds to earn tax free income. by appellant from its own funds to 3. On the facts and the circumstances of the appellant company's case and in law,

2.4 The Assessing Officer, however, did not accept the assessee’s The Assessing Officer, however, did not accept the assessee’s The Assessing Officer, however, did not accept the assessee’s claim and recorded dissatisfaction with the correctness of the suo claim and recorded dissatisfaction with the correctness of the suo claim and recorded dissatisfaction with the correctness of the suo motu disallowance. The Assessing Officer observed that the assessee motu disallowance. The Assessing Officer observed that the assessee motu disallowance. The Assessing Officer observed that the assessee had not computed the disallowance in accordance with section 14A t computed the disallowance in accordance with section 14A t computed the disallowance in accordance with section 14A read with Rule 8D of the Income read with Rule 8D of the Income-tax Rules, 1962 (“the Rules”), and tax Rules, 1962 (“the Rules”), and that expenditure relating to office infrastructure, rent, salaries, that expenditure relating to office infrastructure, rent, salaries, that expenditure relating to office infrastructure, rent, salaries, depreciation, and other administrative costs had not been considered. depreciation, and other administrative costs had not been cons depreciation, and other administrative costs had not been cons It was further observed that investments, including those in It was further observed that investments, including those in It was further observed that investments, including those in subsidiary companies, were capable of yielding exempt income and subsidiary companies, were capable of yielding exempt income and subsidiary companies, were capable of yielding exempt income and thus attracted the provisions of section 14A. thus attracted the provisions of section 14A. The Assessing Officer The Assessing Officer however rejected the claim of the assessee of the suo-motu however rejected the claim of the assessee of the suo however rejected the claim of the assessee of the suo disallowance and he recorded dissatisfaction to the claim of the disallowance and he recorded dissatisfaction to the claim of the disallowance and he recorded dissatisfaction to the claim of the assessee observing as under: assessee observing as under:

Bajaj Consultants Private Limited, Bajaj Consultants Private Limited, of the assessee for such non disallowance. As far as investment by the intention of the assessee for such non disallowance. As far as investment by the intention of the assessee for such non disallowance. As far as investment by the assessee company in its subsidiary company is concerned, that investments will assessee company in its subsidiary company is concerned assessee company in its subsidiary company is concerned, that investments will also earn dividend income for the assessee which is not chargeable to tax and will dividend income for the assessee which is not chargeable to tax and will dividend income for the assessee which is not chargeable to tax and will attract the provision of section 14A of the IT Act. attract the provision of section 14A of the IT Act. Further, perusal of the balance sheet and profit & loss account submitted reveals Further, perusal of the balance sheet and profit & loss account submitted reveals Further, perusal of the balance sheet and profit & loss account submitted reveals that the assessee has been maintaining office pr that the assessee has been maintaining office premises, staff, etc. Assessee is also emises, staff, etc. Assessee is also debiting expenditure in the nature of office, rents, salary and depreciation against debiting expenditure in the nature of office, rents, salary and depreciation against debiting expenditure in the nature of office, rents, salary and depreciation against such infrastructure which cannot be said to be used exclusively for the purpose of such infrastructure which cannot be said to be used exclusively for the purpose of such infrastructure which cannot be said to be used exclusively for the purpose of its business. Therefore, keeping in view, the amoun its business. Therefore, keeping in view, the amount of investments made by the t of investments made by the assessee and expenditure claimed against utilizing such infrastructure, it will be assessee and expenditure claimed against utilizing such infrastructure, it will be assessee and expenditure claimed against utilizing such infrastructure, it will be valid to say that assessee has utilized his infrastructure in making such valid to say that assessee has utilized his infrastructure in making such valid to say that assessee has utilized his infrastructure in making such investments earning exempt Income. Therefore, provisions of section 14A r.w. Rule investments earning exempt Income. Therefore, provisions of section 14 