DCIT Vs Jindal Pipes Ltd. (ITAT Delhi)
In a significant ruling, the Income Tax Appellate Tribunal (ITAT) Delhi Bench has dismissed appeals filed by the Deputy Commissioner of Income Tax (DCIT) against Jindal Pipes Ltd. The Tribunal upheld the Commissioner of Income-tax (Appeals) [CIT(A)] orders, which had deleted disallowances related to technical know-how fees, captive power and fuel expenses, and limited disallowance under Section 14A of the Income Tax Act, 1961. The ruling, pronounced on May 30, 2025, provides relief to Jindal Pipes Ltd. for Assessment Years (AY) 2016-17 and 2018-19.
Jindal Pipes Ltd., a company engaged in the manufacturing of ERW, black, and galvanized steel pipes and tubes, had its returns selected for scrutiny in the relevant assessment years, leading to certain disallowances by the Assessing Officer (AO).
Technical Know-How Fees Disallowance
The first issue concerned the disallowance of Rs. 4,08,81,700/- paid as technical know-how fees to M/s Jindal Drilling and Industries Ltd. (JDIL) for AY 2016-17. The AO had disallowed this amount by invoking Section 37(1) of the Act, arguing that the assessee failed to provide proof of receiving services from technical personnel of JDIL.
Jindal Pipes Ltd. had entered into a technical collaboration agreement with JDIL to meet the experience requirements for bidding with ONGC for jack-up rig drilling activities. Before the CIT(A), the assessee maintained that JDIL provided rig managers, superintendents, and assistance in operation and maintenance, charging $850 per day. The assessee highlighted that invoices were accepted by ONGC, confirming service delivery, and that the Rig Division reported a profit of Rs. 24.03 crore in AY 2016-17, demonstrating the contribution of these services to profitability.
