Circle v. M/S Delhi International Airport Pvt. Ltd

$~S-57 IN THE HIGH COURT OF DELHI AT NEW DELHI +ITA 380/2022 PRINCIPAL COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE..... AppellantThrough:Mr.ZohebHossain,Sr.StandingCounsel with Mr.Vipul Agrawal andMr.ParthSemwal,Jr.StandingCounsel. versus M/S DELHI INTERNATIONAL AIRPORT PVT. LTD . ..... Respondent Through:None. %Date of Decision: 06[th]October, 2022 CORAM: HON'BLE MR. JUSTICE MANMOHANHON'BLE MS. JUSTICE MANMEET PRITAM SINGH ARORAJ U D G M E N T CM APPL.43156/2022 1.Keeping in view the averments in the application, the delay in re-filing the appeal is condoned. 2.Accordingly, the application stands disposed of. ITA 380/2022 3.Present Income Tax Appeal has been filed challenging the ImpugnedOrder dated 31[st]January, 2018 passed by the Income Tax AppellateTribunal (‘ITAT’) in ITA No. 3707/Del/2013 & ITA No.4203/Del/2013 forthe Assessment Year 2010-11. 4.Learned Counsel for the Appellant states that the ITAT has erred innot disallowing the interest expenses amounting to Rs.10,07,34,000/-, beingexpenditure incurred in relation to exempt income, under the provisions ofSection 14A of the Income Tax Act, 1961 (‘the Act’). He submits that ITAThas erred in holding that earning of exempt income during the year underconsideration is a sin qua non for application of Section 14A of the Act. 5.He states that the term ‘in relation to’ as used in Section 14A of theAct contemplates direct and/or proximate nexus between ‘expenditureincurred' and ‘earning of exempt income'. 6.He further states that the ITAT has erred in deleting the disallowanceunder Section 14A of the Act without considering the legislative intent ofSection 14A of the Act which has been further clarified by CBDT CircularNo.5/2014 dated 11[th]February, 2014. 7.A perusal of the paper book reveals that the authorities below havegiven concurrent finding of fact that the assessee did not earn any exemptincome during the year under consideration. The relevant extract of theITAT order is reproduced hereinbelow:- “76.The facts qua the disallowance are that the assesseesubmitted before the Assessing Officer that no dividend incomewas earned by the assessee during the relevant year, thus nodisallowance was called for but the Assessing Officer rejectedthe contention of the assessee and invoking section 14A of the Actread with Rule 8D of Income-tax Rules, 1962 (in short ‘theRules’) made disallowance of Rs.10,07,34,000/-. xxxxxxxxx 81. Before us, there is no dispute on the fact that no dividendincome was earned by the assessee during the relevant year andtherefore respectfully following the finding of the Hon’ble DelhiHigh Court, we hold that no disallowance is required to made in terms of section 14A of the Act in the case of the assessee as noexempt income is received or receivable during the relevant year.Accordingly, we allow the ground No.1 of the appeal of theassessee and dismiss the ground No. 5 of the appeal of theRevenue. 82. The ground No. 2 of the appeal of the assessee is regardingadding the amount of disallowance made under section 14A ofthe Act to the cost of the mutual fund units. This ground has beenraised without prejudice to the ground No. 1 of the appeal of theassessee. Since the ground No. 1 has already been allowed infavour of the assessee, the ground No. 2 is rendered infructuousand accordingly dismissed.” 8.In the opinion of this Court, the present case is covered by theDivisionBenchjudgmentin CheminvestLtd.vs.CIT,[2015]61Taxmann.com 118 (Delhi), wherein this Court has held that the expression'does not form part of the total income' in Section 14A of the Act means thatthere should be an actual receipt of income which is not includible in thetotal income, during the relevant previous year for the purpose ofdisallowing any expenditure incurred in relation to the said income. In otherwords, Section 14A will not apply if no exempt income is received orreceivable during the relevant previous year. 8.In the opinion of this Court, the present case is covered by theDivisionBenchjudgmentin CheminvestLtd.vs.CIT,[2015]61Taxmann.com 118 (Delhi), wherein this Court has held that the expression'does not form part of the total income' in Section 14A of the Act means thatthere should be an actual receipt of income which is not includible in thetotal income, during the relevant previous year for the purpose ofdisallowing any expenditure incurred in relation to the said income. In otherwords, Section 14A will not apply if no exempt income is received orreceivable during the relevant previous year. 9.Furthermore, this Court in Pr. Commissioner of Income Tax(Central)-2Vs.M/sEraInfrastructure(India)Ltd.inITANo.204/2022 vide judgment and order dated 20[th]July, 2022 has dealt withthe issue of amendment made by the Finance Act, 2022 to Section 14A ofthe Act. The relevant portion of the said judgment is reproducedhereinbelow: “8. Consequently, this Court is of the view that the amendment ofSection 14A, which is “for removal of doubts” cannot be presumed to be retrospective even where such language is used,if it alters or changes the law as it earlier stood.” 10.Consequently, this Court is of the view that no substantial question oflaw arises for consideration in the present appeal. Accordingly, the same isdismissed. MANMOHAN, J OCTOBER 6, 2022TS MANMEET PRITAM SINGH ARORA, J