DCIT CC 13, JHANDEWALAN vs. ELECTRICALS AND ELECTRONICS INDIA LIMITED, KOLKATA

ITA 7999/DEL/2025Status: DisposedITAT Delhi29 September 2026AY 2017-188 pages
AI SummaryDismissed

What were the facts?

The Revenue (Appellant) filed an appeal against the order of the CIT(A) for Assessment Year 2017-18. The Assessing Officer (AO) had made an addition of Rs. 34,36,65,947/- under Section 56(2)(viia) and Rs. 32,86,237/- under Section 14A. The assessee had filed its return of income on 29.10.2017. The AO's order was dated 27.12.2019. The CIT(A) allowed the assessee's appeal, leading to the present appeal by the Revenue. The Revenue's grounds of appeal concerned the deletion of additions made under Section 56(2)(viia) and Section 14A.

What did the Tribunal hold?

The Tribunal held that grounds of appeal Nos. 1 and 2, relating to the deletion of addition of Rs. 34,36,65,947/- under Section 56(2)(viia), were unpressed as no oral or written submissions were made by the Revenue. Consequently, these grounds were rejected. Regarding grounds of appeal Nos. 3 and 4, concerning the deletion of addition of Rs. 32,86,237/- under Section 14A, the Tribunal noted the Revenue's argument that the CIT(A) deleted the disallowance because no exempt income was earned, which was contrary to the ratio in CIT vs. Rajendra Prasad Moody and Maxopp Investment Ltd. The Tribunal observed that it is an admitted fact that the assessee earned no exempt income during the impugned year. The Tribunal relied on the Delhi High Court's decisions in Cheminvest Ltd. and PCIT vs. Era Infrastructure (India) Ltd., which held that Section 14A does not apply where no exempt income is received or receivable during the relevant previous year. Therefore, the Tribunal rejected grounds of appeal Nos. 3 and 4. The appeal filed by the Revenue was dismissed.

What were the issues?

The Tribunal had to decide the following issues: 1. Whether the CIT(A) was correct in deleting the addition of Rs. 34,36,65,947/- under Section 56(2)(viia) of the Income Tax Act, 1961, when the fair market value exceeded the consideration, and the difference exceeded Rs. 50,000. 2. Whether the CIT(A) was correct in deleting the addition of Rs. 34,36,65,947/- under Section 56(2)(viia) by ignoring that the section empowers additions when shares are invested below fair market value and there is a default in filling details accurately. 3. Whether the CIT(A) was correct in deleting the addition of Rs. 32,86,237/- on account of disallowance under Section 14A of the Income Tax Act, 1961, despite expenses relatable to earning exempt income needing disallowance irrespective of whether such income was earned. 4. Whether the CIT(A) was correct in deleting the addition of Rs. 32,86,237/- under Section 14A, ignoring the ratio of judgments in CIT vs. Rajendra Prasad Moody and Maxopp Investment Ltd. vs. CIT. Assessee's contentions: For issues 1 and 2, the assessee submitted that the Revenue conceded that the issue is covered in favor of the assessee. The CIT(A) relied on the assessee's own case for preceding assessment years where additions under Section 56(2)(viia) were deleted because the provisions are applicable only to private companies, not listed companies. The ITAT Delhi had also upheld this deletion for AY 2015-16. Therefore, grounds 1 and 2 should be dismissed. For issues 3 and 4, the assessee contended that Section 14A does not apply where no exempt income is received or receivable during the relevant previous year, citing Cheminvest Ltd. v. CIT (Delhi HC). The assessee argued that the Revenue's attempt to distinguish Cheminvest by relying on Rajendra Prasad Moody and Maxopp Investment Ltd. is misconceived, as Cheminvest considered and distinguished Moody. The assessee further relied on PCIT v. Era Infrastructure (India) Ltd. (Delhi HC), which dismissed the Revenue's appeal as covered by Cheminvest and IL & FS Energy Development Co. Ltd., holding that the amendment to Section 14A by the Finance Act, 2022, is prospective. The assessee argued that the amended Rule 8D cannot override the substantive provision of Section 14A as judicially interpreted. Thus, since no exempt income was earned or receivable for AY 2017-18, no disallowance under Section 14A could be made.

Which sections of the Income-tax Act were involved?

Section 56(2)(viia),Section 14A,Section 143(3),Section 250

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH “E”, NEW DELHI

Before: SHRI VIMAL KUMAR & SHRI SANJAY AWASTHI

For Appellant: Adv. Sh. Shailesh Gupta, Adv
For Respondent: Shri Robin Rawal, CIT. DR
Hearing: 16.09.2026Pronounced: 29.09.2026

PER VIMAL KUMAR, JM:

The appeal filed by the Appellant/Revenue is against order dated 07.08.2025 of ld. Commissioner of Income Tax (Appeals), Delhi-28[hereinafter

P a g e | 2 Electricals & Electronics India Limited

referred to as “the CIT(A)”] under section 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) arising out of assessment order dated 27.12.2019 of Ld. Assessing Officer/ ACIT, Central Circle- 13 Delhi (hereinafter referred to as ‘the AO’) u/s 143(3) of the Act for A.Y. 2017-18. 2. Brief facts of the case are

The order continues below.

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