ENGENRIN HYDRO POWER LIMITED,HYDERABAD V. ACIT, CIRCLE-5(1), HYDERABAD

MA 88/HYD/2025

AI Insights

Engenrin Hydro Power Ltd. filed three Miscellaneous Applications (MAs) against the consolidated order of the Tribunal, which pertained to the assessment years 2016-17 to 2018-19. The applications contended that there were mistakes apparent from the record in the Tribunal's earlier decision, particularly regarding the sourcing of funds for increased investments and the non-consideration of previous rulings on similar issues. The Tribunal found merit in the argument that the legal ground concerning the non-applicability of section 14A in the absence of exempt income was not adjudicated, which constituted a mistake apparent from the record. Consequently, the Tribunal recalled the consolidated order for this specific issue and also addressed the penalty appeal related to the quantum appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 791782 (ITAT-HYDERABAD)
• Duration Of Justice: 1 month(s) 10 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 10-12-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-A
• Assessment Year: 2017-2018
• Appeal Filed On: 30-10-2025
• Other Referred Cases: Pradip Chandra Parija vs. Pramod Chandra Patnaik, Honda Siel Power Products Ltd. vs. CIT, Uttar Gujarat Vij Co. Ltd. vs. ITO, HDFC Bank Ltd. vs. DCIT, CIT v. Reliance Telecom Ltd., DCIT vs. M/s. Modi Builders and Realtors Private Limited, Vinayak Steels Limited vs. ITO, M/s. Kamadhenu Sukrit Pvt Ltd vs. ITO
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P MURALI MOHAN RAO
• Keywords: Set aside; Opportunity of being heard; Earning of tax free income
• Section: 14A

Judgement Text

" MA Nos 87 to 89 of 2025 ENGENRIN HYDRO POWER LTD Page 1 of 11 आयकर अपीलȣय अͬधकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘ A ‘ Bench, Hyderabad Įी ͪवजय पाल राव, उपाÚ य¢ एवं Įी मधुसूदन सावͫडया, लेखा सदè य क े सम¢ । Before Shri Vijay Pal Rao, Vice-President A N D Shri Madhusudan Sawdia, Accountant Member M.A. Nos. 87 to 89/Hyd/2025 (आ.अपी.सं /ITA Nos.828 to 830/Hyd/2024 (िनधाŊरण वषŊ/Assessment Years: 2016-17 to 2018-19) M/s. ENGENRIN HYDRO POWER LIMITED Hyderabad PAN:AABCV6385R Vs. Assistant Commissioner of Income Tax, Circle 5(1) Hyderabad (Appellant) (Respondent) िनधाŊįरती Ȫारा/Assessee by: C.A. P Murali Mohan Rao राज̾ व Ȫारा/Revenue by:: Smt. G. Saritha, Sr. DR सुनवाई की तारीख/Date of hearing: 28/11/2025 घोषणा की तारीख/Pronouncement: 10/12/2025 आदेश/ORDER Per Madhusudan Sawdia, A.M.: These three Miscellaneous Applications are filed by the assessee against the consolidated order of this Tribunal dated 09.04.2025 passed in ITA Nos. 828 to 830/Hyd/2024 for the assessment years 2016–17 to 2018–19, contending that certain mistakes apparent from record exist in the impugned order which Printed from counselvise.com MA Nos 87 to 89 of 2025 ENGENRIN HYDRO POWER LTD Page 2 of 11 require rectification under section 254(2) of the Income Tax Act, 1961 (“the Act”). M.A No.87/Hyd/2025: 2. The Learned Authorized Representative (“Ld. AR”) submitted that the Tribunal recorded an incorrect factual observation that the fresh investments during the year were made out of borrowed funds and based on this observation, restored the matter to the file of the Learned Assessing Officer (“Ld.AO”) for verification. It was submitted that the assessee had an increase in equity capital and interest-free loans, which were available for making the increased investments. Therefore, according to the Ld. AR, the Tribunal’s observation that the investments were sourced from borrowed funds is factually incorrect. In support of his contention, the Ld. AR placed reliance the judgment of the Hon’ble Supreme Court in the cases of Pradip Chandra Parija vs. Pramod Chandra Patnaik (254 ITR 99) and Honda Siel Power Products Ltd. vs. CIT (295 ITR 466), the judgment of the Hon’ble Gujarat High Court in the case of Uttar Gujarat Vij Co. Ltd. vs. ITO (473 ITR 729) and the decision of the Hon’ble Bombay High Court in the case of HDFC Bank Ltd. vs. DCIT (383 ITR 529). The Ld. AR submitted that these authorities support the proposition that non-consideration of relevant facts, non-consideration of binding precedents, and factual mistakes constitute mistakes apparent from the record warranting rectification under section 254(2) of the Act. Printed from counselvise.com MA Nos 87 to 89 of 2025 ENGENRIN HYDRO POWER LTD Page 3 of 11 3. The second contention of the assessee is that in its own case for the assessment years 2013–14 and 2014–15, the Tribunal had decided an identical issue in favour of the assessee and, therefore, non-consideration of those orders constitutes a mistake apparent from record. The Ld. AR further submitted that it is a settled legal position that no disallowance under section 14A of the Act can be made when there is no exempt income during the relevant previous year, which legal plea was raised by the assessee in the original proceedings but was not adjudicated by the Tribunal. Thus, according to the Ld. AR, the consolidated order requires recall to this limited extent. 