JINDAL COMBINES PVT LTD,MUMBAI vs. DEPUTY COMMISSIONER OF INCOME TAX - 6(1) (2), MUMBAI

आयकरअपीलीयअिधकरण�ायपीठमुंबईम�। IN THE INCOME TAX APPELLATE TRIBUNAL “F” BENCH, MUMBAI BEFORE SHRI PAWAN SINGH, JM & SHRI ARUN KHODPIA, AM I.T.A. No.2079/Mum/2026 (Assessment Year: 2014-15) Jindal Combines Pvt Ltd Deputy Commissioner of Income 1101 Girnar Building, Tardeo, Tax-6(1)(2) Vs. Mumbai-400034 Aaykar Bhavan, Maharshi Karve Road, New Marine Lines, Mumbai-400020 PAN: AABCJ0861E Assessee- अपीलाथ� / Appellant Revenue-��थ�/ Respondent :

Assesseeby : Shri Vijay Mehta a/w Shri Tarang Mehta : Shri Vibhor Badoni, Sr. DR Revenueby : 24.06.2026 Date of Hearing : 07.09.2026 Date of Pronouncement

O R D E R Per Arun Khodpia, AM: This appeal is preferred by the assessee, directed against the order of the Commissioner of Income Tax Appeals, National Faceless Appeal Centre (NFAC), Delhi [in short, “the Ld. CIT(A)”], dated 05.01.2026 for the Assessment Year (AY) 2014-15,arises from the assessment order under section 143(3) of the Income Tax Act, 1961 [in short, “the Act”] dated 02.12.2016, passed by Income Tax Officer-6(3)(3), Mumbai [in short, “the Ld.AO”].

ITA No. 2079/Mum/2026 Jindal Combines Pvt Ltd 2. The grounds of appeal raised by the assessee are as under: “1. Disallowance of Interest expenses of ₹ 6,04,13,835/- claimed u/s 24(b) of the Income-tax Act, 1961. i. The Hon'ble CIT(A) erred in confirming the disallowance of interest expenses of 6,04,13,825/-claimed under section 24(b) of the Income-tax Act, 1961, ii. The Hon'ble CIT(A) erred in confirming the disallowance of interest expenses of 6,04,13,825/- claimed under section 24(b) of the Act, 1961, against the House Property Income, ignoring binding appellate orders passed in the assessee's own case for AY 2010-11 to AY 2012-2013, wherein identical disallowance has been deleted. The Disallowance therefore, is disregard of binding order is neither justified nor valid. 2. The Hon'ble CIT(A) erred in confirming disallowance of ₹ 6,81,077/- under section 14A r.w. rule 8D despite the fact that no exempt income was earned during the year and identical disallowances stood deleted in assessee's own case for earlier assessment years. 3. The Hon'ble CIT(A) erred in confirming the disallowance of expenses of ₹50,92,740/-incurred wholly and exclusively for earning taxable business income.” 3. Brief facts of the case are that the assessee is a company engaged in the business of letting out of properties. On perusal of the return of the assessee, it is observed by the Ld. AO that the assessee had disclosed rental income of Rs.8,81,47,572/- received from M/s. Aegis Limited for letting out the property at JCPL Tower, Gurgaon and have claimeddeduction under section 24(b) amounting to Rs. 6,04,13,825/-. In the course of assessment proceedings, the assessee was requested to furnish the details of borrowed funds taken and utilization for housing loan and copy of the housing loan certificate. In this regard, assessee submitted that the interest of Rs. 5,59,06,976/- has been paid to India Bulls Limited and the remaining amount of Rs. 45,06,849/-was paid to HDFC Bank. In order to inquire further, the Ld. AO issued a letter to the assessee to furnish copy of loan sanction order from India Bulls and also to prove the

ITA No. 2079/Mum/2026 Jindal Combines Pvt Ltd nexus between borrowed funds and its utilization for construction of the property let out during the year under consideration. In response, the assessee submitted that a term loan was availed from HDFC Bank for acquiring the property. It is also clarified that during the year under consideration, the new management has taken over the company along with assets and liabilities and management had paid the consideration towards the property by its letter dated 23.11.2016. The assessee has further submitted that the loan was taken for funding the construction of property in Gurgaon, Haryana, the income from which has been offered for tax under the head house property.

