THE PR. COMMISSIONER OF INCOME TAX -CENTRAL -1 vs. SAMAST VIKAS LIMITED.

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ITA/300/2026HC DelhiDLHC01110343202523 April 2026Author: HON'BLE MR. JUSTICE DINESH MEHTA,HON'BLE MR. JUSTICE VINOD KUMAR3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the appeal. Regarding the disallowance under Section 14A, the Court held that this issue had been decided against the Department by the High Court itself in the case of Cheminvest Ltd. v. CIT. For the second question, which the Court considered to be essentially a question of fact and appreciation of evidence, it was held that no perversity could be alleged in the findings of the Appellate Authority (CIT(A) and ITAT). Concerning the issue of interest-free loans to subsidiaries, the Court noted that the CIT(A) had found that the respondent-assessee had sufficient funds available to make these advances, a finding affirmed by the Tribunal. Therefore, based on these findings, the appeal was dismissed.

What were the facts?

The Principal Commissioner of Income Tax - Central - 1 (the Revenue) filed an appeal before the Delhi High Court against an order dated 31.12.2024 passed by the Income Tax Appellate Tribunal (ITAT). The ITAT's order was in relation to ITA No. 3984/DEL/2024 concerning the assessment year(s) not specified. The appeal challenges the deletion of additions made by the Assessing Officer (AO). The AO had made an addition of Rs. 3,10,19,795/- under Section 14A and Rs. 9,92,70,233/- under Section 36(1)(iii) of the Income Tax Act, 1961. The Commissioner of Income Tax (Appeals) had deleted these additions, and the ITAT upheld the CIT(A)'s order. The Revenue's appeal to the High Court was filed with significant delays, which were condoned.

What were the issues?

The High Court had to decide the following issues raised by the appellant-Revenue: 1. Whether the CIT(A) erred in allowing the assessee's appeal against the AO's order, which had made additions of Rs. 3,10,19,795/- under Section 14A and Rs. 9,92,70,233/- under Section 36(1)(iii) of the Income Tax Act, 1961. 2. Whether the CIT(A) erred in ignoring that the assessee failed to substantiate the correctness of expenditure claims related to income not forming part of total income. 3. Whether the CIT(A) erred in ignoring that the AO rightly followed CBDT circulars and legal precedents in disallowing expenses even without earning exempt income in the subject AY. 4. Whether the CIT(A) erred in ignoring that the assessee failed to substantiate the reason for transferring interest-bearing borrowed funds as interest-free loans to its subsidiary. Assessee's arguments: The judgment does not record specific arguments made by the assessee. However, the grounds of appeal implicitly suggest the assessee contended that the CIT(A)'s deletion of additions was justified. Revenue's arguments: The Revenue argued that the CIT(A) erred in deleting the additions made under Section 14A and Section 36(1)(iii). They contended that the assessee failed to substantiate its claims and that the AO had correctly followed CBDT circulars and legal precedents, even in the absence of exempt income. The Revenue also argued that the assessee did not provide reasons for advancing interest-free loans from borrowed funds.

Which sections of the Income-tax Act were involved?

Section 14A,Section 36(1)(iii)

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
$~8 * IN THE HIGH COURT OF DELHI AT NEW DELHI + ITA 300/2026, CM APPL. 23331/2026 & CM APPL. 23332/2026 THE PR. COMMISSIONER OF INCOME TAX -CENTRAL -1 .....Appellant Through: Mr. Ruchir Bhatia, SSC with Mr. Anant Maan, JSC. versus SAMAST VIKAS LIMITED. .....Respondent Through: Mr. Ved Jain, Mr. Nischay Kantoor, Ms. Vandana Kothari & Mr. Sparsh Kapoor, Advocates. CORAM: HON'BLE MR. JUSTICE DINESH MEHTA HON'BLE MR. JUSTICE VINOD KUMAR

O R D E R %

23.04.

2026 CM APPL. 23332/2026 (delay in re-filing)

1.

Instant application has been filed under Section 151 of the Civil Procedure Code, 1908, read with Section 5 of the limitation act seeking condonation of delay of 149 days in re-filing the appeal.

2.

For the reasons stated in the application, the delay of 149 days in re- filing the appeal is condoned.

3.

Application stands allowed. CM APPL. 23331/2026 (delay in filing)

4.

Instant application has been filed under Section 151 of the Civil Procedure Code, 1908, read with Section 5 of the limitation act seeking condonation of delay of 156 days in filing the appeal.

5.

For the reasons stated in the application, the delay of 156 days in re- 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 Order is downloaded from the DHC Server on 27/04/2026 at 13:14:17

filing the appeal is condoned.

6.

Application stands allowed. ITA 300/2026

7.

Instant appeal has been preferred against the order dated 31.12.2024 passed by Income Tax Appellate Tribunal, Delhi Bench ‘G’, New Delhi (hereinafter referred to as ‘Tribunal’) in ITA No. 3984/DEL/2024. The grounds which the appellant-Revenue had taken in the appeal before the Tribunal are as follows: "(i) Whether on the facts and circumstances of the case, the Ld. CIT(A) erred in allowing the appeal of the assesse against the order dated 10.06.2021 vide which the addition of Rs. 3,10,19,795/ made on account of disallowance under section 14A of the Act and addition of Rs. 9,92,70,233/- on account of disallowance under section 36(1) (ill) of the Act was deleted. (ii) Whether the Ld. CIT(A) erred in ignoring the facts of the case that during the assessment proceedings, the assessee had failed to substantiate the correctness of the claim of expenditure in relation to income which does not form part of the total income during the relevant assessment year. (iii) Whether the Ld. CIT(A) erred in ignoring the facts of the case that Assessing Officer rightly followed the CBDT circular and legal precedence in disallowing expenses even though no exempt income has been earned in subject AY. (iv) Whether the Ld. CIT(A) erred in ignoring the facts of the case that during the assessment proceedings, the assessee had failed to substantiate the reason behind transfer of its interest-bearing borrowed funds advanced as loans to its subsidiary company without charging. any interest on the same during the relevant assessment year."

8.

Heard rival counsel and perused the record.

9.

So far as issue relating to disallowance under Section 14A is concerned, the same has been decided against the Department by this Court in the case of Cheminvest Ltd. v. CIT reported in [2015] 61 taxmann.com 118/234 Taxman 761/378 ITR 33 (Delhi)

10.

While observing that the second question raised by the appellant is essentially a question of fact and appreciation of evidence, we are of 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. The Order is downloaded from the DHC Server on 27/04/2026 at 13:14:17

view that no perversity can be alleged in such finding of the Appellate Authority.

11.

Adverting to the remaining issue of giving interest free loan, we find that the interest free loan was given by the respondent-assessee to its subsidiaries and another parties, and it had sufficient fund available at its disposal to do the same as has been found by the Commissioner Income Tax (Appeals)-24 (hereinafter referred to as ‘CIT(A)’) in order. The Tribunal has affirmed such finding of the CIT (A).

12.

The instant appeal is, therefore, dismissed and disposed of. DINESH MEHTA, J. VINOD KUMAR, J. APRIL 23, 2026/nk 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 Order is downloaded from the DHC Server on 27/04/2026 at 13:14:17

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