4. Per contra, the Learned Departmental Representative (“Ld. DR”) submitted that this Tribunal at para nos. 7 to 7.2 of its order has already recorded the factual finding that there was an increase in investments in the relevant years and that the issue of such increase was not present in earlier years. Therefore, the Coordinate Bench’s orders relied on by the assessee for earlier years are not applicable to the present facts. It was submitted that what the assessee seeks through these MAs is a review of the decision of the Tribunal, which is impermissible under section 254(2) of the Act in view of the judgment of the Hon’ble Supreme Court in CIT v. Reliance Telecom Ltd. (440 ITR 1). The Ld. DR further submitted that as Tribunal had captured the submissions of parties and recorded factual findings in its order, therefore, no mistake apparent from record exists. Printed from counselvise.com MA Nos 87 to 89 of 2025 ENGENRIN HYDRO POWER LTD Page 4 of 11 5. We have heard both parties and perused the material available on record including the case law relied on. The first contention of the assessee relates to the Tribunal having observed that the fresh investments were made out of borrowed funds. During the course of the original appellate proceedings, the assessee had submitted that no fresh funds were deployed for the increase in investments and that the increased investments were sourced from current liabilities. However, on perusal of the material available on record, the Tribunal had found this submission of the assessee as factually incorrect. Further, at no stage during the original appellate proceedings did the assessee contend that the investments were sourced from equity capital or interest-free funds. No balance sheet for A.Y. 2016–17 or supporting detail evidencing such claim was ever placed before the Tribunal. These arguments are raised for the first time in the present MA and therefore cannot constitute a mistake apparent from record. In this regard, we have gone through para nos. 7 to 7.2 of the impugned order which is to the following effect: “7. We have heard the rival contentions and also gone through the record in the light of the submissions made by either side. We have gone through the order of Ld. AO wherein at para no.4 of his order, the Ld. AO has given factual finding that the assessee has opening balance of investment of Rs.8,34,34,47,000/- in unquoted equity shares and the closing balance of the same are Rs.8,97,96,98,000/- during the year under consideration. As such there is fresh investment in unquoted equity shares during the year under consideration. However, the Ld. AR invited our attention to note no.11 related to non-current investment forming part of financial statement for the year ended 31.03.2016 placed at page no.49 of the paper book and submitted that no actual Printed from counselvise.com MA Nos 87 to 89 of 2025 ENGENRIN HYDRO POWER LTD Page 5 of 11 payment has been made by the assessee of such fresh investment. Such fresh investment has been accounted in the books of account by increase in the other current liability to the same amount and sufficient disclosure in this regard has been made by the auditor in the audited financial statements. Hence, no fresh funds have been deployed during the year on account of investment in unquoted equity shares. We have gone through note no.9 related to other current liabilities and note no.11 related to non-current investment forming part of financial statements of the assessee for the year ended 31.03.2016 which are placed at page nos.48 and 49 respectively of the paper book, which are to the following effect : Printed from counselvise.com MA Nos 87 to 89 of 2025 ENGENRIN HYDRO POWER LTD Page 6 of 11 7.1 On perusal of above, we found that there is increase in total non-current investments by Rs.63,62.51 lakhs and increase