ITA No. 2079/Mum/2026 Jindal Combines Pvt Ltd the entire interest expense claimed by the assessee under section 24(b) of the Act. Further the Ld.AO has examined the profit and gains from business of the assessee and noted that expenses incurred under the head repairs to building, insurance, rates and taxes excluding taxes on income and interest on delayed payment of Service Tax are claimed by the assessee.With respect to such expenses, the Ld.AO observed that the assessee has only income from property letting out property apart from interest from FDs and excess provision written back which shows that the assessee is not carrying on any business activity excluding letting out of the properties.

ITA No. 2079/Mum/2026 ITA No. Jindal Combines Pvt Ltd Jindal Combines Pvt Ltd

ITA No. 2079/Mum/2026 Jindal Combines Pvt Ltd claimed under section 24(b) are furnished before us as a written note which is extracted as under: “Details of allowable interest I. Interest paid to Indiabulls Housing Finance Limited Loan details for the period from 01.04.2013 to 03.03.2014 The principal amount of loan borrowed - Rs. 45.75 cr. Amount utilized for the purpose of repayment of earlier loan (to the extent of its utilization for acquisition of house property) - Rs. 25 cr. Percentage of amount utilized for acquisition of house property 55% (as admitted by the A.O. in preceding years). Amount of interest paid - Rs. 5.59 cr. Proportionate amount allowable @ 55% - Rs. 3.07 cr. (55% of Rs. 5.59 cr.) II. Interest paid to HDFC Limited Loan details for the period from 04.03.2014 to 31.03.2014 The principal amount of loan borrowed - Rs. 47 cr. Amount utilized for the purpose of repayment of earlier loan (to the extent of its utilization for acquisition of house property) - Rs. 25 cr. Percentage of amount utilized for acquisition of house property - 53% (Rs. 25 cr. out of Rs. 47 cr.). Amount of interest paid - Rs. 0.45 cr. Proportionate amount allowable @ 53% - Rs. 23.85 lacs (53% of Rs. 0.45 cr.) Therefore, total amount of interest allowable is Rs. 330.85 lacs (Rs. 3.07 cr. + Rs. 23.85 lacs). The balance amount of interest is towards investment in debentures and bank FD. The same should be allowed to be capitalized/as a deduction based on the verification by the A.O.” 9. It was the submission that since the interest which is claimed under section 24(b) of the Act was only towards the funds borrowed from different financial institutions, which were utilized for repayment of the existing housing loans

ITA No. 2079/Mum/2026 Jindal Combines Pvt Ltd which originally were utilized for the construction of property, therefore, to the extent such loans were utilized for acquisition of property or for repayment of loans through which the property is acquired shall be allowable under section 24(b) of the Act. Ld. Counsel also furnished a chart showing utilization of borrowed funds and its nexus with subsequent loans utilized to repay the earlier loans. The chart is reproduced as under:

Details of utilization of borrowing and claim of interest expenditure allowed by the Department

Sr. Final position of allowance of A.Y. Particulars No. claim HDFC had sanctioned a loan of Rs. 38 cr. on 07.07.2008 to the assessee. Out of this, Rs. 31.50 cr. has been utilized towards The claim of interest has been 1. 2009-10 construction of house property and allowed u/s. 143(1) of the Act. balance Rs. 6.5 cr. has been utilized for making investment (debentures). 83% of interest expenditure, in the ratio of utilization of borrowed amount (Rs. 31.50 cr. The assessee continued to pay the 2. 2010-11 out of Rs. 38 cr.) has been interest to HDFC Limited allowed against house property income by the A.O. pursuant to the order of the Hon'ble Tribunal. i) 83% of interest expenditure has been allowed against house property income by the A.O. himself. The assessee continued to pay the 3. 2011-12 interest to HDFC Limited ii) Balance 17% of interest, in the ratio of utilization of borrowed amount (Rs. 6.5 cr. out of Rs. 38 cr.) has been allowed to be capitalized to the cost of investment pursuant to the order 7

ITA No. 2079/Mum/2026 Jindal Combines Pvt Ltd

Sr. Final position of allowance of A.Y. Particulars No. claim of the Hon'ble Tribunal.

