2021 (3) TMI 1212 - HC - Income Tax

Disallowance u/s 14A - correctness of such claim of the Respondent in respect of such expenditure in relation to income which does not form part of the total income under this Act - license fee paid to the Department of telecommunication by the assessee - whether exemption under section 10A of the Act should not be computed after excluding telecommunication expenses and foreign currency expenditure from the export turnover - HELD THAT - In view of the decision rendered in HCL COMNET SYSTEMS SERVICES LTD. 2021 (3) TMI 1182 - DELHI HIGH COURT These questions of law as suggested by the revenue cannot be entertained. In brief, the questions of law as suggested by the revenue stand covered by various judgments of either this Court or the Supreme Court.

Summary

Issues:
1. Interpretation of Section 14A(1) of the Income Tax Act
2. Interpretation of Circular No. 5 of 2014 issued by the CBDT
3. Justification of expenditure in relation to income not forming part of total income
4. Nature of license fee paid to the Department of Telecommunication
5. Computation of exemption under section 10A of the Act

Interpretation of Section 14A(1) of the Income Tax Act:
The appeal challenged the ITAT's interpretation of Section 14A(1) of the Income Tax Act, contending that the ITAT erred in holding that Section 14A can only be invoked if the Respondent earned exempted income during the assessment year. The appellant argued that the only precondition for invoking Section 14A is the existence of "expenditure incurred in relation to such income which does not form part of the total income under this Act." However, the High Court dismissed the appeal, citing a previous judgment rendered on the same issue, stating that the questions of law suggested by the revenue could not be entertained as they were covered by various judgments of either the High Court or the Supreme Court.

Interpretation of Circular No. 5 of 2014 issued by the CBDT:
Another issue raised in the appeal was the interpretation of Circular No. 5 of 2014 issued by the CBDT, which clarifies the scope and meaning of Section 14A of the Act. The appellant contended that the ITAT erred in its interpretation of the circular. However, the High Court did not delve into this issue specifically as it dismissed the appeal based on the previous judgment, stating that the questions of law raised were already covered by existing legal precedents.

Justification of Expenditure in Relation to Income Not Forming Part of Total Income:
The appellant further argued that the ITAT failed to appreciate that the Assessing Officer was not justified in accepting the correctness of the respondent's claim regarding expenditure related to income not forming part of the total income under the Act. However, the High Court did not provide a detailed analysis of this issue in the judgment as it dismissed the appeal based on the previous decision.

Nature of License Fee Paid to the Department of Telecommunication:
The appeal also raised the issue of the true nature of the license fee paid to the Department of Telecommunication by the assessee. The appellant claimed that the expenditure was a capital expenditure, contrary to the ITAT's decision. However, the High Court did not analyze this issue separately in the judgment as it dismissed the appeal on other grounds.

Computation of Exemption Under Section 10A of the Act:
Lastly, the appellant contested the ITAT's decision regarding the computation of exemption under section 10A of the Act, arguing that telecommunication expenses and foreign currency expenditure should be excluded from the export turnover. The High Court did not provide a detailed analysis of this issue in the judgment as it dismissed the appeal without considering these specific contentions.