ITAT Delhi Judgments — December 2025

The Tribunal, relying on precedents from coordinate benches (Tata Sons Ltd. and NDTV Networks Ltd.), held that the assessee's activity of making strategic investments in subsidiary companies, as per its main object, constitutes a business activity. Consequently, the expenses claimed were allowable as business expenditure, and the set-off of current year business loss against income declared under other heads was also permitted. The Tribunal also rejected the application of Section 14A.

The Tribunal observed that the CIT(A) failed to consider the assessee's documentary evidence regarding the agricultural nature of the land, relying on the Goetze India Ltd. judgment to reject new claims made without a revised return. The Tribunal found this problematic, set aside the orders of both the CIT(A) and the AO, and restored the matter to the AO for a fresh decision after providing the assessee a fair opportunity to be heard.

The Tribunal upheld the CIT(A)'s decision, ruling that the assessee had successfully discharged the onus by demonstrating the identity, creditworthiness, and genuineness of the unsecured loans through confirmations, ITRs, and bank statements, and the advances against land sales with confirmations and sale deeds. The Tribunal noted that all transactions were conducted via banking channels and the AO's remand report provided no grounds to challenge the veracity of the documents.

The Tribunal admitted the additional legal ground regarding the limitation issue. Upon reviewing the sequence of events and applying the ratio of the Supreme Court's decisions, it was found that the notice under Section 148, issued on 21.07.2022, was beyond the maximum time available (23 days, expiring on 24.06.2022). Consequently, the notice was held to be time-barred, and the reassessment order passed pursuant to it was quashed as bad in law, rendering other grounds academic.

The Tribunal dismissed the appeals, upholding the disallowance. It was held that employee contributions to PF and ESI are governed exclusively by Section 36(1)(va) and must be deposited within the due dates specified by relevant statutes, not merely before the ROI filing date, as clarified by the Supreme Court in Checkmate Services (448 ITR 518 SC). The Tribunal further ruled that Supreme Court judgments interpret existing law retrospectively, and the distinction between assessments under Section 143(1)(a) versus 143(3) does not alter this principle, nor do subsequent statutory amendments change the retrospective application.

The Tribunal upheld the assessee's eligibility for Section 36(1)(viii) deduction, confirming its primary business as a financial corporation for infrastructure development in renewable energy. It ruled that all disputed incomes (interest on deposits/loans, management fees refund, lead institution fees, fees-based activity, interest rate swap, and UNDP grant interest) were inextricably linked to its core business and should be treated as business income. The Tribunal also allowed depreciation on beneficial ownership, upheld the allowance of Hindi Development Expenditure, and deleted disallowance under Section 40(a)(ia) for short deduction, and Section 14A disallowance. The assessee's appeals were allowed, and the department's appeals were dismissed.

Relying on Supreme Court decisions in UOI vs. Rajeev Bansal and Deepak Steel and Power Ltd., the Tribunal noted the Revenue's concession that all reassessment notices for AY 2015-16 issued on or after April 1, 2021, must be dropped as they are time-barred under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA). Since the Section 148 notice for AY 2015-16 was issued on 08.04.2021, it was held to be bad in law, and the consequential assessment order was quashed.

The Tribunal held that a substantive right to refund cannot be denied due to technical or procedural difficulties in the e-filing utility, citing Bombay High Court judgments. It further noted that the ITAT Special Bench decision, relied upon by the lower authorities to prioritize domestic law over DTAA for DDT, had been overruled by the Bombay High Court in the Colorcon Asia Pvt. Ltd. case. Therefore, the assessee was entitled to the beneficial DTAA rate of 10% on dividends, and the AO was directed to process the refund claim.

The Tribunal held that the assessee's refund claim could not be rejected on technical grounds due to limitations in the income-tax return utility, as substantive rights under Section 237 read with Article 265 of the Constitution cannot be overridden by procedural hurdles. On merits, following the Bombay High Court decision in Colorcon Asia Pvt. Ltd. (which overruled the Special Bench decision relied upon by lower authorities), the Tribunal affirmed that DDT is a tax on dividend income of the shareholder, and thus, the beneficial rate of 10% under Article 10 of the India-Japan DTAA is applicable. The AO was directed to accept the refund claim.

The Tribunal upheld the disallowance, ruling that Supreme Court judgments interpret existing law retrospectively, applying from the date the provision was enacted. Employee contributions are exclusively governed by Section 36(1)(va), requiring deposit within statutory due dates, irrespective of deposit before filing the return. The argument that the issue was debatable at the time of processing or that amendments to Sections 36(1)(va) and 43B applied prospectively was rejected.