investments earning exempt Income. Therefore, provisions of section 14 8D are clearly attracted in this case. 8D are clearly attracted in this case. 4.4 In view of the above discussion, I am fully satisfied that though the assessee 4.4 In view of the above discussion, I am fully satisfied that though the assessee 4.4 In view of the above discussion, I am fully satisfied that though the assessee has not claimed actual expenditure directly attributable to the exempt income, it has not claimed actual expenditure directly attributable to the exempt income, it has not claimed actual expenditure directly attributable to the exempt income, it has, nevertheless, incurred expenditure has, nevertheless, incurred expenditure which are otherwise claimed against which are otherwise claimed against taxable income and are relatable to the business infrastructure maintained by the taxable income and are relatable to the business infrastructure maintained by the taxable income and are relatable to the business infrastructure maintained by the assessee and used in its business as well as making investment in share. It is assessee and used in its business as well as making investment in share. It is assessee and used in its business as well as making investment in share. It is pertinent to note that the assessee has claimed to have incurred merger any pertinent to note that the assessee has claimed to have inc pertinent to note that the assessee has claimed to have inc expenditure in relation to investments from which exempt income is earned, the expenditure in relation to investments from which exempt income is earned, the expenditure in relation to investments from which exempt income is earned, the assessee could not have invested or earned any exempt income from such assessee could not have invested or earned any exempt income from such assessee could not have invested or earned any exempt income from such investments without maintaining such infrastructure, expenses of which are claimed investments without maintaining such infrastructure, expenses of which are claimed investments without maintaining such infrastructure, expenses of which are claimed in the profit and loss profit and loss account. Before making disallowance u/s. 144 r.w. account. Before making disallowance u/s. 144 r.w. Rule 8D, it would be relevant to quote section 14A and Rule BD at this juncture. would be relevant to quote section 14A and Rule BD at this juncture. would be relevant to quote section 14A and Rule BD at this juncture. Section 14A read as under Section 14A read as under: Expenditure incurred in relation to income not includible in total income 14A Expenditure incurred in relation to income not includible in total income 14A Expenditure incurred in relation to income not includible in total income 14A 1. For the purpose of computing the total income under this Chapter, no deduction For the purpose of computing the total income under this Chapter, no deduction For the purpose of computing the total income under this Chapter, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to shall be allowed in respect of expenditure incurred by the assessee in relation to shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under this Act. income which does not form part of the total income under this Act. income which does not form part of the total income under this Act.

Bajaj Consultants Private Limited, Bajaj Consultants Private Limited, limb 2 of the above section automatically comes into play if the assessee Thus, limb 2 of the above section automatically comes into play if the assessee Thus, limb 2 of the above section automatically comes into play if the assessee contends that no or very less expenditure if the expenditure disallowed by the at no or very less expenditure if the expenditure disallowed by the at no or very less expenditure if the expenditure disallowed by the assessee is not as per the working of under section 14A r.w.r 8D expenditure has assessee is not as per the working of under section 14A r.w.r 8D expenditure has assessee is not as per the working of under section 14A r.w.r 8D expenditure has been incurred by the assessee to earn the exempt income. Further, the assessee has been incurred by the assessee to earn the exempt income. Further, the assessee has been incurred by the assessee to earn the exempt income. Further, the assessee has taken plea that investme taken plea that investment cannot be considered for the disallowance u/s 14A of nt cannot be considered for the disallowance u/s 14A of the IT Act. This argument of the assessee is not acceptable because no documentary the IT Act. This argument of the assessee is not acceptable because no documentary the IT Act. This argument of the assessee is not acceptable because no documentary evidence in this regard has been submitted by the assessee and in the assessment evidence in this regard has been submitted by the assessee and in