PR. COMMISSIONER OF INCOME TAX (CENTRAL)-2, DELHI vs. HINDUSTAN POWER PROJECTS PVT. LTD.

$~19 * IN THE HIGH COURT OF DELHI AT NEW DELHI + ITA 244/2025 & CM APPL. 44576/2025 PR. COMMISSIONER OF INCOME TAX (CENTRAL)-2, DELHI .....Appellant Through: Mr. Sanjay Kumar, SSC with Ms. Monica Benjamin, JSC, Ms. Easha, JSC, Advs. Versus HINDUSTAN POWER PROJECTS PVT. LTD. .....Respondent Through: Mr. Sachit Jolly, Sr Adv with Mrs. Mansha Anand, Mr. Abhyudaya Shankar Bajpai, Mr. Sohum Dua, Advs. CORAM: HON'BLE MR. JUSTICE V. KAMESWAR RAO HON'BLE MR. JUSTICE VINOD KUMAR O R D E R % 25.07.2025 1. This appeal has been filed by the Revenue under Section 260A of the Income Tax Act, 1961 (the Act) impugning the order dated 31.12.2024 whereby the Income Tax Appellate Tribunal (ITAT) has decided two appeals. The same being ITA 2747/Del/2024 and 2748/De1/2024 which were for the Assessment Years 2018-19 and 2019-20. 2. It has been informed by the learned counsel for the parties that the appeal under Section 260A challenging the same order being 30.12.2024 in ITA No.2747/Del/2024 was decided by this Court in Pr. Commissioner of Income Tax (Central)-2 v. Hindustan Power Projects Pvt. Ltd : Neutral 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 27/03/2026 at 11:50:07

Citation : 2025: DHC: 5559-DB whereby this Court has dismissed the appeal filed by the Revenue being on ITA 227/2025 on 14.07.2025. 3. For parity of reasons, this appeal which arises from ITA 2748/De1/2024 and relates to assessment year 2019-20 is also dismissed. The relevant paragraphs of the order dated 14.07.2025 in ITA 227/2025 are the following 6. “It is also the Assessee’s contention that all investments were made from surplus funds and, therefore, in any event, there would be no occasion of disallowing any expenditure in respect of any exempt income that such an investment could possibly have yielded. Notwithstanding the said submission, the learned PCIT found that the disallowance under Section 14A of the Act was required to be made. 7. The ITAT noted that there were decisions of various High Courts supporting the view as expressed by the Assessee. It also noted that this Court in the case of Pr. Commissioner of Income Tax-04 v. IL & FS Energy Development Company Limited : Neutral Citation : 2017:DHC: 4465-DB and Pr. Commissioner of Income Tax (Central)-2 v. M/s Era Infrastructure (India) Limited : Neutral Citation : 2022:DHC: 2690-DB has also accepted the view and those decisions were ignored. 8. The paragraph 5 of the impugned order which encapsulates the ITAT’s decision in this regard is set out below: “5. Heard rival submissions, perused the orders of the authorities below. On perusal of the balance sheet of the assessee which is placed at pages 72 and the schedule of other income which is placed at page 91 of the Paper Book suggests that the assessee had not received any dividend/exempt income. We also observed that in course of assessment proceedings the Assessing Officer issued a questionnaire along with notice u/s 142 of the Act which is placed at pages 128 & 129 requiring the assessee to submit the details of deductions claimed under chapter VIA and section 10 of the Act. The assessee also furnished its reply stating that the assessee has not claimed any deduction under chapter VI and also u/s 10 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 27/03/2026 at 11:50:07

Act. On perusal of the order passed by the Ld. PCIT it is observed that according to Ld. PCIT disallowance u/s 14A of the Act to be made even when no exempt income is earned during the relevant year. He placed reliance on various decisions which are cited at page 19 of his order. Perusal decision of page 19 of the Ld. PCIT order it is observed that various decisions have been cited are all non jurisdictional High Court decisions and the binding decision of the jurisdictional High Court in the case of PCIT Vs. IL & FS Energy Development Company Ltd. (supra) and PCIT Vs. Era Infrastructure (I) Ltd. (supra) were ignored. In these two cases the jurisdictional High Court had clearly held that where the assessee had not earned any exempt income in the relevant assessment year there could be no disallowance in terms of section 14A read with Rule 8D the decision rendered by jurisdictional High Court in the case of PCIT Vs. IL & FS Energy Development Company Ltd. (supra) was in August 16, 2017 which decision was rendered much prior to the completion of assessment by the Assessing Officer on 27.09.2021 u/s 153A for the AY 2018-19. Therefore, in our considered view since the assessee had not earned any exempt income there cannot be any disallowance u/s 14A and we hold that the assessment orders passed by the Assessing Officer u/s 153A for the assessment years 2018-19 and 2019-20 are not erroneous and prejudicial to the interest of the Revenue as the twin conditions are not satisfied for invoking the provision of section 263 of the Act. In the circumstances, we quash the orders passed by the Ld. PCIT u/s 263 of the Act for the assessment years 2018-19 and 2019-20.” 9. It is not disputed that the decisions of this Court in the case of Pr. Commissioner of Income Tax-04 v. IL & FS Energy Development Company Limited (supra) and Pr. Commissioner of Income Tax (Central)-2 v. M/s Era Infrastructure (India) Limited (supra) support the view of the Assessee. Clearly, in this view, the assessment order cannot be held as erroneous and prejudicial to the interest of the Revenue. In any event, the view in this regard would be a plausible view and does not warrant any interference under Section 263 of the Act. 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 27/03/2026 at 11:50:07