Principal Commissioner Of Income Tax vs. Delhi International Airport Pvt Ltd. - (High Court of Delhi) (06 Oct 2022)

Section 14A of IT Act will not apply, if no exempt income is received or receivable during the relevant previous year

MANU/DE/3833/2022

Direct Taxation

Present Income Tax Appeal has been filed challenging the Impugned Order passed by the Income Tax Appellate Tribunal ('ITAT') for the Assessment Year 2010-11. The Appellant states that, the ITAT has erred in not disallowing the interest expenses amounting to Rs.10,07,34,000, being expenditure incurred in relation to exempt income, under the provisions of Section 14A of the Income Tax Act, 1961. He submits that, ITAT has erred in holding that earning of exempt income during the year under consideration is a sin qua non for application of Section 14A of the Act.

It is submitted that, the term 'in relation to' as used in Section 14A of the IT Act contemplates direct and/or proximate nexus between 'expenditure incurred' and 'earning of exempt income'. Further submission that, the ITAT has erred in deleting the disallowance under Section 14A of the IT Act without considering the legislative intent of Section 14A of the IT Act which has been further clarified by CBDT Circular No.5/2014 dated 11th February, 2014.

A perusal of the paper book reveals that, the authorities below have given concurrent finding of fact that, the assessee did not earn any exempt income during the year under consideration.

In the opinion of this Court, the present case is covered by the Division Bench judgment in Cheminvest Ltd. vs. CIT, wherein this Court has held that the expression 'does not form part of the total income' in Section 14A of the Act means that there should be an actual receipt of income which is not includible in the total income, during the relevant previous year for the purpose of disallowing any expenditure incurred in relation to the said income. Section 14A of IT Act will not apply, if no exempt income is received or receivable during the relevant previous year. Consequently, this Court is of the view that no substantial question of law arises for consideration in the present appeal. Accordingly, appeal dismissed.

Tags : ASSESSMENT EXPENSES INTEREST