the assessment evidence in this regard has been submitted by the assessee and in the assessment of earlier year also, such investmen of earlier year also, such investments were considered for the disallowance u/s ts were considered for the disallowance u/s 14A. Even otherwise, the groupism of investment can only be done in the same kind 14A. Even otherwise, the groupism of investment can only be done in the same kind 14A. Even otherwise, the groupism of investment can only be done in the same kind of investments only. Thus, the fact remains undisputed that the disallowance is to of investments only. Thus, the fact remains undisputed that the disallowance is to of investments only. Thus, the fact remains undisputed that the disallowance is to be worked out mandatorily as per Rule 8D of Inc be worked out mandatorily as per Rule 8D of Income-tax Rule. In this regard, tax Rule. In this regard, reliance is placed on the following judgments: reliance is placed on the following judgments:- 4.5.1 The Hon'ble Bombay High Court in the case of Godrej & Boyce applied to Godrej & Boyce applied to 4.5.1 The Hon'ble Bombay High Court in the case of work Manufacturing Co. Ltd. [328 ITR 81] work Manufacturing Co. Ltd. [328 ITR 81] has held that Rule has held that Rule 8D has to out the disallowance u/s 14A with effect from 2008 disallowance u/s 14A with effect from 2008-09 onwards where the assessing 09 onwards where the assessing officer is not satisfied with the correctness of the claim of the assessee. In the officer is not satisfied with the correctness of the claim of the assessee. In the officer is not satisfied with the correctness of the claim of the assessee. In the instant case, the undersigned is not satisfied with the claim of the assessee, hence instant case, the undersigned is not satisfied with the claim of the assessee, hen instant case, the undersigned is not satisfied with the claim of the assessee, hen the disallowance u/s 14A has to be calculated the disallowance u/s 14A has to be calculated within the provision of Rule 8D within the provision of Rule 8D of Income-tax Rule. 4.5.2 In the case of Daga Capital Management (P) Ltd. (2009) 117 ITD 169 Daga Capital Management (P) Ltd. (2009) 117 ITD 169 Daga Capital Management (P) Ltd. (2009) 117 ITD 169, the Hon'ble ITAT (Special Bench. Mumbai) held that Sec. 14A of the IT Act has an Hon'ble ITAT (Special Bench. Mumbai) held that Sec. 14A of the IT Act has an Hon'ble ITAT (Special Bench. Mumbai) held that Sec. 14A of the IT Act has an overriding effect and applies to all expenditure in relation to exempted income, even overriding effect and applies to all expenditure in relation to exempted income, even overriding effect and applies to all expenditure in relation to exempted income, even though such expenditure would have been allowable under other provisions such as though such expenditure would have been allowable under other provisions such as though such expenditure would have been allowable under other provisions such as Sec. 36(1)(ii) It was further held that u/s 14A, not only direct expenditure, but also Sec. 36(1)(ii) It was further held that u/s 14A, not only direct expenditure, but also Sec. 36(1)(ii) It was further held that u/s 14A, not only direct expenditure, but also the indirect expenditure can be considered. It was also held that onus in this regard e indirect expenditure can be considered. It was also held that onus in this regard e indirect expenditure can be considered. It was also held that onus in this regard is upon the assessee to prove that a particular does not come under the ambit of is upon the assessee to prove that a particular does not come under the ambit of is upon the assessee to prove that a particular does not come under the ambit of Sec. 14A. The ratio of this judgment is squarely applicable to the facts of the instant Sec. 14A. The ratio of this judgment is squarely applicable to the facts of the instant Sec. 14A. The ratio of this judgment is squarely applicable to the facts of the instant case. 4.5.3 Further, CBDT, vide circular No. 5 of 2014 dated 11/02/2014 has clarified 4.5.3 Further, CBDT, vide circular No. 5 of 2014 dated 11/02/2014 has clarified 4.5.3 Further, CBDT, vide circular No. 5 of 2014 dated 11/02/2014 has clarified that the disallowance u/s 14A is to be made even if no exempted income had been that the disallowance u/s 14A is to be made even if no exempted income had been that the disallowance u/s 14A is to be made even if no exempted income had been earned by the assessee during the year under consideration. It has been further earned by the assessee during the year under consideration. It has been further earned by the assessee during the year under consideration. It has been further clarified that even if the assessee claims that no expenditure in respect of exempted t even if the assessee claims that no expenditure in respect of exempted t even if the assessee