Income Tax Appellate Tribunal - Mumbai
Dcit, Circle 1(3)(1), Mumbai vs Trent Hypermarket Private Limited, ... on 14 May, 2026
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI "E" BENCH : MUMBAI
BEFORE SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER
AND
SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER
ITA No. 1900/Mum/2026
Assessment Year : 2017-18
DCIT, Circle-1(3)(1), Trent Hypermarket
Room No. 540, 5th Floor, Private Limited,
Aayakar Bhavan, vs. 2nd Floor, Taj Building,
M.K. Road, D.N. Road, Fort,
Mumbai-400020. Mumbai-400001.
PAN : AACCT9803D
(Appellant) (Respondent)
For Assessee : Shri Gautam Thacker
For Revenue : Shri Hemanshu Joshi, Sr.DR
Date of Hearing : 11-05-2026
Date of Pronouncement : 14-05-2026
ORDER
PER VIKRAM SINGH YADAV, A.M :
This is an appeal filed by the Revenue against the order of the Learned Commissioner of Income Tax (Appeals)-National Faceless Appeal Centre (NFAC), Delhi ['Ld.CIT(A)'], dated 02-12-2025, pertaining to Assessment Year (AY) 2017-18, wherein the Revenue has taken the following grounds of appeal:
"1. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance made u/s 14A of the Act r.w. Rule 8D amounting to Rs.2,92,60,000/- ignoring the fact that assessee company had substantial investments capable of generating exempt income.2 ITA No. 1900/Mum/2026
2. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance made u/s 14A of the Act r.w. Rule 8D amounting to Rs.2,92,60,000/- ignoring the fact that CBDT Circular No. 5/2014 dated 11th February, 2014 is binding on the assessing officer wherein it has been clarified that the disallowance u/s, 14A is applicable even if no exempt income could be earned during the year.
3. The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary."
2. Briefly, the facts of the case are that the assessee filed its return of income, declaring loss of Rs. 61,64,59,326/-. Subsequently, the case of the assessee was selected for scrutiny and assessment proceedings were completed u/s. 143(3) of the Income Tax Act, 1961 ('the Act'), vide order dt. 18-12-2019, accepting the returned income. Subsequently, the AO basis information that assessee had investments of Rs. 30.69 crores in the equity shares of its subsidiaries, Rs. 245.15 crores in Quoted and Unquoted Mutual Funds and also had current investment of Rs. 16.76 crores in Unquoted Mutual Funds, totaling to Rs. 292.60 crores, noted that these investments had the potential of generating exempt income in the form of dividend or Long Term Capital Gain u/s. 10(34) of the Act. It was further noted that the assessee had systematically invested sums in the mutual funds, and moreover, various mutual funds were liquidated during the relevant year computing Short Term Capital Gains to the tune of Rs. 35.37 crores and further, the assessee has not made any disallowance u/s. 14A of the Act by taking plea that the dominant purpose of its investment was to acquire controlling stake over its group companies/subsidiaries and that it did not receive any dividend income during the relevant year, however, considering the value and extent of financial operation involving investment, disallowance u/s. 14A of the Act was required to be made in the scrutiny assessment completed on 18-12- 2019, which has not happened and has resulted in under assessment of income of Rs. 2,92,60,000/- being 1% of the average investment. Basis the 3 ITA No. 1900/Mum/2026 said information, the reasons were recorded and notice u/s. 148 of the Act was issued on 30-03-2021.
3. The assessee-company filed its return of income in response to notice u/s. 148 of the Act. Thereafter, notices u/s. 143(2) and 142(1) of the Act were issued calling for necessary information and documentation. In its submissions, the assessee-company submitted that it is not in receipt of any dividend or other exempt income during the year and the income from redemption of debt mutual fund has already been offered to tax in the form of Short Term Capital Gains. It was further submitted that the equity investment in subsidiary is done for business and strategic reason and investment in debt funds is done for short term purposes.