in other current liabilities by Rs.25,25.82 lakhs. As such the increase in other current liabilities not at par as compared to increase in non-current investment . Therefore, the submission of the Ld. AR that no fresh funds have been deployed during the year towards fresh investment is not acceptable. Accordingly, the same is required to be reverified. Further, whether fresh investments are out of borrowed fund or not is also to be verified. We have also gone through the decision of this Tribunal in assessee's own case for A.Ys. 2013-14 and 2014-15 in ITA nos.1931 & 1932/Hyd/2017 dated 03.05.2018, wherein this Tribunal has decided the issue at para nos.2 & 3 in favour of the assessee, which are to the following effect : “ 2. There is no dispute with regard to the fact that the assessee company did not earn any exempt income during the years under consideration. In fact, in the grounds, duly authorised by the Ld. CIT, the Revenue has not objected to the claim of the assessee that no exempt income was earned during the years under consideration. Identical issue had come for adjudication before the ITAT Hyderabad in number of cases wherein the Bench observed that section 14A refers to disallowance of expenditure “in relation to income” which pre-supposes existence of income in the form of dividend as otherwise section 14A cannot be pressed into service. In the following cases, the ITAT, Hyderabad Bench had taken an identical view. (i) DCIT vs. M/s. Modi Builders and Realtors Private Limited (ITA No.1167/Hyd/2017, dated 03.04.2017) (ii) Vinayak Steels Limited vs. ITO (ITA No. 103/Hyd/2017, dated 04.04.2018) and (iii) M/s. Kamadhenu Sukrit Pvt Ltd vs. ITO (ITA No.460/Hyd/2017, dated 22.11.2017) 3. Since the view taken by the Ld. CIT(A) is in consonance with the view taken by the ITAT Hyderabad Bench, in the absence of any direct decision cited by the Learned Departmental Representative holding a contrary view, we do not find any infirmity in the orders passed by the Ld. CIT(A).” Printed from counselvise.com MA Nos 87 to 89 of 2025 ENGENRIN HYDRO POWER LTD Page 7 of 11 7.2 On perusal of above, we found that the dispute regarding sources of fresh investment was not there before the Tribunal in assessee's own case for A.Ys. 2013-14 and 2014-15 (supra). Accordingly, the decision of this Tribunal in assessee's own case for A.Ys. 2013-14 and 2014-15 (supra) cannot be applied to the present case before us. Further, as held by us, the issue regarding sources of fresh investment and the quantum of fresh investment is required to be verified, we deem it appropriate to set aside the issue to the file of Ld. AO for reverification of the issue and decide the issue as per law. Accordingly, we direct the Ld. AO to verify the quantum of fresh investments made during the year under consideration and the amount of borrowed fund directly attributable to such fresh investments and decide the issue as per law after providing an opportunity of being heard to the assessee. 5.1 On a perusal of the above, we find that the Tribunal had not returned any categorical factual finding that the fresh investments were made out of borrowed funds. The issue was merely restored to the file of the Ld. AO for the limited purpose of verifying the quantum of borrowed funds, if any, forming part of the increased investments. There is no factual or legal mistake in such restoration, as the verification was required due to the absence of complete factual details before the Tribunal. As regards the reliance placed by the assessee on the decision of the Hon’ble Bombay High Court in the case of HDFC Bank Ltd. v. DCIT (Supra), we find that the same is not applicable to the facts of the present case. In that case, it was held that when investments in tax-free securities are made out of own interest-free funds, no disallowance under section 14A of the Act can be made on account of interest expenditure. However, in the present case, it is yet to be verified whether the investments have been made out of interest-free funds or not. Hence, the said judgment cannot be applied in the absence of established facts. Printed from counselvise.com MA Nos 87 to 89 of 2025 ENGENRIN HYDRO POWER LTD Page 8 of 11 5.2 The reliance placed on the judgments of the Hon’ble Supreme Court in Pradip Chandra Parija (supra) and the Hon’ble Gujarat High Court in Uttar Gujarat Vij Co. Ltd. (supra) is also misplaced. These decisions held that under identical facts, the later bench is bound to follow the earlier decision. However, in the present case, the facts of A.Ys. 2013–14 and 2014–15 are not identical, as there was no issue before the coordinate bench in those years regarding the increase in investments. Accordingly, those decisions are factually distinguishable. 