Indian Renewable Energy Development Agency Limited Vs DCIT (ITAT Delhi)
IREDA Wins Big Across Years: Delhi ITAT Allows 36(1)(viii) Deduction, Treats Interest & Ancillary Receipts as Business Income; 14A, 40(a)(ia) & Depreciation Issues Settled
Delhi ITAT ‘C’ Bench in Indian Renewable Energy Development Agency Ltd. Vs. DCIT & cross appeals by Revenue [ITA Nos. 2566 to 2573 & 2910 to 2917/Del/2024, AYs 2010-11 to 2013-14 & 2015-16 to 2018-19, order dated 31.12.2025] largely allowed Assessee’s appeals and dismissed Revenue’s appeals, holding that IREDA, a PSU under Ministry of New & Renewable Energy, is a financial corporation engaged in eligible business of long-term financing of infrastructure projects in renewable energy and is entitled to deduction u/s 36(1)(viii). Tribunal noted that CBDT approval requirement stood dispensed with post 01.04.2000 and consistency also favoured Assessee, as deduction was allowed in later years.
Tribunal further held that various receipts such as interest on short-term deposits, interest on staff loans, lead institution fees, documentation charges, fee-based income, interest rate swap gains, refund/write-back of management fees u/s 41(1), miscellaneous receipts and interest earned on UNDP/ADB/KfW/World Bank linked funds were all inextricably linked to core financing activity and assessable as business income, not income from other sources. Re-characterisation by AO/NFAC was rejected as erroneous and mechanical.
On Section 14A, Tribunal held that in absence of exempt income and without recording dissatisfaction, enhancement of disallowance was unsustainable. Depreciation on Jungpura residential flat was allowed applying doctrine of beneficial ownership following Mysore Minerals (SC). Hindi development expenditure incurred in compliance with Government of India directives was held allowable as business expenditure. Disallowance u/s 40(a)(ia) for alleged short deduction of TDS was deleted, reiterating that the provision applies only to non-deduction, not short deduction. Revenue appeals were dismissed and Assessee’s appeals were allowed
FULL TEXT OF THE ORDER OF ITAT DELHI