4. The submissions so filed by the assessee were considered but not found acceptable to the AO. The AO referred to the rationale behind the introduction of Section 14A of the Act as provided in the Memorandum explaining the provisions of Finance Bill, 2001. The AO further referred to the Finance Bill, 2022 which has proposed to insert an explanation to section 14A to clarify that bereft exempt income being earned in any year, disallowance u/s. 14A will still be attracted and the Bill further proposes to apply the amendment retrospectively. Following the same, the AO worked out the disallowance u/s. 14A of the Act r.w. Rule 8D amounting to Rs. 2,92,60,000/- being 1% of the total annual average value of the investment.
5. Thereafter, the assessee carried the matter in appeal before the Ld.CIT(A) and submitted that there are investment in the forms of debt mutual funds and investment in subsidiaries which are needed for strategic business purposes. It was submitted that the debt mutual funds 4 ITA No. 1900/Mum/2026 are growth oriented mutual funds which do not provide any dividend income and, therefore, no dividend income has been received from the said investments. It was further submitted that the assessee has redeemed certain debt mutual funds during the year under consideration and capital gains generated amounting to Rs. 35.36 crores have already been offered to tax. Referring to the source of investment in the subsidiary, it was submitted that the same has been made out of redemption of mutual funds and other internal accruals available with the company and no dividend income or any other income has been earned which has been claimed as exempt in terms of the equity investments on the subsidiaries.
6. Further, the assessee drawn reference to clause 9 of Finance Bill, 2022, which seeks to amend section 14A and it was submitted that the same provides that amendment to section 14A of the Act is made applicable from 1st April, 2022, which means AY. 2022-23 and onwards and it is therefore a prospective amendment. Further reference was drawn to the explanatory memorandum to the Finance Bill 2022 which also states that this amendment will take effect from 1st April, 2022 and will accordingly apply in relation to AY. 2022-23 and subsequent assessment years.
7. Further, reference was drawn to the decision of the Hon'ble Delhi High Court in the case of PCIT vs. Era Infrastructure (India) Ltd., [2022] 141 taxmann.com 289, wherein the Hon'ble High Court has held that amendment in section 14A, which is "for removal of doubts" cannot be presumed to be retrospective even where such language is used if it alters or changes the law as it earlier stood.
5 ITA No. 1900/Mum/20268. Further reference was drawn to the earlier assessment years wherein in absence of exempt income, the Ld.CIT(A) as well as the Tribunal has held that no disallowance u/s. 14A can be made in the year in which no exempt income is earned or received by the assessee and reference was drawn to the Co-ordinate Bench decision of the Tribunal for the AY. 2012- 13 which has in turn followed the Hon'ble Delhi High Court in the case of Cheminvest Ltd., 281 CTR 447.
9. The submissions so filed by the assessee were considered by the Ld.CIT(A). The Ld. CIT(A) referred to the amendment brought in by the Finance Act, 2022 and stated that the said provision applies for AY. 2022- 23 and subsequent years. The ld CIT(A) further relied upon the decision of the Hon'ble Gauhati High Court in the case of Williamson Financial Services Ltd. vs. CIT [2024] 166 taxmann.com 607 (Gauhati), wherein it was held that the explanation inserted to Section 14A vide Finance Act, 2022 is applicable prospectively. Further reference was drawn to the decision of the Hon'ble Delhi High Court in the case of PCIT vs. Era Infrastructure (India) Ltd., in ITA 204/2022 & CM APPL. 31445/2022, dated 20-07-2022, wherein it was held that the amendment of section 14A which is for removal of dues cannot be presumed to be retrospective even where such language is used to alter or changes the law as earlier stood. The Ld.CIT(A) finally directed the AO to deletion the addition of Rs. 2,92,60,000 made u/s. 14A of the Act as there was no exempt income earned during the year and also for the reason that section 14A has been held to be prospective by different judicial forums and the grounds of appeal were decided in favour of the assessee.
