INCOME TAX ACT, 1961

Section 14A read with Rule 8D of Income Tax Rules, 1962

Disallowance under section 14A - Expenditure against exempt income - Applicability of amendment to section 14A by Finance Act, 2022 -

Revenue challenged an order passed by Tribunal. It was stated that the Tribunal erred in deleting disallowance made by AO under section 14A read with rule 8D. It was further stated that the Tribunal erred in relying on decision of High Court in the case of Pr. CIT v. M/s. IL & FS Energy Development Company Ltd. 2017 SCC Online Del 9893, because Revenue had not accepted the said decision and preferred an SLP against such decision. It was also submitted that in view of amendment made by Finance Act, 2022 to section 14A by inserting a non obstante clause and an Explanation after the proviso, a change in law has been brought about and consequently, the judgments relied upon by the authorities below including Pr. CIT v. M/s. IL & FS Energy Development Company Ltd. 2017 SCC Online Del 9893, were no longer good law. Held: A perusal of Memorandum of Finance Bill, 2022 revealed that amendment made to section 14A will take effect from 1-4-2022 and will apply in relation to assessment year 2022-23 and subsequent assessment years. Further, Supreme Court in the case of Sedco Forex International Drill Inc & Ors. v. CIT & Anr. (2005) 12 SCC 717 : 2005 TaxPub(DT) 1870 (SC) held that a retrospective provision in a tax Act which is 'for the 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. Further, though the judgment of High Court in the case of Pr. CIT v. M/s. IL & FS Energy Development Company Ltd. 2017 SCC Online Del 9893 had been challenged and was pending adjudication before Supreme Court, yet there was no stay of the said judgment till date. Consequently, instant appeal filed by Revenue was dismissed being covered by the judgment passed by the predecessor Division Bench in the cases of Pr. CITv. IL & FS Energy Development Company Ltd. 2017 TaxPub(DT) 3890 (Del-HC) and Cheminvest Ltd. v. CIT (2015) 378 ITR 33 (Del) : 2015 TaxPub(DT) 3520 (Del-HC).

REFERRED : Sedco Forex International Drill Inc & Ors. v. CIT & Anr. (2005) 12 SCC 717 : 2005 TaxPub(DT) 1870 (SC), Pr. CITv. IL & FS Energy Development Company Ltd. 2017 TaxPub(DT) 3890 (Del-HC), Cheminvest Ltd. v. CIT (2015) 378 ITR 33 (Del) : 2015 TaxPub(DT) 3520 (Del-HC), Shree Chamundi Mopeds Ltd. v. Church of South India Trust Association (1992) 3 SCC 1 : 1992 TaxPub(CL) 0159 (SC) and Kunhayammed & Ors. v. State of Kerala & Anr. (2000) 6 SCC 359 : 2000 TaxPub(DT) 1461 (SC)

FAVOUR : In assessee's favour

A.Y. :

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