The Tribunal held that IREDA is eligible for the Section 36(1)(viii) deduction, considering its nature as a financial corporation involved in infrastructure development, prior CBDT approvals, and the principle of consistency. All disputed income streams were found to be inextricably linked to the assessee's core business of financing and investment, therefore assessable as 'business income'. The Tribunal also affirmed the allowance of Hindi Development Expenditure and the depreciation claim based on 'beneficial ownership', and deleted the disallowance under Section 40(a)(ia), clarifying it applies only to non-deduction of TDS, not short-deduction.

The Tribunal held that IREDA is eligible for deduction under Section 36(1)(viii), being a financial corporation providing long-term finance for eligible infrastructure projects, a fact not disputed by the Revenue. It determined that interest on short-term deposits, staff loans, various business service charges (management fees refund, lead institution fees, fees-based activity, interest rate swap income, miscellaneous income) were inextricably linked to the assessee's business operations and should be treated as business income. The Tribunal also upheld the allowance of depreciation on a building under beneficial ownership, Hindi Development Expenditure, and confirmed that disallowance under Section 40(a)(ia) applies only to non-deduction, not short-deduction, of TDS.

The Tribunal allowed the assessee's appeals and dismissed the Revenue's appeals, affirming that the assessee was eligible for the Section 36(1)(viii) deduction. It re-characterized all disputed income streams as "business income," concluding they were inextricably linked to the assessee's core financing activities. Furthermore, disallowances under Section 14A and Section 40(a)(ia) (for short deduction of TDS) were deleted, and allowances for depreciation on a residential flat (based on beneficial ownership) and Hindi Development Expenditure were upheld.

The Tribunal held that IREDA is eligible for the deduction under Section 36(1)(viii) as a financial corporation providing long-term finance for eligible projects. All disputed income streams were found to be inextricably linked to the assessee's primary business activities and thus assessable as 'business income'. The Tribunal also upheld the allowance of depreciation based on beneficial ownership, Hindi Development Expenditure, and deletion of disallowance under Section 40(a)(ia) for short deduction of TDS.

The Tribunal found that the assessee had sufficient cause for not filing the reply and that the CIT(A) violated natural justice by not admitting crucial additional evidences. The case is restored to the Assessing Officer for de novo adjudication, with a direction to consider all additional evidences and provide a reasonable opportunity of being heard.

The Tribunal found that the approval granted by the Additional Commissioner of Income Tax under Section 153D was mechanical, consolidated for multiple assessment years, and lacked proper application of mind, citing discrepancies like an incorrect search date and absence of discussion on assessment records or income. It was held that the mandatory requirement of prior approval under Section 153D, essential for search assessments under Section 153A, must not be given mechanically and requires independent application of mind for each year. Consequently, the entire assessment proceedings were vitiated and quashed due to the invalid approval.

The Tribunal confirmed the PCIT's order, holding that the AO's invocation of Section 37(1) for bogus purchases was faulty as the assessee failed to explain the source of the expenditure. The Tribunal found that Section 69C, which deals with unexplained expenditure, was clearly applicable in this case because the goods were never received and the purchases were established to be bogus. The PCIT's direction to re-assess by applying Section 69C read with Section 115BBE was deemed correct and in line with statutory provisions and judicial precedents.

The Income Tax Appellate Tribunal (ITAT) upheld the decision of the Ld. CIT(A), confirming the deletion of additions made under Section 68. The Tribunal found that the assessee had successfully discharged the onus by proving the identity, creditworthiness, and genuineness of the unsecured loans and advances against land through confirmations, ITRs, and bank statements, with all transactions conducted through banking channels. The AO's remand report also did not find any adverse comments or inconsistencies with the evidence provided.

The Tribunal held that IREDA is eligible for deduction under Section 36(1)(viii) as it is a financial corporation providing long-term finance for eligible business. It ruled that all disputed income streams are inextricably linked to its business operations and thus constitute 'business income'. Disallowances under Section 14A and 40(a)(ia) were deleted, depreciation was allowed based on beneficial ownership, and Hindi Development Expenditure was also allowed, thus allowing all appeals of the assessee and dismissing all appeals of the department.

The Income Tax Appellate Tribunal upheld the decision of the Ld. CIT(A), finding that the assessee had successfully discharged the onus to prove the identity, creditworthiness, and genuineness of the unsecured loans and advances against land sales. All transactions were conducted through banking channels, and the AO's remand report contained no adverse comments on the additional evidence. The tribunal concluded that there was no reason to interfere with the deletion of additions made under Section 68, and this decision applies to all assessment years under appeal.

