Pr. Commissioner Of Income Tax (Central)-2 v. Hindustan Power Projects Pvt. Ltd

$~43 IN THE HIGH COURT OF DELHI AT NEW DELHI %Date of Decision : 14.07.2025 +ITA 227/2025 PR. COMMISSIONER OF INCOME TAX (CENTRAL)-2 .....AppellantThrough:Mr Sanjay Kumar, SSC, Ms MonicaBenjaminandMs EashaKadian,JSCs.BenjaminandMs EashaKadian,JSCs. versus HINDUSTAN POWER PROJECTS PVT. LTD. .....RespondentThrough:Mr Sanchit Jolly, Sr Advocate withMr. Mansha Anand, Mr. Sohum Dua,Mr. Abhyudaya Shankar Bajpai, Ms.Manvi Mogha, AdvocatesMr. Mansha Anand, Mr. Sohum Dua,Mr. Abhyudaya Shankar Bajpai, Ms.Manvi Mogha, Advocates CORAM:HON'BLE MR. JUSTICE VIBHU BAKHRUHON'BLE MR. JUSTICE TEJAS KARIA VIBHU BAKHRU, J. (ORAL) CM APPL. 40793/2025 1.For the reasons stated in the application, the delay in filing thecaptioned appeal stands condoned. 2.The application is disposed of. ITA 227/2025 3.The Revenue has filed the present appeal under Section 260A of the Income Tax Act, 1961 [the Act], inter alia, impugning an order dated31.12.2024 [impugned order] passed by the learned Income Tax AppellateTribunal . The impugned order is a common order passed by theITATintwoappealsbeingITANo.2747/Del/2024andITANo.2748/Del/2024 in respect of Assessment Year 2018-19 and AY2019-20 captioned as Hindustan Power Projects Pvt. Ltd. v. Pr.CIT-4. 4.The present appeal is confined to the impugned order in so far as itrelates to the Assessee’s had appeal being ITA No.2747/Del/2024 in respectof AY 2018-19. The Assessee preferred the said appeal against the orderdated 31.03.2024 passed by the Principal Commissioner of Income Tax,Delhi - 4 under Section 263 of the Act whereby the PCIT had heldthat the order passed by the Assessing Officer under Section 153A ofthe Act in respect of AY 2018-19 is erroneous as it is prejudicial to theinterest of the Revenue. 5.The AO had accepted the Assessee’s contention that there would beno disallowance under Section 14A of the Act for the reason that theAssessee did not have any exempt income during the AY 2018-19 in asmuch as, the AO did not make any disallowance under Section 14A of theAct read with Rule 8D of the Income Tax Rules, 1962 [the Rules]. It is theAssessee’s case that no expenditure could be disallowed under Section 14Aof the Act as the Assessee did not have any exempt income during therelevant AY 2018-19 and, therefore, no part of the expenditure could beattributed to the exempt income. 6.It is also the Assessee’s contention that all investments were made from surplus funds and, therefore, in any event, there would be no occasionof disallowing any expenditure in respect of any exempt income that such aninvestmentcouldpossiblyhaveyielded.Notwithstandingthesaidsubmission, the learned PCIT found that the disallowance under Section14A of the Act was required to be made. 7.The ITAT noted that there were decisions of various High Courtssupporting the view as expressed by the Assessee. It also noted that thisCourt in the case of Pr. Commissioner of Income Tax-04 v. IL & FSEnergy Development Company Limited : Neutral Citation : 2017:DHC:4465-DB and Pr. Commissioner of Income Tax (Central)-2 v.M/s EraInfrastructure (India) Limited : Neutral Citation : 2022:DHC: 2690-DBhas also accepted the view and those decisions were ignored. 8.The paragraph 5 of the impugned order which encapsulates theITAT’s decision in this regard is set out below: 7.The ITAT noted that there were decisions of various High Courtssupporting the view as expressed by the Assessee. It also noted that thisCourt in the case of Pr. Commissioner of Income Tax-04 v. IL & FSEnergy Development Company Limited : Neutral Citation : 2017:DHC:4465-DB and Pr. Commissioner of Income Tax (Central)-2 v.M/s EraInfrastructure (India) Limited : Neutral Citation : 2022:DHC: 2690-DBhas also accepted the view and those decisions were ignored. 8.The paragraph 5 of the impugned order which encapsulates theITAT’s decision in this regard is set out below: “5. Heard rival submissions, perused the orders ofthe authorities below. On perusal of the balancesheet of the assessee which is placed at pages 72and the schedule of other income which is placedat page 91 of the Paper Book suggests that theassessee had not received any dividend/exemptincome.We also observed that in course ofassessment proceedings the Assessing Officerissued a questionnaire along with notice u/s 142 ofthe Act which is placed at pages 128 & 129requiring the assessee to submit the details ofdeductions claimed under chapter VIA and section10 of the Act. The assessee also furnished its replystating that the assessee has not claimed anydeduction under chapter VI and also u/s 10 of the Act.On perusal of the order passed by the Ld.PCIT it is observed that according to Ld. PCITdisallowance u/s 14A of the Act to be made evenwhen no exempt income is earned during therelevant year.He placed reliance on variousdecisions which are cited at page 19 of his order.Perusal decision of page 19 of the Ld. PCIT orderit is observed that various decisions have beencitedareallnonjurisdictionalHighCourtdecisionsandthebindingdecisionofthejurisdictional High Court in the case of PCIT Vs.IL & FS Energy Development Company Ltd.(supra) and PCIT Vs. Era Infrastructure (I) Ltd.(supra) were ignored.In these two cases thejurisdictional High Court had clearly held thatwhere the assessee had not earned any exemptincome in the relevant assessment year there couldbe no disallowance in terms of section 14A readwithRule8Dthedecisionrenderedbyjurisdictional High Court in the case of PCIT Vs.IL & FS Energy Development Company Ltd.(supra) was in August 16, 2017 which decisionwas rendered much prior to the completion ofassessment by the Assessing Officer on 27.09.2021u/s 153A for the AY 2018-19. Therefore, in ourconsidered view since the assessee had not earnedanyexemptincometherecannotbeanydisallowance u/s 14A and we hold that theassessment orders passed by the Assessing Officeru/s 153A for the assessment years 2018-19 and2019-20 are not erroneous and prejudicial to theinterest of the Revenue as the twin conditions arenot satisfied for invoking the provision of section263 of the Act. In the circumstances, we quash theorders passed by the Ld. PCIT u/s 263 of the Actfor the assessment years 2018-19 and 2019-20.” 9.It is not disputed that the decisions of this Court in the case of Pr. Commissioner of Income Tax-04 v. IL & FS Energy DevelopmentCompany Limited (supra) and Pr. Commissioner of Income Tax (Central)-2 v. M/s Era Infrastructure (India) Limited (supra) support the view of theAssessee.Clearly, in this view, the assessment order cannot be held aserroneous and prejudicial to the interest of the Revenue. In any event, theview in this regard would be a plausible view and does not warrant anyinterference under Section 263 of the Act. 10.In view of the above, we do not find any infirmity with the impugnedorder. No substantial question of law arises for consideration of this Court.The appeal is, accordingly, dismissed. VIBHU BAKHRU, J JULY 14, 2025M TEJAS KARIA, J