The assessee borrowed Rs. 45.75 cr. on 26.09.2011 from Indiabulls Pursuant to the order of the A.O. Financial Services Ltd. out of passed u/s. 143(3) r.w.s. 250 which; r.w.s. 263 of the Act; i) 83% of interest expenditure for (i) Rs. 25 cr. has been utilized a period up to 25.09.2011 and towards repayment of principal 55% of interest (in the ratio of amount of loan taken from HDFC Rs. 25 cr. out of Rs. 45.75 cr.) 4. 2012-13 Limited, for a period post 25.09.2011 has been allowed against house property income. (ii) Rs. 9 cr. has been invested in ICD, and ii) 20% of interest paid to Indiabulls Financial Services Ltd. (in the ratio of Rs. 9 cr. out of (iii) balance Rs. 11 cr. has been Rs. 45.75 cr.) has been allowed utilized towards investment against interest income on ICD.

Pursuant to the order of the A.O. passed u/s. 143(3) r.w.s. 250 r.w.s. 263 of the Act;

i) The interest expenditure to the The assessee continued to pay the extent of 55% has been allowed 5. 2013-14 interest to Indiabulls Financial against house property income. Services Ltd. ii) 20% of interest paid to Indiabulls Financial Services Ltd. (in the ratio of Rs. 9 cr. out of Rs. 45.75 cr.) has been allowed against interest income on ICD.

The assessee borrowed Rs. 47 cr. on 04.03.2014 from HDFC Limited 6. 2014-15 Year under consideration. and repaid Rs. 43.39 cr. to Indiabulls Financial Services Ltd.

ITA No. 2079/Mum/2026 Jindal Combines Pvt Ltd 10. Per contra Ld. DR vehemently supported the orders of Revenue Authorities, has referred to para 4.4.1 of the CIT(A)’s order who categorically noted that as per the finding of Ld. AO, the funds were utilized for general corporate purposes of the group, therefore, there was no direct nexus which is required under section 24(b). Mere repayment of loan with another does not automatically transmit the character of construction capital if the original utilization is in doubt, the principle of res judicatadoes not apply to Income Tax proceedings.

ITA No. 2079/Mum/2026 Jindal Combines Pvt Ltd house property, i.e., Rs. 31.50 crores out of the total loan of Rs. 38.00 crores. Similar was the position in AY 2011-12, wherein the assessee claimed 83% of the interest expenditure on the loan availed from HDFC Bank in AY 2009-10 against income from house property, while the remaining interest expenditure was capitalised, as the corresponding portion of the loan had been utilised towards investment, pursuant to the order of the Tribunal.In the subsequent AY 2012-13, the assessee availed another loan of Rs. 45.75 crores on 26.09.2011 from Indiabulls Financial Services Ltd., out of which an amount of Rs. 25.00 crores were utilised towards repayment of the principal amount of the loan availed from HDFC Bank. It is further submitted that, for AY 2012-13, an assessment was completed u/s 143(3) r.w.s. 250 r.w.s. 263 of the Act, wherein 83% of the interest expenditure for the period up to 25.09.2011 and 55% of the interest expenditure, being in the ratio of Rs. 25.00 crores to Rs. 45.75 crores, for the period subsequent to 25.09.2011, was allowed against income from house property. The remaining 20% of the interest expenditure paid to Indiabulls Financial Services Ltd., corresponding to Rs. 9.00 crores out of the loan of Rs. 45.75 crores, was allowed against interest income earned on ICDs.