claims that no expenditure in respect of exempted income are made, such disallowance has to be made. income are made, such disallowance has to be made. In view of the above judicial pronouncements as well as the circular of CBDT. the In view of the above judicial pronouncements as well as the circular of CBDT. the In view of the above judicial pronouncements as well as the circular of CBDT. the contention of the assessee, if so raised, is not a contention of the assessee, if so raised, is not acceptable. Thus, I am of the opinion cceptable. Thus, I am of the opinion that the fact remains undisputed that the disallowance is to be worked out that the fact remains undisputed that the disallowance is to be worked out that the fact remains undisputed that the disallowance is to be worked out mandatorily as per the norms prescribed under Rule 8D of the Income-tax Rule. The mandatorily as per the norms prescribed under Rule 8D of the Income mandatorily as per the norms prescribed under Rule 8D of the Income case of the assessee is covered under Rule 8D of Income-tax Rule wherein the case of the assessee is covered under Rule 8D of Income case of the assessee is covered under Rule 8D of Income method of working of disallowance of expenditure u/s.14A of the IT Act is laid. method of working of disallowance of expenditure u/s.14A of the IT Act is laid. method of working of disallowance of expenditure u/s.14A of the IT Act is laid. 2.4 Being dissatisfied with the assessee’s claim, the Assessing Being dissatisfied with the assessee’s claim, the Assessing Being dissatisfied with the assessee’s claim, the Assessing Officer invoked Rule 8D and computed disallowance under Rule Officer invoked Rule 8D and computed disallowance under Rule Officer invoked Rule 8D and computed disallowance under Rule

“8.5. The first issue raised by the appellant is that the AO had not recorded “8.5. The first issue raised by the appellant is that the AO had not recorded “8.5. The first issue raised by the appellant is that the AO had not recorded adequate satisfaction. In this regard, I find that the AO had indeed discussed the adequate satisfaction. In this regard, I find that the AO had indeed discussed the adequate satisfaction. In this regard, I find that the AO had indeed discussed the issue in para 4.3 and subsequent paragraphs of the assessment order and given issue in para 4.3 and subsequent paragraphs of the assessment or issue in para 4.3 and subsequent paragraphs of the assessment or reasons as to why the claim of the appellant is not acceptable. He has brought out reasons as to why the claim of the appellant is not acceptable. He has brought out reasons as to why the claim of the appellant is not acceptable. He has brought out that the appellant had failed to consider the associated cost in the nature of office, that the appellant had failed to consider the associated cost in the nature of office, that the appellant had failed to consider the associated cost in the nature of office, rent, depreciation against such infrastructure which cannot be stated to be used rent, depreciation against such infrastructure which cannot be stated to rent, depreciation against such infrastructure which cannot be stated to exclusively for the purpose of business. In the case of Devarsons Industries P Ltd vs exclusively for the purpose of business. In the case of Devarsons Industries P Ltd vs exclusively for the purpose of business. In the case of Devarsons Industries P Ltd vs ACIT. Gujarat HC, 84 taxmann.com 244, dt. rat HC, 84 taxmann.com 244, dt.25.07.2017, the Hon'ble HC has held 25.07.2017, the Hon'ble HC has held that where AO gave detailed reasons for making disallowance u/s.14A, mere fact that where AO gave detailed reasons for making disallowance u/s.14A, mere fact that where AO gave detailed reasons for making disallowance u/s.14A, mere fact that AO did not arrive at a satisfaction in a particular manner wou AO did not arrive at a satisfaction in a particular manner wou AO did not arrive at a satisfaction in a particular manner would not destroy the mandate of Section 14A. It was held that "As long as there is sufficient material to 14A. It was held that "As long as there is sufficient material to 14A. It was held that "As long as there is sufficient material to enable the Assessing Officer to arrive at such a satisfaction and which is also enable the Assessing Officer to arrive at such a satisfaction and which is also enable the Assessing Officer to arrive at such a satisfaction and which is also recorded by him in the order of assessment, the requirements of the statute would y him in the order of assessment, the requirements of the statute would y him in the order of assessment, the requirements of the statute would be satisfied.” It was further held that the time taken by Board and Senior It was further held that the time taken by Board and Senior It was further held that the time taken