2022 (9) TMI 1559 - AT - Income Tax

Disallowance u/s 14A r.w.r. 8D - exempt income earned or not? - Assessee submitted assessee did not receive any exempt income and the CIT (Appeals) deleted the disallowance following the decision of Cheminvest Limited 2015 (9) TMI 238 - DELHI HIGH COURT for the reason that the assessee did not receive any exempt income during the assessment year under consideration HELD THAT - We observe that recently in the case of PCIT Vs. Era Infrastructure (India) Ltd. 2022 (7) TMI 1093 - DELHI HIGH COURT following the decision of Sedco Forex International Drill. 2005 (11) TMI 25 - SUPREME COURT and the decision of M.M. Aqua Technologies Ltd. 2021 (8) TMI 520 - SUPREME COURT held that the Amendment to section 14A of the Act which is for removal of doubts cannot be presumed to be retrospective. Similar view has been taken in the recent decision in Telecommunications Consultants India Ltd. 2022 (8) TMI 1486 - DELHI HIGH COURT . Thus, no infirmity in the order passed by the ld. CIT (Appeals) in deleting the disallowance made under section 14A read with Rule 8D of the Act. Ground raised by the Revenue is rejected

Summary

Issues involved:
Appeal against deletion of addition made on account of disallowance under section 14A r.w.r. 8D of the Income Tax Rule, 1962 for the assessment year 2016-17.

Analysis:

1. Disallowance under section 14A:
The appeal was filed by the Revenue against the order of the ld. Commissioner of Income Tax (Appeals) deleting the addition made on account of disallowance under section 14A r.w.r. 8D of the Income Tax Rule, 1962. The assessee did not receive any exempt income during the assessment year, which led to the deletion of the disallowance. The ld. CIT (Appeals) relied on the decision of the Hon'ble Delhi High Court in the case of Cheminvest Limited Vs. CIT. Additionally, the jurisdictional High Court in the case of PCIT Vs. Era Infrastructure (India) Ltd. clarified that the Amendment to section 14A, even if there is no exempt income, applies prospectively. This decision was followed in the case of PCIT Vs. Telecommunications Consultants India Ltd. The Tribunal observed that the Amendment to section 14A, for removal of doubts, cannot be presumed to be retrospective, as per the decisions of the Hon'ble Supreme Court and the Hon'ble Delhi High Court. Consequently, the disallowance made under section 14A read with Rule 8D of the Act was rightly deleted by the ld. CIT (Appeals), and the Revenue's appeal was dismissed.

2. Judicial interpretation and precedents:
The Tribunal considered the judicial interpretations provided by the Hon'ble Delhi High Court and the jurisdictional High Court regarding the applicability of section 14A in cases where no exempt income was received. The decisions in the cases of Cheminvest Limited Vs. CIT, PCIT Vs. Era Infrastructure (India) Ltd., and PCIT Vs. Telecommunications Consultants India Ltd. were crucial in determining the prospective application of the Amendment to section 14A. The Tribunal emphasized the importance of following judicial precedents and the principles laid down by higher courts while interpreting tax laws and amendments. By aligning with the decisions of the higher courts, the Tribunal upheld the deletion of the disallowance made under section 14A in the present case.

3. Conclusion:
The Tribunal, after considering the submissions and orders of the authorities, concluded that there was no infirmity in the decision of the ld. CIT (Appeals) to delete the disallowance under section 14A read with Rule 8D of the Act. The Tribunal's decision was based on the absence of exempt income for the assessee during the assessment year and the prospective application of the Amendment to section 14A as clarified by the higher courts. Therefore, the appeal of the Revenue was dismissed, affirming the decision of the lower authorities.

This detailed analysis of the judgment highlights the key legal aspects, interpretations, and precedents considered by the Tribunal in reaching its decision on the appeal against the disallowance under section 14A of the Income Tax Act.