ITA No. 2079/Mum/2026 Jindal Combines Pvt Ltd and 20% was allowed against interest income earned on ICDs. The year under consideration is AY 2014-15, wherein the Ld. AO has departed from the position consistently adopted in the preceding years and disallowed the interest expenditure claimed by the assessee u/s 24(b) of the Act. 14. In this factual backdrop, once the assessee has demonstrated the nexus between the borrowed funds and their utilisation towards construction of the property, and the Ld. AO himself had, in the preceding assessment years, allowed the interest expenditure to the extent attributable to the funds utilised for construction of the property u/s 24(b) of the Act, the departure from the consistently adopted position in the year under consideration would require examination with reference to the facts and material available on record. In the absence of any material brought on record to establish a change in the nature or utilisation of the borrowed funds, the Revenue, having consistently accepted the aforesaid basis of allocation in the preceding years, could not, without demonstrating any distinguishing feature or change in facts, adopt a contrary position in the year under consideration. Accordingly, the disallowance of interest expenditure u/s 24(b) of the Act, on the facts as emanating from the record, was not warranted. 15. We, prima facie, find substance in the submissions of the assessee and agree with the same, which is also borne out from the orders passed by the Ld. AO in the preceding AYs, wherein the assessee was allowed deduction u/s 24(b) of the Act in respect of the interest expenditure attributable to the funds utilised 11

ITA No. 2079/Mum/2026 Jindal Combines Pvt Ltd towards construction of the property. Under these circumstances, we are unable to subscribe to the view adopted by the Revenue Authorities in the present case. However, on perusal of the order of the Ld. CIT(A), a new fact has emerged, namely, that the fundamental character of the original borrowing was for corporate/working capital purposes and not strictly for construction of the property. The Ld. CIT(A) agreed with the contention that refinancing of a loan is permissible; however, the assessee was required to demonstrate that the original borrowing was utilised for construction, as the utilisation of the original borrowing was otherwise in doubt. 16. Principally, we agree with the submissions of the assessee that if the borrowed funds are utilised for construction of a building, the interest expenditure attributable thereto would be eligible for deduction u/s 24(b) of the Act, subject to fulfilment of the conditions prescribed therein. Further, where such borrowing is subsequently refinanced, the interest expenditure relatable to the refinancing of the original borrowing would also partake of the same character, to the extent the refinancing is utilised for repayment of the principal amount of the original borrowing and a direct nexus with the borrowing utilised for construction of the building is established. We, therefore, approve the aforesaid principle, subject, however, for verification of the relevant facts from corroborative evidence to be furnished by the assessee, having onus to satisfy the assessing authority, particularly with regard to the utilisation of the original borrowing and the nexus between the original and subsequent borrowings. 12

ITA No. 2079/Mum/2026 Jindal Combines Pvt Ltd Accordingly, Ground No. 1 of the appeal is allowed for statistical purposes in the above terms. 17. Ground No. 2 pertains to disallowance under section 14A which is made by the Ld. AO for Rs. 6,81,077/- under his conviction that as per CBDT Circular No. 5/2014 Rule 8D comes into play in the present case and therefore the assessee is allowable to pay tax on disallowance under section 14A to the extent of 5% of average investment of the assessee. Ld. AR on this aspect has argued that the assessee has clarified before the Ld. AO that the assessee had not earned any exempt income during the year under consideration. Therefore, disallowance under Section 14A is not applicable in the case of the assessee. The Ld. AO observed that applicability of Rule 8D read with Section 14A would trigger irrespective of the fact whether any such income has been earned during the financial year or not. It relates only to the capability of the investment to earn exempt income and the actual expenditure incurred for earning of the exempt income during the year under consideration. On this aspect, we are of the considered view that the Ld.AO was not right, while contravening the settled principles of law as laid down by Hon’ble Courts including the Hon’ble Bombay High Court in the case of Pr. CIT Vs Kohinoor Project Pvt Ltd (121 taxmann.com 177) following the judgement of Hon'ble Delhi High Court in the case of Cheminvest Ltd. v. CIT [2015] 378 ITR 33has held that in absence of exempt income, no disallowance is warranted u/s 14A of the Actis called for.

ITA No. 2079/Mum/2026 Jindal Combines Pvt Ltd We accordingly direct the Ld.AO to delete the addition under section 14A. ground of appeal no 2 is thus allowed.

Order pronounced in the open court on 07-09-2026.

Sd/- Sd/- (PAWAN SINGH) (ARUN KHODPIA) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated : 07-09-2026. Ankit K., Sr. PS 14

ITA No. 2079/Mum/2026 Jindal Combines Pvt Ltd

Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. DR, ITAT, Mumbai 4. Guard File 5. CIT

BY ORDER,

(Dy./Asstt. Registrar) ITAT, Mumbai