DCIT Vs Welspun Steel Limited (ITAT Mumbai)
ITAT Mumbai, in its decision on the appeal by the Revenue, upheld the CIT(A)’s order that had partly allowed the appeal of Welspun Steel Limited regarding the disallowance made under Section 14A of the Income Tax Act, 1961. The dispute revolved around an addition of INR 7.98 crore made by the Assessing Officer under Section 14A read with Rule 8D. The CIT(A) had deleted this disallowance after noting that the Assessee did not earn any exempt income during the assessment year, and also removed the upward adjustment for computing Book Profits under Section 115JB of the Act. This decision was aligned with the Special Bench ruling in the case of ACIT v. Vireet Investments Pvt. Ltd. The Revenue’s argument that the amendments introduced by the Finance Act, 2022 should apply retrospectively was rejected, as the Tribunal reaffirmed the judgments of the Bombay High Court and Supreme Court, which emphasized that disallowance under Section 14A cannot exceed the amount of exempt income earned by an assessee in the relevant year.
In its analysis, the Tribunal discussed the Finance Act 2022 amendment, which the Revenue claimed had retrospective effect. However, the Tribunal cited rulings that these amendments should be applied prospectively, effective only from the assessment year 2022-23. Citing past case law, including the judgment of the Hon’ble Delhi High Court, the Tribunal concluded that the retrospective application of these amendments was not valid. Therefore, the appeal was dismissed, and the order of the CIT(A) was upheld, effectively disallowing the Revenue’s plea for additional disallowance under Section 14A. The second ground of appeal raised by the Revenue, which involved adjustments for computing Book Profits, was rendered academic and dismissed accordingly.
