PCIT, CENTRAL-3 vs. MALANA POWER COMPANY LTD.

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ITA/547/2025HC DelhiDLHC01075914202219 January 2026Bench: HON'BLE MR. JUSTICE VINOD KUMAR,HON'BLE MR. JUSTICE DINESH MEHTA2 pages
AI SummaryDismissed

What did the High Court hold?

The Delhi High Court held that the disallowance under Section 14A of the Income Tax Act, 1961, cannot exceed the amount of dividend received by the assessee. The Court's reasoning was based on the fact that this issue had been conclusively decided by a number of previous judgments of the same Court. The Revenue's counsel was unable to present any arguments to the contrary or to distinguish the present appeals from the precedents. Consequently, the appeals filed by the Revenue were dismissed. The ratio decidendi is that the disallowance under Section 14A is capped by the amount of dividend income. The operative direction was the dismissal of the appeals.

What were the facts?

The appeals were filed by the Principal Commissioner of Income Tax (Revenue) against the respondents, Bhilwara Energy Ltd. and Malana Power Company Ltd. (Assessees). The assessment years are not explicitly stated in the provided text. The appeals challenge orders passed by the Income Tax Appellate Tribunal (though the specific order is not detailed, it's implied the Tribunal's decision is under challenge). The core issue revolves around the disallowance under Section 14A of the Income Tax Act, 1961. The procedural history indicates that the Revenue has appealed to the High Court after an adverse decision at a lower level. The amount in dispute is not specified.

What were the issues?

1. Whether the disallowance under Section 14A of the Income Tax Act, 1961, can exceed the amount of dividend received by the assessee? (Question of law) The Revenue contended that the disallowance under Section 14A could potentially exceed the dividend income. However, the Revenue's counsel, Mr. Agarwal, was unable to dispute the position of law as established by previous judgments. The Assessees, through their counsel Mr. Satyen Sethi, argued that the issue had already been decided by multiple judgments of the Delhi High Court, specifically citing the case of Principal Commissioner of Income-tax Central-1 versus R.J. Corp. Ltd. [2025] 181 taxmann.com 749 (Delhi).

Which sections of the Income-tax Act were involved?

Section 14A

AI-generated summary — verify with the full judgment below

$~17, 19 & 20 * IN THE HIGH COURT OF DELHI AT NEW DELHI + ITA 366/2025 and CM APPL. 54343/2025, CM APPL. 54344/2025

PRINCIPAL COMMISSIONER OF INCOME TAX-1 DELHI

.....Appellant Through: Mr. Abhishek Maratha, SSC with Mr. Apoorv Agarwal, JSC.

versus

BHILWARA ENERGY LTD

.....Respondent Through: Mr. Satyen Sethi, Ms. Arta Trana Panda and Mr. Gargi Sethee, Advocates.

+ ITA 545/2025 and CM APPL. 66717/2025 PRINCIPAL CMMISSIONER OF INCOME TAX, CENTRAL-3, DELHI

.....Appellant Through: Mr. Abhishek Maratha, SSC with Mr. Apoorv Agarwal, JSC.

versus

M/S MALANA POWER COMPANY LTD .....Respondent Through: Mr. Satyen Sethi, Ms. Arta Trana Panda and Mr. Gargi Sethee, Advocates.

+ ITA 547/2025 and CM APPL. 66813/2025, CM APPL. 66814/2025

PCIT, CENTRAL-3

.....Appellant Through: Mr. Abhishek Maratha, SSC with Mr. Apoorv Agarwal, JSC.

versus

MALANA POWER COMPANY LTD.

.....Respondent Through: Mr. Satyen Sethi, Ms. Arta Trana 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 29/05/2026 at 16:15:06

Panda and Mr. Gargi Sethee, Advocates. CORAM:

HON'BLE MR. JUSTICE DINESH MEHTA

HON'BLE MR. JUSTICE VINOD KUMAR

O R D E R %

19.01.2026 1. Issue involve in the present appeals is as under:- “Whether disallowance under Section 14A can exceed the amount of dividend received by assessee?” 2. Mr. Satyen Sethi, learned Counsel appearing for the respondents, at the outset, submitted that the issue involved in the present appeals have already been decided by a number of judgments of this Court including Judgment rendered in the case of Principal Commissioner of Income-tax Central-1 versus R.J. Corp. Ltd. [2025] 181 taxmann.com749 (Delhi). 3. Mr. Agarwal, learned counsel for the appellants despite his attempts could not dispute the aforesaid position of facts and law. 4. Hence, the captioned appeals, with pending applications are dismissed.

DINESH MEHTA, J.

VINOD KUMAR, J. JANUARY 19, 2026/MR 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 29/05/2026 at 16:15:06

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