This Court In The Case Of Cit v. M/S Kribhco [2012] 349 Itr 618(Delhi) Has Held That Provisions Of Section 14A Are Inapplicable As Far Asdeductions, Which Are Permissible And Allowed Under Chap

%Date of Decision: 11[th]October, 2022 CORAM:HON'BLE MR. JUSTICE MANMOHANHON'BLE MS. JUSTICE MANMEET PRITAM SINGH ARORAJ U D G M E N T MANMOHAN, J (Oral): 1.Present Income Tax Appeal has been filed challenging the order dated06[th]January, 2021 passed by the Income Tax Appellate Tribunal (‘ITAT’) inITA No.7367/DEL./2017 for the Assessment Year (‘AY’) 2007-08. 2.Learned Counsel for the Appellant states that the expenditure incurredfor earning dividend income of Rs.113.86 crores from OMIFCO-OMAN, anoverseas company in Oman, cannot be disallowed under Section 14A of theIncome Tax Act, 1961 (‘the Act’), as no tax is payable on the said dividendin Oman and India, as tax sparing credit of notional tax on the Dividend isallowed under Article 25 of India-Oman DTAA. He states that the ITAT haserred in not appreciating the fact that the assessee is effectively not payingany tax on the said income either in the source country or in India and thus, ITA 390/2022 dividend income for all purposes is exempted from tax. He further states thatthe ITAT has erred in restricting the disallowance to the tune of Rs.74.26lakhs as against Rs.9.10 Crore, disallowance made by the Assessing Officerunder Section 14A read with Rule 8D of the Act after excluding theinvestment in OMIFCO-Oman. 3.This Court is of the opinion that in view of Section 14A(1), nodeduction is to be allowed in respect of expenditure incurred by the assesseein relation to income which does not form part of the total income under theAct. As per Section 2(45) of the Act, “total income” means the total amountof income referred to in Section 5, computed in the manner laid down in theAct. Therefore, Section 14A pertains to disallowance of deduction in respectof income which does not form part of the total income. Since the dividendreceived by the assessee from OMIFCO, Oman is chargeable to tax in Indiaunder the head "Income from other sources" and forms part of the totalincome, the same is included in taxable income in the computation ofincome filed by the assessee. However, rebate of tax has been allowed to theassessee from the total taxes in terms of Section 90(2) of the Income TaxAct read with Article 25 of the Indo Oman, DTAA and thus, the dividendearned can be said to be in the nature of excluded income and, therefore, theprovisions of Section 14A would not be attracted in this case. 4.This Court in the case of CIT vs. M/s Kribhco [2012] 349 ITR 618(Delhi) has held that provisions of Section 14A are inapplicable as far asdeductions, which are permissible and allowed under Chapter VIA areconcerned. The relevant extract of the judgment is reproduced hereinbelow:- ITA 390/2022 “32…Thus, the income on which the deduction is allowed forms apart of the total income, though not included in the amount orquantum on which tax is paid. … 34. Section 14A states that for the purpose of computing total incomeunder Chapter IV, no deduction shall be allowed in respect ofexpenditure incurred in relation to the income which does not formpart of the total income under this Act. It does not state that incomewhich is entitled to deduction under Chapter VI-A has to be excludedfor the purpose of the said Section. The words “do not form part ofthe total income under this Act” is significant and important. Asnoticed above, before allowing deduction under Chapter VI-A wehave to compute the income and include the same in the totalincome. In this manner, the income which qualifies for deductionsunder Sections 80C to 80U has to be first included in the totalincome of the assessee. It, therefore, becomes part of the income,which is subjected to tax. Thereafter, deduction is to be allowed inaccordance with and subject to the fulfillment of the conditions of therespective provisions. This is also subject to Section 80AB and80A(1) and (2). Chapter VI-A does not postulate or state that theincomes which qualify for the said deduction will be excluded andnot form part of the total income. They form part of the total incomebut are allowed as a deduction and reduced.” (emphasis supplied) 5.In view of the aforesaid mandate of law, this Court is of the view thatno substantial question of law arises for consideration in the present appeal.Accordingly, the same is dismissed. MANMOHAN, J OCTOBER 11, 2022/msh MANMEET PRITAM SINGH ARORA, J ITA 390/2022 Page 3 of 3