PR. COMMISSIONER OF INCOME TAX, CENTRAL-3, DELHI vs. JINDAL SAW LTD.

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ITA/437/2026HC DelhiDLHC01108688202308 July 2026Author: HON'BLE MR. JUSTICE DINESH MEHTA,HON'BLE MR. JUSTICE RAJNEESH KUMAR GUPTA4 pages
AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the appeal filed by the Revenue. Regarding the disallowance under Section 14A, the Court noted the assessee's submission that this issue was decided against the Revenue in CIT vs. Caraf Builders & Constructions Pvt. Ltd. and the SLP was rejected by the Supreme Court. Therefore, this ground was decided against the Revenue. Concerning the disallowance under Section 40(a)(ia), the Court held that if appropriate tax has been deducted, an assessee cannot be held in default or have the amount disallowed under Section 40(a)(ia) merely because tax was deducted under a different provision, especially when the order holding the assessee in default was set aside by the Tribunal. Thus, these grounds were also decided against the Revenue. For the issue concerning Section 115JB, the Court relied on its own judgment in Pr. CIT v. Bhushan Steel Ltd., which the Revenue's counsel could not dispute. Consequently, this ground was also decided against the Revenue. The appeal was dismissed in its entirety.

What were the facts?

The appeal was filed by the Pr. Commissioner of Income Tax, Central-3, Delhi (Revenue) against an order of the Income Tax Appellate Tribunal (ITAT). The assessee is Jindal Saw Ltd. The appeal challenges the ITAT's deletion of disallowances made under Section 14A and Section 40(a)(ia) of the Income Tax Act, 1961. The disallowance under Section 14A amounted to Rs. 8,51,49,991/-, and under Section 40(a)(ia) it was Rs. 3,31,95,556/-. The Revenue also questioned the ITAT's decision regarding the computation of book profit under Section 115JB.

What were the issues?

1. Whether the ITAT was justified in deleting the disallowance under Section 14A of the Income Tax Act, 1961 amounting to Rs. 8,51,49,991/-, and whether earning exempt income is a prerequisite for its application, contemplating a direct nexus between expenditure and exempt income, and whether the ITAT correctly considered legislative intent and CBDT circulars, and ignored the principle from CIT vs. Rajendra Prasad Moody (1978)? (Questions 2.1 to 2.5) - Assessee's contention: The issue regarding Section 14A has been decided against the Revenue by this Court in CIT vs. Caraf Builders & Constructions Pvt. Ltd. (101 Taxmann.com 167), and the SLP was rejected by the Supreme Court. - Revenue's contention: Not recorded. 2. Whether the ITAT was justified in deleting the disallowance under Section 40(a)(ia) of the Income Tax Act, 1961 amounting to Rs. 3,31,95,556/-, by ignoring the order under Sections 201(1) and 201(1A) passed by the ITO(TDS) and the Assessing Officer's findings? (Questions 2.6 to 2.8) - Assessee's contention: The disallowance was made because tax was deducted under Section 194C instead of Section 194I. The ITAT set aside the orders under Sections 201(1) and 201(1A), and since the finding of default was reversed, the disallowance is unjustified. - Revenue's contention: Not recorded. 3. Whether the ITAT was justified in ignoring Explanation 1(f) to Section 115JB(2) of the Income Tax Act, 1961, which requires increasing book profit by expenditure relatable to Section 10 income, thus justifying disallowance under Section 14A read with Rule 8D for book profit computation? (Question 2.9) - Assessee's contention: This issue has been decided by this Court in Pr. CIT v. Bhushan Steel Ltd. (ITA 593/2015). - Revenue's contention: The Revenue's counsel was not in a position to dispute this position of fact and law.

Which sections of the Income-tax Act were involved?

Section 14A,Section 40(a)(ia),Section 115JB,Section 10,Section 194C,Section 194I,Section 201(1),Section 201(1A)

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
$~4 * IN THE HIGH COURT OF DELHI AT NEW DELHI + ITA 437/2026, CM APPL. 35536/2026, CM APPL. 35537/2026 PR. COMMISSIONER OF INCOME TAX, CENTRAL-3, DELHI .....Appellant Through: Mr.Gaurav Gupta, SSC, Mr.Shivendra Singh JSC, Mr.Yojit Pareek JSC and Ms. Aryama Singh Rajput, Adv. versus JINDAL SAW LTD. .....Respondent Through: Mr. Rohit Jain, Mr. Saksham Singhal & Mr. Tavish Venna, Advocates. CORAM: HON'BLE MR. JUSTICE DINESH MEHTA HON'BLE MR. JUSTICE RAJNEESH KUMAR GUPTA

O R D E R %

08.07.

2026

1.

The instant appeal has been preferred on the following questions:- “2.1 Whether on the facts and the circumstances of the case, ITAT is justified in deleting the disallowance under section 14A of the l.T. Act amounting to Rs.8,51,49,991/-

2.