by Board and Senior Management needs to be considered. In the present case, it is obvious that the Management needs to be considered. In the present case, it is obvious that the Management needs to be considered. In the present case, it is obvious that the appellant has not considered s appellant has not considered such expenditure. A perusal of the P&L A/c of the uch expenditure. A perusal of the P&L A/c of the appellant shows that the total expenditure is Rs.10,75,95,657/-. This includes appellant shows that the total expenditure is Rs.10,75,95,657/ appellant shows that the total expenditure is Rs.10,75,95,657/ Director's remuneration of Rs. Director's remuneration of Rs.2,98,00,000/- It would be preposterous to hold that no It would be preposterous to hold that no part of Director's functions or time was sp part of Director's functions or time was spent on the investments. Similarly, t ent on the investments. Similarly, the appellant has spent Rs. appellant has spent Rs.21,96,433/- on office repairs and maintenance. The on office repairs and maintenance. The appellant has only disallowed staff salary of Rs.3,37,910/ appellant has only disallowed staff salary of Rs.3,37,910/- and no rental charges whatever has been disallowed. This holds true for other related expenditure such as whatever has been disallowed. This holds true for other relat whatever has been disallowed. This holds true for other related expenditure such as electricity expenditure, computer, stationary etc. The space and other associated electricity expenditure, computer, stationary etc. The space and other associated electricity expenditure, computer, stationary etc. The space and other associated

Bajaj Consultants Private Limited, Bajaj Consultants Private Limited, used by such staff in the office has not been taken into account. Thus, in my cost used by such staff in the office has not been taken into account. Thus, in my cost used by such staff in the office has not been taken into account. Thus, in my view, the AO's action in rejecting the claim of the appellant and drawing his view, the AO's action in rejecting the claim of the appellant and dr view, the AO's action in rejecting the claim of the appellant and dr satisfaction is valid in the eyes of law. This part of the contention of the appellant is satisfaction is valid in the eyes of law. This part of the contention of the appellant is satisfaction is valid in the eyes of law. This part of the contention of the appellant is rejected. 3.1 Further, the Ld. CIT(A) rejected the claim of the assessee of the Ld. CIT(A) rejected the claim of the assessee of the Ld. CIT(A) rejected the claim of the assessee of linkage of the net own fund for interest expenditure as no such linkage of the net own fund for interest expenditure linkage of the net own fund for interest expenditure disallowance was made by the assessing officer. made by the assessing officer. After considering the fter considering the decision of the Income Tax Appellate Tribunal in the assessee’s one decision of the Income Tax Appellate Tribunal in the assessee’s one decision of the Income Tax Appellate Tribunal in the assessee’s one case the Ld. CIT (A) case the Ld. CIT (A) upheld the invocation of section 14A read with upheld the invocation of section 14A read with Rule 8D, while directing the Assessing Officer to recompute the Rule 8D, while directing the Assessing Officer to recompute the Rule 8D, while directing the Assessing Officer to recompute the disallowance strictly in accordance with the monthly average of disallowance strictly in accordance with the monthly average of disallowance strictly in accordance with the monthly average of investments furnished by the assessee investments furnished by the assessee as under:

8.8. The appellant has relied on the decisions of Hon'ble ITAT in its own case the 8.8. The appellant has relied on the decisions of Hon'ble ITAT in its own case the 8.8. The appellant has relied on the decisions of Hon'ble ITAT in its own case the Hon'ble ITAT has observed in vide for AY 2018-19 & Hon'ble ITAT has observed in vide for AY Hon'ble ITAT has observed in vide for AY 2854/Mum/2023 for AY 2020 2854/Mum/2023 for AY 2020-21 dt.27.03.2024. 