Case Law Details
DCIT Vs Jite Shipyard Ltd (Delhi High Court)
Introduction: In a recent case involving the Income Tax Appellate Tribunal, the Delhi High Court addressed a crucial issue related to the disallowance made under Section 14A of the Income-tax Act, 1961 (the Act). The appellant, the Deputy Commissioner of Income Tax (DCIT), contested the order passed by the Tribunal for the Assessment Year 2015-16. The central question before the court was whether the disallowance under Section 14A could exceed the exempt income earned by the respondent, Jite Shipyard Ltd.
Detailed Analysis: The central issue presented in the appeal focuses on the interpretation of Section 14A of the Income-tax Act and its application to the expenses related to income other than gross income. The dispute, while seemingly straightforward, delves into the nuanced understanding of the relationship between disallowances and exempt income.
The Delhi High Court, in its judgment, refers to precedent-setting cases such as Cheminvest Limited v. Commissioner of Income Tax-VI (2015) 61 taxmann.com 118 and Commissioner of Income-tax, Central 1, Chennai v. Chettinad Logistics (P.) Ltd. (2017) 80 taxmann.com 221 (Madras). The court notes that the issue at hand is already settled by these judgments.
It’s noteworthy that Justice Rajiv Shakdher, who authored the judgment in Commissioner of Income-tax, Central 1, Chennai v. Chettinad Logistics (P.) Ltd., was part of the bench overseeing the present case. The Supreme Court, in a subsequent Special Leave Petition (SLP) filed against the mentioned judgment, dismissed the appeal on both delay and merits on 02.07.2018.
Conclusion: The case of DCIT vs. Jite Shipyard Ltd reinforces the principle that the disallowance under Section 14A of the Income-tax Act cannot exceed the actual exempt income earned by the assessee. The reliance on established precedents, including a Supreme Court dismissal of a Special Leave Petition, further solidifies the legal position on this matter. This judgment provides clarity and guidance on the interpretation of Section 14A, ensuring a fair and consistent application of tax law.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. This appeal concerns Assessment Year (AY) 2015-16.
2. Via the instant appeal, the appellant/revenue seeks to assail the order dated 27.03.2023 passed by the Income Tax Appellate Tribunal [in short, “Tribunal”].
3. It is not in dispute that the only issue that arises for consideration in the instant appeal is: Whether disallowance made under Section 14A of the Income-tax Act, 1961 [in short, “the Act”] can exceed the exempt income earned by the respondent/assessee?
4. There is no dispute that the issue raised, hereinabove, is covered by the following judgments:
(i) Cheminvest Limited v. Commissioner of Income Tax-VI, (2015) 61 taxmann.com 118.
5. To be noted, one of us [Rajiv Shakdher, J.], was part of the bench that authored the judgment in Commissioner of Income-tax, Central 1, Chennai v. Chettinad Logistics (P.) Ltd.. A special leave petition (SLP) filed by the appellant/revenue, against the said judgment, was dismissed by the Supreme Court on 02.07.2018 [reported in (2018) 95 taxmann.com 250 (SC)], both on the grounds of delay and merits.
6. The order of the Supreme Court in the said matter reads as follows:
“1. The Special Leave petition is dismissed on the ground of delay as well as on merits.”
7. In these circumstances, no substantial question of law arises for our consideration. The appeal is, accordingly, closed.
8. Consequently, the pending applications are rendered infructuous and are, accordingly, closed.
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