No Disallowance u/s 14A Without Exempt Income – ₹43.23 Cr Addition Deleted: ITAT Mumbai

Shri Hari Trust Vs ACIT (ITAT Mumbai)

No disallowance u/s 14A without exempt income – Even suo-moto disallowance withdrawable; additions of ₹43.23 Cr deleted – ITAT Mumbai

In Shri Hari Trust vs ACIT (A.Y. 2016-17), the AO invoked section 14A r.w. Rule 8D and made total disallowance of ₹43.23 crore, including additional disallowance of ₹24.94 crore over and above assessee’s suo-moto disallowance of ₹18.28 crore. The assessee argued that no exempt income was earned during the year and the suo-moto disallowance itself was wrongly made due to incorrect advice.

The ITAT accepted that an assessee can withdraw an incorrect suo-moto disallowance during assessment or appellate proceedings, relying on coordinate bench rulings such as Aditya Birla Nuvo Ltd. It further held that in absence of exempt income, provisions of section 14A cannot be invoked, following precedents including HDFC Bank Ltd. .

Accordingly, both components of disallowance — the assessee’s own ₹18.28 crore and the additional ₹24.94 crore made by AO — were deleted. Since the quantum additions were removed, the stay application became infructuous. The assessee’s appeal was allowed in full.

FULL TEXT OF THE ORDER OF ITAT MUMBAI

The instant appeal of the assessee filed against the order of the NFAC, Delhi [for brevity ‘the Ld. CIT(A)], order passed under section 250 of the Income Tax Act 1961 (for brevity ‘the Act’) for assessment year 2016-17, date of order 14.10.2025. The impugned order emanated from the order of the Ld. Assistant Commissioner of Income Tax, Circle-21(3), Mumbai (for brevity the “Ld. AO”), order passed under section 143(3) of the Act, date of order 30.12.2018.