DCIT Vs Hindustan Clean Energy Ltd. (ITAT Delhi)
Project Terminated, Shares Worth Zero – ITAT Allows ₹68 Cr Capital Loss & Strikes Down 68 Addition
A 90MW hydropower project was allotted by the Himachal Pradesh Govt. to HPPPL in 2009, which paid ₹18 Cr upfront fees. A project company MHEPCL was formed, shares were moved within group companies, & eventually Hindustan Clean Energy Ltd. (Assessee) acquired the shares in 2018 at cost. In 2021, Assessee sold 49% equity + 100% CCPS to an outsider (Devarsi Constructions Pvt. Ltd.) for ₹100 total, based on a negative NAV valuation of –₹1.49 per share. It claimed long-term capital loss of ₹68.27 Cr. AO disallowed the loss & also added ₹1.43 Cr u/s 68 from an assignment of loan.
CIT(A) deleted both additions. Revenue appealed.
Issue 1 – Long Term Capital Loss on sale of shares (₹68.27 Cr)
AO said: Why buy shares in 2018 when project was already doubtful? Sale at nominal ₹100 is artificial.
Assessee explained:
- Investment decisions carry risk; this project failed due to Govt. termination (18.09.2019).
- Land was locked for hydel use only; project rights lost; litigation pending.
- NAV valuation as on 28.02.2021 = –₹9.49 Cr ⇒ –₹1.49/share.
- AO himself reproduced & did not dispute valuation!
- Shares bought at cost in AY 2019-20—accepted in earlier year, cannot be questioned now.
CIT(A) & ITAT held:
- Once cost of acquisition was accepted earlier & fair valuation is negative, selling at nominal value is commercially rational.
- Project termination is undisputed. Realistic distress sale.
- Loss is genuine & allowable.
- Capital loss allowed.
Issue 2 – Addition of ₹1.43 Cr u/s 68 (loan assignment)
