PR. COMMISSIONER OF INCOME TAX-7 vs. TULIP TELECOM LTD.

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ITA/484/2022HC DelhiDLHC01043996202224 November 2022Bench: HON'BLE MR. JUSTICE MANMOHAN,HON'BLE MS. JUSTICE MANMEET PRITAM SINGH ARORA3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that no substantial question of law arises for consideration in the present appeal and accordingly dismissed the appeal. The Court reasoned that the present case is covered by its previous judgment in Cheminvest Ltd. vs. CIT, which held that the expression 'does not form part of the total income' in Section 14A means there must be an actual receipt of income not includable in total income for disallowance of related expenditure. Therefore, Section 14A will not apply if no exempt income is received or receivable. The Court also referred to its decision in Cargo Motors Pvt. Ltd. Vs. Dy.Commissioner of Income Tax, which held that CBDT Circular No.5/2014 cannot override the express provisions of Section 14A read with Rule 8D. Furthermore, the Court noted its ruling in Pr. Commissioner of Income Tax (Central)-2 Vs. M/s Era Infrastructure (India) Ltd., stating that the amendment of Section 14A for 'removal of doubts' is not retrospective. Consequently, the ITAT's order upholding the deletion of the addition was affirmed.

What were the facts?

The Revenue, Pr. Commissioner of Income Tax-7, filed an appeal before the Delhi High Court challenging an order dated 11th May, 2022, passed by the Income Tax Appellate Tribunal (ITAT). The ITAT had upheld the deletion of an addition of Rs. 24,69,07,029/- made by the Assessing Officer. This addition was on account of disallowance under Section 14A read with Rule 8D of the Income Tax Rules, 1962. The Assessing Officer had made the addition despite the assessee, Tulip Telecom Ltd., not earning any exempt income during the Assessment Year 2012-13. The Revenue contended that the ITAT erred in confirming the deletion, citing CBDT Circular No. 5/2014 and the Finance Bill, 2022, which, according to them, permit disallowance even without exempt income.

What were the issues?

1. Whether the Tribunal erred in law and on facts in confirming the deletion of the addition of Rs. 24,69,07,029/- made by the Assessing Officer under Section 14A read with Rule 8D of the Income Tax Rules, 1962, when the assessee had not earned any exempt income during the Assessment Year 2012-13? Assessee's Contentions: The judgment does not record any specific contentions made by the assessee before the High Court. However, the ITAT's order, as reproduced, indicates that the CIT(A) held that Section 14A cannot be invoked where no dividend income has been received, following decisions in Joint Investment Pvt. Ltd. vs. CIT and CIT vs. Holcim India Pvt. Ltd. The ITAT found no fallacy in the CIT(A)'s findings and no contrary binding decision from the Revenue. Revenue's Contentions: The Revenue argued that the ITAT erred in deleting the addition. They contended that CBDT Circular No. 5/2014 dated 11th February, 2014, clearly states that disallowance under Section 14A read with Rule 8D shall be made even in cases where no exempt income was earned. They also referred to clarifications in the Finance Bill, 2022. The Revenue argued that the Assessing Officer was justified in making the addition.

Which sections of the Income-tax Act were involved?

Section 14A

AI-generated summary — verify with the full judgment below

$~S-47 * IN THE HIGH COURT OF DELHI AT NEW DELHI + ITA 484/2022 PR. COMMISSIONER OF INCOME TAX-7 ..... Appellant Through: Mr.Puneet Rai, Sr.Standing Counsel with Ms.Adeeba Mujahid, Jr.Standing Counsel and Mr.Nikhil Jain, Advocate. versus TULIP TELECOM LTD. ..... Respondent Through: None. CORAM: HON'BLE MR. JUSTICE MANMOHAN HON'BLE MS. JUSTICE MANMEET PRITAM SINGH ARORA O R D E R % 24.11.2022 CM APPL.50604/2022 Keeping in view the averments in the application, the delay in filing the appeal is condoned. Accordingly, the application stands disposed of. ITA 484/2022 Present Income Tax Appeal has been filed challenging the Order dated 11th May, 2022 passed by the Income Tax Appellate Tribunal (‘ITAT’) in ITA No.4834/Del/2017 for the Assessment Year 2012-13. Learned counsel for the appellant states that the ITAT has erred in confirming the order of CIT(A) deleting the addition of Rs.24,69,07,029/- made by the Assessing Officer on account of Section 14A read with Rule 8D This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 15/06/2026 at 01:30:51

of the Income Tax Rules, 1962 (‘the Rules’). He states that the ITAT has failed to appreciate the fact that the Assessing Officer was justified in making the addition of Rs.24,69,07,029/-, since the CBDT Circular No. 5/2014 dated 11th February, 2014 clearly states that disallowance under Section 14A read with Rule 8D of the Rules shall be made even in cases where no exempt income was earned during the year by the assessee and the same was also clarified in Finance Bill, 2022. A perusal of the paper book reveals that the Authorities below have given concurrent findings of fact that the assessee did not earn any dividend income during the year under consideration. The relevant extract of the ITAT order is reproduced hereinbelow:- “8. We have heard the Learned DR and perused the material on record. The issue in the present ground is with respect to the disallowance u/s 14A r.w Rule 8D of the Rules. We find that CIT(A) while deleting the addition has given a finding that no dividend income, which is exempt from tax, was received by assessee during the year. He thereafter following the decision of Honble Delhi High Court in the case of Joint Investment Pvt. Ltd. vs. CIT 372 ITR 694 and CIT vs. Holcim India Pvt. Ltd. 272 ITR 386 (Delhi), held that Section 14A of the Act cannot be invoked where no dividend income has been received by the assessee. Before us, no fallacy in the findings of CIT(A) has been pointed out by Revenue nor Revenue has placed any contrary binding decision in its support. In such a situation, we find no reason to interfere with the order of CIT(A). Thus the ground of Revenue is dismissed.” This Court is of the view that the present case is covered by the Division Bench judgment in Cheminvest Ltd. vs. CIT, [2015] 61 Taxmann.com 118 (Delhi), wherein it has been 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 includable 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, This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 15/06/2026 at 01:30:51

Section 14A will not apply if no exempt income is received or receivable during the relevant previous year. This Court in Cargo Motors Pvt. Ltd. Vs. Dy.Commissioner of Income Tax, ITA 7/2020 decided on 7th October, 2022 has also held that CBDT Circular No.5/2014 cannot override the express provision of Section 14A read with Rule 8D. Furthermore, this Court in Pr. Commissioner of Income Tax (Central)-2 Vs. M/s Era Infrastructure (India) Ltd., [2022] 141 taxmann.com 289 (Del) has held that the amendment of Section 14A, which is “for removal of doubts” is not retrospective. Consequently, this Court is of the view that no substantial question of law arises for consideration in the present appeal. Accordingly, the same is dismissed. MANMOHAN, J MANMEET PRITAM SINGH ARORA, J NOVEMBER 24, 2022 TS This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 15/06/2026 at 01:30:51

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