8.9. Having carefully perused the order of the Hon'ble ITAT, it is seen that the 8.9. Having carefully perused the order of the Hon'ble ITAT, it is seen that the 8.9. Having carefully perused the order of the Hon'ble ITAT, it is seen that the Department had challenged the alternative finding of the CIT(A) and not the finding Department had challenged the alternative finding of the CIT(A) and not the finding Department had challenged the alternative finding of the CIT(A) and not the finding related to section 14A disallowance. related to section 14A disallowance. This is evident from the para 8 of the order of This is evident from the para 8 of the order of the Hon'ble Tribunal, wherein the Hon'ble Tribunal stated as under- the Hon'ble Tribunal, wherein the Hon'ble Tribunal stated as under the Hon'ble Tribunal, wherein the Hon'ble Tribunal stated as under “...Thereafter, in paragraph 7.6 of the order impugned, the CIT(A) has ...Thereafter, in paragraph 7.6 of the order impugned, the CIT(A) has ...Thereafter, in paragraph 7.6 of the order impugned, the CIT(A) has accepted the alternative submission of the Assessee that even if pro accepted the alternative submission of the Assessee that even if pro accepted the alternative submission of the Assessee that even if provisions contained in Rule 8D of the IT Rules were to be applied, only the investments contained in Rule 8D of the IT Rules were to be applied, only the investments contained in Rule 8D of the IT Rules were to be applied, only the investments yielding exempt income during the relevant previous year were to be taken yielding exempt income during the relevant previous year were to be taken yielding exempt income during the relevant previous year were to be taken into consideration. On perusal of the grounds raised by the Revenue, we find into consideration. On perusal of the grounds raised by the Revenue, we find into consideration. On perusal of the grounds raised by the Revenue, we find that the grievance that the grievance raised by the Revenue in the present appeal is restricted to raised by the Revenue in the present appeal is restricted to the order of CIT(A) allowing the without prejudice contention raised by the the order of CIT(A) allowing the without prejudice contention raised by the the order of CIT(A) allowing the without prejudice contention raised by the Assessee....." 8.10. Thus, the ambit of the decisions of the Hon'ble ITAT is related to the 8.10. Thus, the ambit of the decisions of the Hon'ble ITAT is related to the 8.10. Thus, the ambit of the decisions of the Hon'ble ITAT is related to the disallowance of 14A on the disallowance of 14A on the investments which actually yielded exempt income investments which actually yielded exempt income during the year. Therefore, this decision of the Hon'ble Tribunal does not help the during the year. Therefore, this decision of the Hon'ble Tribunal does not help the during the year. Therefore, this decision of the Hon'ble Tribunal does not help the appellant in any manner as the issue addressed was different. appellant in any manner as the issue addressed was different. appellant in any manner as the issue addressed was different. 8.11. In view of the above discussion, I am of the view that the AO has rightly 8.11. In view of the above discussion, I am of the view that 8.11. In view of the above discussion, I am of the view that drawn the satisfaction and proceeded to make a disallo drawn the satisfaction and proceeded to make a disallowance in accordance with wance in accordance with Rule 8D. However, it is noticed that the appellant has indeed filed the working of . However, it is noticed that the appellant has indeed filed the working of . However, it is noticed that the appellant has indeed filed the working of Bajaj Consultants Private Limited, Bajaj Consultants Private Limited, average of investments vide letter dt. of investments vide letter dt.19.12.2019. A perusal of the 19.12.2019. A perusal of the same shows that the average investments in at least the initial few months is lower than shows that the average investments in at least the initial few months is lower than shows that the average investments in at least the initial few months is lower than what has been computed by the AO. In any case, since Rule 8D warrants adoption what has been computed by the AO. In any case, since Rule 8D warrants adoption what has been computed by the AO. In any case, since Rule 8D warrants adoption of monthly average of investments and the appellant has provided the same, the AO of monthly average of investments and the appellant has provided the same, the AO of monthly average of investments and the appellant has provided the same, the AO is bound to compute the disallowance in accordance with such balances. To this nd to compute the disallowance in accordance with such balances. To this nd to compute the disallowance in accordance with such balances. To this extent, the arguments of the appellant are agreed with and the AO is directed to extent, the arguments of the appellant are agreed with and the AO is directed to extent, the arguments of the appellant are agreed with and the AO is directed to rework the disallowance in accordance with Rule 8D. The disallowance u/s 14A rework the disallowance in accordance with Rule 8D. The disallowance u/s 14A rework the disallowance in accordance with Rule 8D. The disallowance u/s 14A stands sustained on the b stands sustained on the basis of such reworking (after excluding the suo moto asis of such reworking (after excluding the suo moto disallowance of Rs.3,60,748/ disallowance of Rs.3,60,748/- made by the appellant).

