DCIT, MUMBAI vs. SAHYADRI AGENCIES LIMITED, MOOTHEDATH HOUSE ARIKANNIYUR

ITA 4257/MUM/2025Status: DisposedITAT Mumbai21 January 2026AY 2018-1921 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the disallowance under Section 14A could not exceed the amount of exempt income that the assessee had already suo motu disallowed. Regarding the interest expenditure, the Tribunal found that the CIT(A) had not adequately examined the nexus between the borrowed funds and the business activities, and thus remanded the matter back to the Assessing Officer for further verification.

What were the facts?

The assessee claimed deduction for interest expenses on borrowed funds under Section 36(1)(iii), alleging the funds were used for business purposes, including investment in shares of another company. The revenue disallowed a portion of this interest, and also made an additional disallowance under Section 14A beyond the exempt income.

What were the issues?

Whether interest on borrowed funds for investment in shares is deductible under Section 36(1)(iii) without establishing a proximate business nexus? Whether Section 14A disallowance can exceed exempt income?

Which sections of the Income-tax Act were involved?

Section 14A,Section 36(1)(iii),Section 8D

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “G” BENCH, MUMBAI

Before: SMT. BEENA PILLAI & SHRI GIRISH AGRAWAL

For Appellant: Ms. Priyanka Jain, Shri Pankaj Soni & Avanish
For Respondent: Shri Arun Kanti Datta, CIT DR
Hearing: 17.12.2025Pronounced: 21.01.2026

Per Smt. Beena Pillai, JM: Present appeal filed by the revenue arises out of the order dated 17/04/2025 passes by Ld.CIT(A)-48 for assessment year 2018-19 on following grounds of appeal:- “1. Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) has justified in deleting the additional disallowance of Rs.54,28,892/- made by the Assessing Officer under Section 14A read with Rule &D of the Income Tax Rules, over and above the suo motu disallowance of Rs.9,00,00,000/-offered by the assessee, without appreciating that the disallowance under Section 14A is not restricted to the amount of exempt income, particularly in view of CBDT Circular No. 5/2014 and

The order continues below.

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