The Delhi High Court allowed interest expenses of Rupees Ten Crores there by granting relief to the Delhi International Airport.
The Income Tax Appeal has been filed by the Principal Commissioner of Income Tax challenging the order passed by the Income Tax Appellate Tribunal (‘ITAT’) for the Assessment Year 2010-11.
The Counsel for the appellant, submitted 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 and further 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.
The Counsel stated that the term ‘in relation to’ as used in Section 14A of the Act contemplates direct and or proximate nexus between ‘expenditure incurred’ and ‘earning of exempt income’ and further went on to state that the ITAT has erred in deleting the disallowance under Section 14A of the Act without considering the legislative intent of Section 14A of the Act which has been further clarified by CBDT Circular No.5/2014 dated 11th February, 2014.
Dismissing the appeal, a Division Bench consisting of Justice Manmohan and Justice Manmeet Pritam Singh Arora observed that “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. In other words, Section 14A will not apply if no exempt income is received or receivable during the relevant previous year.”
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