Bajaj Consultants Private Limited, Bajaj Consultants Private Limited, ITA No 4.4 Tested on the anvil of the aforesaid binding precedents, we find Tested on the anvil of the aforesaid binding precedents, we find Tested on the anvil of the aforesaid binding precedents, we find that in the present case the Assessing Officer has duly discharged the that in the present case the Assessing Officer has duly discha that in the present case the Assessing Officer has duly discha statutory obligation under section 14A(2) statutory obligation under section 14A(2) of Act. The Assessing Officer . The Assessing Officer examined the accounts and specifically noted that while the assessee examined the accounts and specifically noted that while the assessee examined the accounts and specifically noted that while the assessee had disallowed certain demat charges and a portion of salary, it failed had disallowed certain demat charges and a portion of salary, had disallowed certain demat charges and a portion of salary, to apportion indirect infrastructu to apportion indirect infrastructure costs—such as rent, electricity, such as rent, electricity, necessarily utilized in managing a and senior management time and senior management time—necessarily utilized in managing a portfolio of over Rs. 40 Crores. We find that the AO’s satisfaction was portfolio of over Rs. 40 Crores. We find that the AO’s satisfaction was portfolio of over Rs. 40 Crores. We find that the AO’s satisfaction was sufficiently grounded in the fact that the Assessee’s infrastructure sufficiently grounded in the fact that the Assessee’s infrastructure sufficiently grounded in the fact that the Assessee’s infrastructure supports both taxable and exempt streams, yet the able and exempt streams, yet the suo-motu able and exempt streams, yet the disallowance remained silent on the common overheads. The reasons disallowance remained silent on the common overheads. disallowance remained silent on the common overheads. recorded are not vague or mechanical; rather, they are rooted in the recorded are not vague or mechanical; rather, they are recorded are not vague or mechanical; rather, they are financial statements and the nature of the assessee’s operations. financial statements and the nature of the assessee’s operations financial statements and the nature of the assessee’s operations 4.5 The dissatisfaction recorded is thus The dissatisfaction recorded is thus factual, reasoned, and factual, reasoned, and founded on the accounts founded on the accounts, satisfying the statutory requirement as satisfying the statutory requirement as explained by the Hon’ble Supreme Court in explained by the Hon’ble Supreme Court in Maxopp Investment Ltd. Maxopp Investment Ltd. (supra). The Assessing Officer thereafter restricted the disallowa . The Assessing Officer thereafter restricted the disallowa . The Assessing Officer thereafter restricted the disallowance to administrative expenditure under Rule 8D(2)(iii) alone, without administrative expenditure under Rule 8D(2)(iii) alone, without administrative expenditure under Rule 8D(2)(iii) alone, without making any disallowance in respect of interest expenditure—an making any disallowance in respect of interest expenditure making any disallowance in respect of interest expenditure approach approach approach that that that further further further evidences evidences evidences application application application of of of mind mind mind and and and proportionality.