2 Whether for application of Section 14A of the Income Tax Act, 1961 the earning of exempt income is an essential legal requirement?

2.

3 Whether the term in relation to' as used in Section 14A of the Act contemplates a direct and proximate nexus between ‟expenditure incurred' and earning of exempt income?

2.

4 Whether ITAT is legally justified in deleting disallowance under section 14A of the Act because the assessee had not earned tax exempt income during the This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above.

year, under considering the legislative intent of introduction of Section 14A by the Finance Act, 2001 and subsequent clarification issued by CBDT vide circular No. 5/2014 dated 10/02/2014?

2.

5 Whether the ITAT is legally justified in deleting the disallowance under section 14A of the Act by not considering a legal principle that allowablity/disallowability of expenditure under the Act is not conditional upon the earning of the income as held by Hon'ble Supreme Court in the case of CIT Vs Rajendra Prasad Moody (1978) 1. 2.6 Whether on the facts and circumstances of the case ITAT is justified in deleting the disallowance u/s 40(a)(ia) of the Income-tax Act, 1961 amounting to Rs. 3,31,95,556/-?

2.

7 Whether on the facts and circumstances of the case ITAT is justified in deleting the disallowance under section 40(a)(ia) of the Income-tax Act, 1961 amounting to Rs. 3,31,95,556/- by ignoring the order under sections 201(1) and 201(1A) passed by ITO(TDS) on 28.03.2011. 2.8 Whether on the facts and circumstances of the case ITAT is justified in deleting the disallowance u/s 40(a)(ia) of the Income-tax Act, 1961 amounting lo Rs. 3,31,95,556/- by ignoring the detailed finding of the Assessing Officer?

2.

9 Whether on the facts and circumstances of the case ITAT is justified in ignoring the Explanation 1(f) to section 115JB (2) of the Income Tax Act, 1961 which provides for the calculation of book profit as increased by the amount or amounts of expenditure relatable to any income to which section 10 (other than the provision in clause (38) shall apply. Hence, the disallowing under section 14A read with Rule 8D has been rightly made while computing book profit under section 115JB of the Income Tax Act 1961?”

2.

Mr.Jain, learned counsel appearing on behalf of the respondent- This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above.

assesee, at the outset, submitted that so far as the first issue regarding deletion of disallowance under Section 14A of the Income Tax Act, 1961 (hereinafter referred to as „the Act of 1961‟) concerned, the same has been Builders & Constructions Pvt. Ltd. 101 Taxmann.com 167 and an SLP filed thereagainst also has been rejected by the Hon’ble the Supreme Court.

3.

While adverting to question Nos. 2.7 and 2.8 relating to Section 40(a)(ia) of the Act of 1961, he submitted that the Assessing Officer (hereinafter referred to as „AO‟) had disallowed the expenditure of Rs.3,31,95,556/-, simply because the assessee had deducted tax under Section 194C of the Act of 1961 whereas according to the AO, it should have been under Section 194I of the Act of 1961. 4. Mr.Jain, further submitted that the order dated 28.03.2011 passed under 201(1) and 201(1A) of the Act relied upon by the AO are concerned, the Tribunal has set aside the same and since the AO’s view that the tax was deducted under the wrong provision itself has been reversed, there cannot be any justification for disallowing the expenditure.

5.

Having heard learned counsel for the parties, we are of the view that when appropriate tax has been deducted, simply because it has been deducted under a provision, the assessee can neither be held to be in default nor can the amount be disallowed by invoking Section 40(a)(ia) of the Act of 1961. More particularly, when the Tribunal has set aside the order holding the assessee to be in default, these grounds of appeal are, therefore, also decided against the Revenue.

6.

The next question is question no.2.9, which is reproduced hereunder:- “2. 9. Whether on the facts and circumstances of This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above.

the case ITAT is justified in ignoring the Explanation 1(f) to section 115JB (2) of the Income Tax Act, 1961 which provides for the calculation of book profit as increased by the amount or amounts of expenditure relatable to any income to which section 10 (other than the provision in clause (38) shall apply. Hence, the disallowing under section 14A read with Rule 8D has been rightly made while computing book profit under section 115JB of the Income Tax Act 1961?”

7.

In relation to above question, Mr. Jain, learned counsel for the assessee submitted that the same has been decided by this Court in ITA 593/2015 titled Pr. CIT v. Bhushan Steel Ltd.

8.

Mr. Gaurav Gupta, learned Senior Standing Counsel for the Revenue, is not in a position to dispute the aforesaid position of fact and law.

9.

The aforesaid ground of appeal too is, therefore, decided against the Revenue in light of judgment in the case of Bhushan Steel (supra).

10.

As a result, the appeal filed by the Revenue is hereby dismissed.

11.

All pending applications, including the application(s) seeking condonation of delay in filing/re-filing also stand disposed of.

DINESH MEHTA, J.

RAJNEESH KUMAR GUPTA, J. JULY 8, 2026 neelam

This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above.

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