The Tribunal allowed the appeals, holding that the refund claim for excess DDT could not be rejected on procedural grounds, as the income-tax return utility did not allow for the necessary rate alteration to claim DTAA benefits. It emphasized that tax authorities should act as facilitators and procedural hurdles should not override substantive rights. On merits, the Tribunal noted that the ITAT Special Bench decision relied upon by the CIT(A) had been overruled by the Bombay High Court, which held that Indian companies are entitled to apply the DTAA beneficial rate of 10% on dividends distributed to non-resident shareholders, overriding Section 115-O of the Income Tax Act.

Following the jurisdictional High Court's ruling in the assessee's own case for Assessment Year 2009-10, which held the 'Resale Price Method' (RPM) as the MAM for similar transactions, the Tribunal directed the Assessing Officer (AO)/Transfer Pricing Officer (TPO) to re-compute the Arm's Length Price for the international transactions concerning purchases of finished goods. The AO/TPO is instructed to apply the 'Resale Price Method' for this re-computation and conduct fresh benchmarking.

The ITAT upheld the CIT(A)'s decision, affirming that the assessments for AYs 2011-12 and 2012-13 were indeed beyond the ten-year block period as per Section 153C read with Section 153A. Following the jurisdictional High Court judgment in PCIT vs. Ojjus Medicare Pvt. Ltd., the Tribunal concluded that the Section 153C notices issued on 25.06.2022 and the subsequent assessment orders dated 14.02.2024 for these assessment years were without legal basis, thus not surviving.

The Tribunal held that the assessee is eligible for the Section 36(1)(viii) deduction, considering its nature of business, past CBDT approvals, and consistency in subsequent assessment years. All disputed income streams, including interest on short-term deposits, staff loans, various business service charges (management fees, lead institution fees, fee-based activity, interest rate swap income, unspent subsidy, interest saving, stale cheques reversed), interest on foreign deposits, and UNDP grants, were held to be business income, being inextricably linked to the assessee's core financing activities. Disallowances under Section 14A, depreciation on buildings (based on beneficial ownership), Hindi Development Expenditure, and Section 40(a)(ia) for short deduction of TDS were deleted.

The Income Tax Appellate Tribunal (ITAT) observed that the facts were identical to earlier assessment years where a coordinate bench had quashed similar assessment orders. It held that the AO's final assessment order, which failed to comply with the binding directions of the DRP (to tax income on a protective basis), was void ab initio and without jurisdiction, as mandated by Section 144C of the Income Tax Act. Consequently, the assessment orders for both Assessment Years 2018-19 and 2020-21 were quashed.

The Tribunal upheld the validity of reopening the assessment but deleted the addition made under Section 68 on merits. It ruled that the AO's failure to provide copies of Shri Subhash Chandra Bhartia's statement and deny cross-examination constituted a serious violation of the principle of natural justice. The Tribunal also noted that the loan was repaid with interest and TDS was deducted prior to the search action, and the prospective amendment to Section 68 was not applicable to the assessment year.

The Tribunal, relying on precedents from Tata Sons Ltd. and NDTV Networks Ltd., held that the assessee's activity of holding strategic investments in subsidiary companies, as per its main object, constitutes a business activity. Consequently, the expenses incurred for day-to-day operations and administration were allowable business expenditures, fully deductible under Section 36(1)(iii). The Tribunal also directed the AO to allow the set-off of such business losses against income declared under other heads of income, and Section 14A provisions were deemed inapplicable.

The Tribunal dismissed the grounds challenging the validity of the reassessment proceedings, confirming that the approval under Section 151 was properly obtained. However, it remanded the issues concerning unexplained bank deposits, notional house property income, and long-term capital gain back to the Assessing Officer for fresh verification and adjudication, providing specific directions for each issue.

The Tribunal upheld the validity of the reassessment proceedings, finding the approval under Section 151 was properly obtained. However, it remanded the issues related to unexplained bank deposits, notional house property income (with specific directions for market value calculation based on municipal circle rates), and long-term capital gains back to the Assessing Officer for fresh verification and adjudication. The charging of interest was deemed consequential.

The Tribunal dismissed the grounds challenging the validity of reassessment proceedings under Section 147/151, finding the approval by Addl. CIT(A) valid as per the law prevailing at the relevant time. However, it partly allowed the appeals for statistical purposes and remanded the issues concerning unexplained bank deposits, notional house property income, and long-term capital gains back to the AO for fresh verification and adjudication with specific directions. The charging of interest under Sections 234A, 234B, and 234C was held to be consequential.