5.3 Similarly, reliance on the decision of the Hon’ble Supreme Court in Honda Siel Power Products Ltd. v. CIT (Supra) is also misplaced. In that case, non-consideration of a coordinate bench decision was held to be a mistake apparent from record. In the present matter, the Tribunal in para nos. 7.1 and 7.2 of its order has duly considered the decisions relied on by the assessee and has recorded a finding that those decisions are factually different. Thus, there is no mistake in the reasoning recorded by the Tribunal. 6. We, however, find merit in the submission of the Ld. AR that the legal ground relating to non-applicability of section 14A of the Act in the absence of exempt income was raised by the assessee but remained unadjudicated in the impugned consolidated order. In our considered view, non-adjudication of this legal ground constitutes a mistake apparent from record requiring rectification. Accordingly, the impugned order of the Tribunal in ITA No.828/ Printed from counselvise.com MA Nos 87 to 89 of 2025 ENGENRIN HYDRO POWER LTD Page 9 of 11 Hyd/2024 is recalled for the limited purpose of adjudicating the legal ground relating to the non-applicability of section 14A of the Act in the absence of exempt income. 7. In the result, the M.A No. 87/Hyd/2025 of the assessee is partly allowed in terms of our above observations. M.A. Nos. 88 and 89/Hyd/2025: 8. The issues involved in these two M.As for A.Ys 2017-18 and 2018-19 are identical to the issues involved in MA No. 87/Hyd/2025 for the assessment year 2016–17. The factual verification regarding the source of the increase in investments for A.Y. 2016–17 will have a direct bearing on the assessment years 2017–18 and 2018–19, as the same pattern of investments continues across these years. Therefore, the findings and observations recorded by this Tribunal while disposing of the M.A. No. 87/Hyd/2025 for A.Y. 2016–17 shall mutatis mutandis apply to the present two M.As as well. Accordingly, these two M.As are also partly allowed and the impugned orders of the Tribunal in ITA Nos.829 & 830/Hyd/2024 are recalled for the limited purpose of adjudicating the legal ground relating to the non-applicability of section 14A of the Act in the absence of exempt income. 9. To sum up, all the M.As filed by the assessee are partly allowed in terms of our above observations. 10. We also note that in the impugned consolidated order, the Revenue’s appeal in ITA No. 831/Hyd/2024 for A.Y. 2018–19 Printed from counselvise.com MA Nos 87 to 89 of 2025 ENGENRIN HYDRO POWER LTD Page 10 of 11 relating to penalty was restored to the file of the Ld. AO solely because the corresponding quantum appeal in ITA No. 830/Hyd/2024 had been restored. Since the quantum appeal itself is being recalled in these M.As, the consequential penalty appeal of the Revenue also requires to be recalled. Accordingly, we recall the appeal of the Revenue in ITA No.831/Hyd/2024. 11. In view of the foregoing discussion, the consolidated order dated 09.04.2025 is recalled for the limited purposes of (i) adjudicating the legal ground relating to applicability of section 14A of the Act in the absence of exempt income, and (ii) recalling the consequential penalty appeal of the Revenue in ITA No. 831/Hyd/2024. To this extent, the M.As filed by the assessee are partly allowed. All other contentions of the assessee are rejected. The registry is directed to fix the appeals for hearing in due course. 12. In the result, the appeal of the assessee in ITA Nos.828 to 830/Hyd/2024 and the appeal of the Revenue in ITA No.831/Hyd/2024 are recalled in terms of our above observations. Order pronounced in the Open Court on 10th December 2025. Sd/- Sd/- (VIJAY PAL RAO) VICE PRESIDENT (MADHUSUDAN SAWDIA) ACCOUNTANT MEMBER Hyderabad, dated 10th December 2025 Vinodan/sps Printed from counselvise.com MA Nos 87 to 89 of 2025 ENGENRIN HYDRO POWER LTD Page 11 of 11 Copy to: S.No Addresses 1 M/s. Engenrin Hydro Power Ltd, Plot No.4, Software Units, Hitech City, Madhapur, Hyderabad 500081 2 Assistant Commissioner of Income Tax, Circle 5(1) Hyderabad 3 Pr. CIT - Hyderabad 4 DR, ITAT Hyderabad Benches 5 Guard File By Order Printed from counselvise.com "