India Infrastructure Finance Company Limited vs Assessment Unit Delhi

PER MANISH AGARWAL, A.M.:

The present appeal is filed by assessee against the order dated 25.11.2025 passed by Ld. Commissioner of Income Tax (A), National Faceless Appeal Centre (“NFAC”), Delhi [“Ld. CIT(A)”] in Appeal No. NFAC/2016-17/10445200 u/s 250 of the Income Tax Act, 1961 [“the Act”] arising out of assessment order dated 13.02.2025 passed u/s 147 r.w.s. 144 r.w.s. 144B of the Act, pertaining to Assessment Year 2017-18.

Brief facts of the case are that the assessee is a company, engaged in the business of providing long term finance, commercial infrastructure project mainly designated sectors like road, bridges, railway, seaports, airports, inland waterways and other transportation projects; power, urban transport, water supply, sewerage, drainage, solid waste man projects etc. and transport and electricity in the urban areas, gas pipeline etc. The return of income was e-filed on 10.10.2017, declaring total income of INR 8,04,10,29,670/- under normal provisions of the Act and book profit of INR 9,73,64,90,418/- was declared u/s 115JB of the Act. The case of the assessee was selected for scrutiny and assessment was completed in terms of the order passed u/s 143(3) of the Act on 17.12.2019 by making disallowance of INR 50,67,402/- on account of amortization premium paid on HTM securities. Thereafter, based on the audit objection raised by the internal team of the department, re-assessment proceedings were initiated by issue of notice u/s 148A of the Act, stating that the assessee has made investments in the securities having exempt income and paid interest however, no disallowance was made u/s 14A of the Act. Thereafter, considering the submissions made by the assessee, order u/s 148A(d) of the Act was passed on 26.03.2024 re-opening the assessment already completed u/s 143(3) of the Act and notice u/s 148 was issued on 26.03.2024 followed by statutory notices issued u/s 143(2) & 142(1) from time to time which were duly replied by the assessee. The assessee claimed that it had no exempt income and therefore, no disallowance should have been made. On the contrary, AO has placed reliance on the CBDT Circular 5/2014 dated 11.02.2014 wherein directions were given for making disallowance u/s 14A r. w. Rule 8D of the Income Tax Rules, 1962 (“the Rules”) and disallowance of INR 1,49,23,530/-was made being 1% of the average value of the investment made having exempt income.

Against the said order, appeal was filed before ld. CIT(A) wherein reliance was placed on the judgement of Hon’ble Supreme Court in the case of PCIT vs Oil Industry Development Board [2019]. However, ld. CIT(A) following the amendment made in section 14A w.e.f. 01.04.2022 applicable from AY 2022-23 and onwards according to which disallowance u/s 14A is made compulsory and dismissed the appeal of the assessee by confirming the disallowance made by AO.

Aggrieved by the said order, the assessee is in appeal before the Tribunal by taking various Grounds of appeal as mentioned in the appeal memo.

Ground of appeal No.1 raised by the assessee is with respect to the disallowance made u/s 14A r. w. Rule 8D of the Rules of INR 1,49,23,530/-.

Heard the contentions of both the parties at length and perused the material available on record. At the outset, it is observed that the assessee has not declared any exempt income from investments for which our attention was drawn to the return of income filed wherein in Schedule “EI” related to “details of exempt income (income not to be included in the total income)” under the title “dividend income” “NIL income” was declared. It is further observed that this issue was examined during the course of assessment proceedings concluded u/s 143(3) and after considering the fact that no exempt income was declared, no disallowance was made u/s 14A of the Act. However, in the reassessment proceedings despite of the fact that the assessee has specifically stated that it has no exempt income, disallowance u/s 14A was made. The Hon’ble Supreme Court in the case of PCIT vs Oil Industry Development Board (supra) has held that “in absence of any exempt income, no disallowance could be made u/s 14A of the Act on the investments made yielding exempt income.”

Further, the Hon’ble Jurisdictional High Court in the case of PCIT vs Era Infrastructure India Ltd. reported in (2022) 448 ITR 674 has held “that the amendment made in section 14A is perspective in nature and applicable from AY 2022-23 and onwards.”

Since the year under appeal is 2017-18 therefore, amendment made in section 14A could not be applied and further the assessee has no exempt income, therefore, no disallowance could be made as has been held by Hon’ble Supreme Court in the case of Oil Industry Development Board (supra) and further held by Hon’ble Jurisdictional High Court in the case of ChemInvest Ltd. vs CIT reported in [2015] 61 taxmann.com 118 [Del.HC]. Accordingly, disallowance made of INR 14923530/- is hereby, deleted. The Ground of appeal No.1 raised by the assessee is thus allowed.

The remaining Grounds of appeal taken on the re-opening of assessment became academic hence, not adjudicated.

In the result, appeal filed by the assessee is allowed.