10. Against the said order so passed by the ld CIT(A), the Revenue is in appeal before us.
6 ITA No. 1900/Mum/202611. During the course of hearing, the Ld.DR relied on the findings of the AO. It was submitted that the Ld.CIT(A) has erred in deleting the disallowance made u/s. 14A of the Act r.w. rule 8D, ignoring the fact that assessee-company had substantial investments capable of generating exempt income. It was further submitted that the Ld.CIT(A) ignored the facts that CBDT Circular No. 5/2014, dt. 11-02-2014 is binding on the AO wherein it has been clarified that the disallowance u/s. 14A is applicable even if no exempt income could be earned during the year under consideration.
12. Per contra, the Ld.AR has been heard who has relied on the findings of the Ld.CIT(A). It was submitted by the ld AR that the matter pertains to the year prior to the amendment and the Hon'ble Gauhati High Court and Delhi High Court have the amendment to be prospective in nature and the Ld.CIT(A) has rightly taken these decisions into account and following the same has deleted the addition so made by the AO. Further, it was submitted that even though there is no decision of the jurisdictional High Court post amendment, however, the Co-ordinate Bench of the Mumbai Tribunal in the case of Geecee Ventures Ltd. vs. DCIT [2025] 174 taxmann.com 1285 (Mumbai-Trib.) has taken cognizance of the decision of the Hon'ble Delhi High Court in the case of PCIT vs. Era Infrastructure (India) Ltd., (supra) and has rejected the contention of the Revenue that the amendment to section 14A introduced in Finance Act, 2022 shall have retrospective effect. Further, it was submitted that similar view has been taken by the Co-ordinate Bench of the Mumbai Tribunal in the case of ACIT vs. Bajaj Capital Ventures (P.) Ltd., [2022] 140 taxmann.com 1. It was accordingly submitted that the appeal so filed by the Revenue may be dismissed and the order of the Ld.CIT(A) be confirmed.
7 ITA No. 1900/Mum/202613. We have heard the rival contentions and perused the material available on record. Admittedly, there are investments in different debt mutual funds as well as investments in the equity shares of its subsidiary companies by the assessee. As far as debt mutual funds are concerned, no dividend income has been earned during the year under consideration and on redemption of debt mutual funds, the capital gains so accrued have already been offered to tax. As far as the equity investments are concerned, it is again an admitted position that no dividend income has been earned or received during the year. The AO has relied on the amendment brought in by the Finance Act, 2022 and has held that the said amendment is retrospective in nature. Interestingly, the assessment order has been passed on 30-03-2022 and at the relevant point in time, the Finance Bill, 2022 though presented on the floor of the House of Parliament, however, has not got assent of the Hon'ble President of India and, therefore, has not become the law of the land and in spite of that, the AO has taken cognizance of the proposed amendment and made the subject disallowance. In any case, the language of the amendment as is evident from clauses to the Finance Bill as well as the Memorandum explaining the Bill is clear wherein it has been stated that the amendment is applicable from 01-04-2022 effective from AY. 2022-23 onwards and, therefore, prospective in nature. The Hon'ble Gauhati High Court in the case of Williamson Financial Services Ltd. vs. CIT (supra) and Hon'ble Delhi High Court in case of Era Infrastructure (supra) have held that the amendment as prospective in nature. The Coordinate Mumbai Benches have taken a similar and consistent view in the matter and the amendment has been held to be prospective in nature. In light of the same, we do not find any infirmity in the order of the Ld.CIT(A), wherein he has followed the decision of the Hon'ble Delhi and Gauhati High Courts 8 ITA No. 1900/Mum/2026 and find no legal and justifiable basis to interfere with the findings of the Ld.CIT(A) and hence, the order and findings of the Ld.CIT(A) are confirmed.
14. In the result, the appeal filed by the Revenue is dismissed.
Order pronounced in the open court on 14-04-2026
Sd/- Sd/-
[SANDEEP SINGH KARHAIL] [VIKRAM SINGH YADAV]
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai,
Dated: 14-04-2026
TNMM
Copy to :
1) The Appellant
2) The Respondent
3) The CIT concerned
4) The D.R, ITAT, Mumbai
5) Guard file
By Order
Dy./Asst. Registrar
I.T.A.T, Mumbai