Bombay High Court
The Pr.Commissioner Of Income Tax-6 vs Essel Corporate Resources P.Ltd. on 11 December, 2025
Author: R.I. Chagla
Bench: R.I. Chagla
2025:BHC-OS:24380-DB
ITXA no. 3292 of 2018
PCIT vs. Essel Corporate
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
INCOME TAX APPEAL NO. 3292 OF 2018
The Pr. Commissioner of Income Tax-6,
Aayakar Bhawan, M.K. Road,
Mumbai - 400 020 ... Appellant
V/s.
Essel Corporate Resources Pvt. Ltd.,
18th Floor, A Wing, Marathon Futurex,
N.M. Joshi Marg, Lower Parel,
Mumbai - 400 013 ... Respondent
_______________________________________
Mr. Akhileshwar Sharma for the Appellant - Revenue
Mr. Jay Nilesh Bhansali for the Respondent - Assessee
_______________________________________
CORAM : R.I. CHAGLA AND
FARHAN P. DUBASH, JJ.
RESERVED ON : 04TH DECEMBER 2025
PRONOUNCED ON : 11TH DECEMBER 2025
ORDER (Per Farhan P. Dubash, J.) :
1. This is an Income Tax Appeal filed under Section 260-A of the Income Tax Act, 1961 (the Act) by the Appellant - Revenue impugning the order dated 16th June 2017 (impugned order) passed by the Income Tax Appellate Tribunal (Tribunal) in Cross Appeals filed against the order of the Pr. Commissioner of Income Tax (A)-12, Mumbai (PCIT) dated 10th February 2017 exercising powers under Section 263 of the Act with Appeal No. Page 1 of 7
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Order dated 11TH December 2025 ::: Uploaded on - 11/12/2025 ::: Downloaded on - 11/12/2025 21:13:22 ::: ITXA no. 3292 of 2018 PCIT vs. Essel Corporate 1835/MUM/2017 filed by the Assessee and Appeal No. 3364/MUM/2017 filed by the Revenue. By the impugned order, the Assessee's Appeal was partly allowed for statistical purposes whilst the Revenue's Appeal was dismissed.
2. In the cross appeals before the Tribunal, the Assessee had raised two grounds of appeal whilst the Revenue had raised three grounds. Insofar as the present Income Tax Appeal is concerned, the same only deals with the third ground raised by the Revenue which relates to deleting the disallowance by the PCIT of Rs.2,09,73,983/- under Section 14A of the Act r/w. Rule 8D of the Income Tax Rules (Rules). The impugned order rejects the ground raised by the Revenue and has upheld the order passed by the PCIT, by holding that the Assessing Officer/Income Tax Officer (ITO) had not recorded any dissatisfaction whilst disagreeing with the Assessee in respect of the expenditure incurred by it, relating to the income forming part of the total income, as required under Section 14A(2) of the Act, before rejecting the claim of the Assessee. In doing so, the Tribunal also relied on and followed the decision of the Supreme Court in Godrej Boyce Mfg. Co. Ltd. which had confirmed the order of this Court reported in 328 ITR 81.
3. Prior thereto, in exercise of the power under Section 263 of the Act, the PCIT had considered and recorded his findings on four grounds of Page 2 of 7
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Order dated 11TH December 2025 ::: Uploaded on - 11/12/2025 ::: Downloaded on - 11/12/2025 21:13:22 ::: ITXA no. 3292 of 2018 PCIT vs. Essel Corporate appeal that were raised before him from the Assessment Order dated 30 th March 2016 (AO) passed under Section 143(3) of the Act. As already stated above, for the purposes of the present Income Tax Appeal, we are called upon to consider ground no. 3 raised in the said appeal which related to the disallowance of Rs.2,09,73,983/- by the ITO under Section 14A of the Act r/w. Rule 8D of the Rules. After considering the arguments of both parties, the PCIT recorded a finding in favour of the Assessee and allowed the said ground of appeal no. 3. The reasons for allowing this ground of appeal found favour with the Tribunal as can be seen from the impugned order. Accordingly, by the said order dated 10 th February 2017, the PCIT had partly allowed the Appeal filed by the Assessee.
4. Mr. Ashileshwar Sharma, learned Counsel for the Appellant - Revenue relied on the impugned order and submitted that the same is bad in law and liable to be quashed and set aside. He invited our attention to the following substantial question of law that is proposed in paragraph 4 of the present Income Tax Appeal viz. :
"A. Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT was justified in deleting disallowance made under Section 14A r/w. Rule 8D stating that the AO has not recorded any satisfaction when AO has recorded his satisfaction in the order and has discussed the issue and then applied Rule 8D ?"Page 3 of 7
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Order dated 11TH December 2025 ::: Uploaded on - 11/12/2025 ::: Downloaded on - 11/12/2025 21:13:22 ::: ITXA no. 3292 of 2018 PCIT vs. Essel Corporate
5. Per contra, Mr. Jay Bhansali, learned Counsel for the Respondent - Assessee submitted that the present Appeal does not raise any substantial question of law inasmuch as the PCIT has recorded detailed findings on the issue relating to the disallowance under Section 14A r/w. Rule 8D and thereafter set aside the AO. The Tribunal has confirmed the said order passed by the PCIT.