The Income Tax Appellate Tribunal upheld the CIT(A)'s decision, confirming that the DDA is indeed a 'local authority'. Consequently, payments of ground rent made to the DDA are exempt from TDS deduction under Section 196 of the Income Tax Act, 1961. The Tribunal relied on the Supreme Court's decision in *Union of India vs R.C. Jain* and CBDT Circular No. 699.

The Tribunal determined that the assessment year was an abated assessment year, a point not disputed by the assessee's representative. Consequently, the CIT(A) erred in quashing the assessment order solely on the basis of a lack of incriminating material, thus allowing Ground 1 of the Revenue's appeal. As the CIT(A) had not addressed the merits of the disallowances, the Tribunal remanded the case back to the AO for a de novo assessment on these remaining issues (Grounds 2 to 9), which were allowed for statistical purposes.

The Tribunal held that the assessee was eligible for the Section 36(1)(viii) deduction, as its activities fell under 'eligible business,' supported by CBDT approvals and consistency. All disputed incomes, including interest on short-term deposits, staff loans, various business service charges (refund of management fees, lead institution fees, fee-based activity, interest rate swap income, miscellaneous income), and interest on foreign deposits, were re-characterized as business income, finding a direct nexus with the assessee's core financing activities. Disallowances under Section 14A and Section 40(a)(ia), and disallowance of depreciation on building and Hindi Development Expenditure, were deleted or rejected against the Revenue, upholding the CIT(A)'s favorable decisions to the assessee.

The Tribunal held that IREDA is eligible for Section 36(1)(viii) deduction, noting its primary objective as a financial corporation for renewable energy projects. It further ruled that all disputed income streams, including interest on deposits (short-term & foreign), staff loans, and various business service charges (refund of management fees, lead institution fees, fees-based activity, interest rate swap income, miscellaneous income including unspent subsidy and interest from UNDP grant), were inextricably linked to its business operations and hence taxable as 'business income'. The Tribunal also upheld the CIT(A)'s deletion of disallowance for Hindi Development Expenditure and disallowance u/s 40(a)(ia) for short deduction of TDS, and allowed depreciation on a building based on beneficial ownership. Disallowance u/s 14A for AY 2017-18 and 2018-19 was also sustained in favour of the assessee.

The Tribunal affirmed IREDA's eligibility for deduction under Section 36(1)(viii) as a financial corporation providing long-term finance for infrastructure development. It ruled that various incomes, including interest on short-term deposits, staff loans, business service charges, and interest on foreign deposits, constituted 'business income'. Additionally, it allowed depreciation on a building based on beneficial ownership, upheld Hindi Development Expenditure, and clarified that Section 40(a)(ia) applies only to non-deduction, not short-deduction, of TDS.

The Tribunal held that the assessee is eligible for the deduction under Section 36(1)(viii) based on consistency and its primary business objectives. All disputed income streams were re-classified as 'business income' due to their inextricable link to IREDA's core financing activities. Disallowance under Section 14A was set aside as no exempt income was earned. Depreciation was allowed based on beneficial ownership, Hindi Development Expenditure was accepted as a business expense, and the disallowance under Section 40(a)(ia) for short deduction of TDS was deleted, affirming it applies only to non-deduction.

The Tribunal, relying on previous judgments from coordinate benches and the Hon'ble Madhya Pradesh High Court, held that once an assessment under Section 153A/153C is completed with prior approval under Section 153D, the PCIT cannot invoke Section 263 without first establishing that the Section 153D approval itself was erroneous and prejudicial to the revenue. Since the PCIT failed to do so, the revisional order passed under Section 263 was deemed to be beyond jurisdiction and unsustainable.

The Tribunal held that, as per the Supreme Court's ruling, the six assessment years for Section 153C proceedings must be reckoned from the date of the satisfaction note (11.10.2022), making Assessment Years 2017-18 to 2022-23 assessable. Therefore, the notice issued under Section 153C for Assessment Year 2016-17 was barred by limitation and without jurisdiction, rendering the consequential assessment order null and void. The Tribunal further ruled that the PCIT lacked jurisdiction to invoke Section 263 to revise an inherently invalid or non-est assessment order, and thus quashed the Section 263 order.

The Tribunal found a critical variance between the penalty show-cause notice, which alleged 'under reported income' under Section 274 read with Section 270A, and the final penalty order, which imposed penalty for 'under reporting income in consequence of any misreporting thereof' invoking Section 270A(8). The Tribunal ruled that if proceedings were initiated for a lighter form of violation, penalty could not be levied for an aggravated violation, and the CIT(A) erred by attempting to substitute the charge. Consequently, the Tribunal allowed the appeal and deleted the penalty.