IN THE INCOME TAX APPELLATE TRIBUNAL, ‘E’ BENCH MUMBAI BEFORE: SHRI AMIT SHUKLA, JUDICIAL MEMBER &

SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA No.6013, 6108, 6915, 6916 & 6917/Mum/2025 (Assessment Years: 2016-17, 2017-18 and 2018-19)

Essel Mining & Vs. Assistant Commissioner Industries Limited, 18th of Income-Tax, Central Floor, Industry House, Circle 1(4), Central Circle 10 Camac Street, Room No.902, 9^th Floor, Kolkata, West Bengal – Prathistha Bhavan, Old 700017. CGO Annexe, Maharshi Karve Road, Mumbai, Maharashtra – 400020.

PAN/GIR No. AAACE 6607 L (Appellant) .. (Respondent)

Assessee by Ms. Sukanya Jayaram Revenue by Shri Ritesh Misra, CIT DR a/w Shri Hemanshu Joshi, SR DR.

Date of Hearing 25/02/2026 Date of Pronouncement 24/03/2026 आदेश / O R D E R PER AMIT SHUKLA, JUDICIAL MEMBER:

1. The aforesaid cross appeals have been filed by the assessee as well as by the Revenue against the separate impugned orders of even date, i.e., 08.08.2025, passed by the learned Commissioner of Income Tax (Appeals)–47, Mumbai, arising out of the assessments framed under section 143(3) of the Income Tax Act, 1961 for the Assessment Years 2016–17, 

2017–18 and 2018–19.

2. At the outset, it is pertinent to observe that the core controversy which runs as a common thread through all these appeals pertains to the disallowance made under section 14A read with Rule 8D of the Income Tax Rules by the Assessing Officer and as partly sustained or restricted by the learned CIT(A). The magnitude of such disallowances across the years, juxtaposed with the relatively minuscule exempt income earned by the assessee, forms the nucleus of the present lis, and the figures of such disallowances, as noted by the authorities below, are to be incorporated in a tabular form at the appropriate place herein.

3. The principal contention advanced on behalf of the assessee before us, shorn of unnecessary embellishment yet carrying considerable legal weight, is that the disallowance under section 14A, irrespective of the computational rigour of Rule 8D, cannot exceed the amount of exempt income earned during the relevant previous year, and therefore, the entire exercise of computing disallowance far in excess of such income is contrary to the settled legal position and deserves to be curtailed to the extent of exempt income alone.

4. In so far as Assessment Year 2016–17 is concerned, which has been treated as the lead year for the purpose of adjudication, it is an undisputed factual position that the assessee has earned dividend income of Rs.1,05,503/-, which has been claimed as exempt. During the course of assessment proceedings, the Assessing Officer called upon the assessee to explain as to why disallowance under section 14A should not be made in respect of expenditure allegedly incurred in relation to earning such exempt income. In response, the assessee categorically submitted that the disallowance, if any, cannot exceed the exempt income earned during the year. However, the Assessing Officer, taking into account the scale and magnitude of the assessee’s operations, observed that the assessee company is engaged in substantial business activities including mining and power generation, having a turnover of Rs.843.50 crores and income from operations of Rs.755.86 crores, and has made investments aggregating to Rs.4,888 crores, and therefore, according to him, it is inconceivable that no substantial expenditure has been incurred for earning exempt income.

5. Proceeding on this premise, the Assessing Officer further observed that earning of exempt income is not a passive activity but requires constant monitoring, strategic decision- making, market research, analysis of trends, and various administrative and managerial inputs, and therefore, expenditure attributable to such activity cannot be ignored. Invoking the provisions of section 14A read with Rule 8D, he computed a disallowance of Rs.24,63,37,320/-. It is, however, a very crucial and significant fact borne out from the record