Saurashtra Cement Limited Vs DCIT (ITAT Mumbai)
This appeal was filed by Saurashtra Cement Limited (the Assessee) against the appellate order dated February 13, 2025, passed by the Addl./Jt. Commissioner of Income Tax (Appeals)-12, Delhi, relating to the Assessment Year (A.Y.) 2016-17. The core issue of the appeal was the Assessing Officer’s (AO) addition of ₹1,15,40,253/- made under Section 14A of the Income Tax Act read with Rule 8D of the Income Tax Rules.
The Assessee had filed its return of income for A.Y. 2016-17, declaring a total loss of ₹(-)1,02,03,583/-. The case was selected for limited scrutiny regarding tax aspects of investments/advances/loans and the admissibility of claimed interest expenses. The AO observed that the Assessee had substantial investments, amounting to ₹78,92,83,088/- as of March 31, 2016, in listed securities, which the AO noted were investments yielding exempt income.
In response, the Assessee submitted that the strategic long-term investments were made from its own funds and non-interest bearing securities (Optionally Convertible Debentures), with only short-term borrowings of ₹6 crore (out of total borrowings of ₹76 crore) being interest-bearing and used primarily for business operations. Critically, the Assessee argued before the AO that no exempt income formed part of the total income during the year, and therefore, Section 14A was not applicable.