6. We have heard both, Mr. Akhileshwar Sharma and Mr. Jay Bhansali and with their able assistance also perused the record.
7. The issue in the present Income Tax Appeal relates to Section 14A of the Act. In the AO, the ITO had initially disallowed a sum of Rs.2,09,73,983/-. The Assessee had raised an objection against the said disallowance of the interest expense under Section 14A r/w. Rule 8D(2)(ii) inasmuch as, it had itself disallowed interest expenditure of Rs.74,18,87,287/- (which was completely disregarded) and the ITO had instead, worked out the disallowance at Rs.76,28,61,270/-. The grievance of the Assessee which has found favour, both with the PCIT and thereafter, also with the Tribunal, is that whilst working out the disallowance, the ITO did not assign any reason as to why the disallowance was computed by him with respect to the interest expenses under Section 14A r/w. Rule 8D(2)(ii). The ITO has not recorded any satisfaction for not accepting the working of Page 4 of 7
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Order dated 11TH December 2025 ::: Uploaded on - 11/12/2025 ::: Downloaded on - 11/12/2025 21:13:22 ::: ITXA no. 3292 of 2018 PCIT vs. Essel Corporate disallowance claimed by the Assessee and both the PCIT and the Tribunal, have found that the working made by the ITO was done mechanically, without justification and contrary to the provisions of the Act.
8. Under Section 14A(2), the ITO is entitled to determine the amount of the expenditure incurred in relation to the income, which does not form part of the total income, in accordance with the method, as may be prescribed and in this regard, Rule 8D has been prescribed. However, the ITO can make such disallowance only if he is not satisfied with the correctness of the claim of the Assessee, having regard to the account of the Assessee, in respect of such expenditure in relation to the income, which does not form part of the total income. Therefore, it is necessary on the part of the ITO to record the satisfaction that the claim made by the Assessee is correct or incorrect and the satisfaction must be recorded having regard to the disallowance claimed by the Assessee.
9. In the present case, the ITO, when recording such satisfaction, has rejected the claim of the Assessee. However, the ITO has not recorded any dissatisfaction whilst disagreeing with the Assessee, with respect to the expenditure incurred by it, relating to the income, forming part of its total income, as required under Section 14A(2) of the Act, before rejecting the claim of the Assessee. In the impugned order, the Tribunal has also followed Page 5 of 7
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Order dated 11TH December 2025 ::: Uploaded on - 11/12/2025 ::: Downloaded on - 11/12/2025 21:13:22 ::: ITXA no. 3292 of 2018 PCIT vs. Essel Corporate the decision of the Supreme Court in Godrej and Boyce (supra) whilst confirming the order passed by the PCIT and dismissing the appeal filed by the Revenue.
10. In an earlier decision dated 2nd April 2019 of this Court in Pr. Commissioner of Income Tax - 5 v/s. Bajaj Finance Ltd. in Income Tax Appeal Nos. 237 and 485 of 2017, a similar question of law was sought to be proposed by the Appellant - Revenue therein. However, whilst dismissing the said Appeals, this Court reiterated that under Section 14A(2), the satisfaction of the AO about the correctness of the expenditure offered for disallowance by the Assessee is a pre-condition, which was not done in that case and therefore, the said Appeals were dismissed. We are not persuaded to differ with this view, which is the correct one.
11. Considering the above position, we are of the considered opinion that the Tribunal has neither committed any perversity nor applied incorrect principles to the given facts. The Tribunal and the PCIT are the final fact finding authorities which have held against the Revenue. No ground of perversity of findings made in the impugned order has been raised in the Memo of Appeal filed by the Appellant - Revenue. The same substantial question of law (that is sought to be raised in the present Income Page 6 of 7
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Order dated 11TH December 2025 ::: Uploaded on - 11/12/2025 ::: Downloaded on - 11/12/2025 21:13:22 ::: ITXA no. 3292 of 2018 PCIT vs. Essel Corporate Tax Appeal) has already been rejected by this Court in Bajaj Finance (supra). In the circumstances, we are of the considered view that the present Appeal also does not raise any substantial question of law.
12. The present Income Tax Appeal is therefore dismissed. There shall be no order as to costs.
( FARHAN P. DUBASH, J. ) ( R.I. CHAGLA J. ) Jyoti Pawar ITXA No. 3292 of 2018 Page 7 of 7 ------------------------------------- Order dated 11TH December 2025 ::: Uploaded on - 11/12/2025 ::: Downloaded on - 11/12/2025 21:13:22 :::