2022 (11) TMI 1447 - AT - Income Tax

Lease payment amortization disallowed, Section 14A disallowance deleted, deemed tax credit allowed under exemption

Krishak Bharti Co-operative Ltd. Versus The A.C.I.T Circle -29 (1) Delhi And (Vice-Versa)

The ITAT Delhi ruled on three issues: (1) Amortization of lease payments from Noida authority was disallowed following coordinate bench precedent, while ... Disallowance being amortization of lease payment - HELD THAT:- Finding parity on facts, respectfully following the findings of the co-ordinate bench, amortization portion of the lease taken from Noida authority is decided against the assessee and the challenge in respect of land at Vishakapatnam and Tuticorn is restored to the file of the Assessing Officer to be decided as per directions given in Assessment Year 2012-13. Disallowance u/s 14A - Assessee has not earned any tax free income which may trigger application of provisions of section 14A - HELD THAT:- Facts on record show that during the year, the assessee has not earned any tax free income which may trigger application of provisions of section 14A of the Act. Such issue has now been decided in favour of the assessee and against the Revenue by the decision of Era Infrastructure [India] Pvt Ltd [2022 (7) TMI 1093 - DELHI HIGH COURT] wherein following the decision in the case of IL & FS Energy Development Company Ltd.[2017 (8) TMI 732 - DELHI HIGH COURT] held that no disallowance u/s 14A of the Act can be made if the assessee had not earned any exempt income. Disallowance of deemed tax credit - HELD THAT:- This issue was also decided in assessee’s own case [2017 (4) TMI 1035 - DELHI HIGH COURT] as held tax exemption on dividend is granted with the objective of promoting economic development within Oman by attracting investments. Issues Involved:1. Disallowance of amortization of lease payment.2. Disallowance under Section 14A of the Income Tax Act.3. Deletion of disallowance of deemed tax credit.Issue 1: Disallowance of Amortization of Lease PaymentThe solitary grievance of the assessee was the confirmation of the disallowance of Rs. 45,45,010/- being amortization of lease payment by the CIT(A). The Tribunal noted that a similar issue was considered in the assessee's own case for Assessment Year 2012-13 and decided partly in favor of the assessee. The Tribunal found force in the contention of the assessee's counsel and noted that the identical issue had been previously addressed. The Tribunal stated, 'Insofar as the amortisable portion of the lease taken from the Noida Authority is concerned, Ld. AR fairly admitted that this issue is covered against the assessee by the order of the Hon'ble Delhi High Court...'. The challenge concerning the land at Visakhapatnam and Tuticorin was restored to the Assessing Officer for a de novo decision. The appeal of the assessee was allowed in part for statistical purposes.Issue 2: Disallowance under Section 14A of the Income Tax ActThe Revenue's appeal included grounds related to the disallowance under Section 14A. The Tribunal observed that the assessee had not earned any tax-free income during the year, which would trigger the application of Section 14A. This issue was decided in favor of the assessee by the Hon'ble Delhi High Court in the case of Era Infrastructure [India] Pvt Ltd, wherein it was held that no disallowance under Section 14A can be made if the assessee had not earned any exempt income. The Tribunal followed the findings of the Hon'ble Delhi High Court, stating, 'Consequently, this Court is of the view that the amendment of Section 14A, which is '˜for removal of doubts' cannot be presumed to be retrospective...'. Ground Nos. 1 and 2 of the Revenue's appeal were dismissed.Issue 3: Deletion of Disallowance of Deemed Tax CreditThe Revenue's appeal also challenged the deletion of disallowance of deemed tax credit of Rs. 18,06,24,855/-. The Tribunal referred to the Hon'ble Delhi High Court's decision in the assessee's own case, which held that the dividend income was taxable but exempt under Omani law, entitling the assessee to the benefits of the Indo-Oman DTAA. The Tribunal noted the clarification from the Omani Ministry of Finance and the interpretation of Article 8 (bis) of the Omani tax law, which aimed to promote economic development by attracting investments. The Tribunal concluded that the clarification from the Omani authorities was conclusive and that the Indian tax authorities had no locus standi to interpret Omani laws. The Tribunal stated, 'These findings are, in this court's opinion, in consonance with logic and reason and do not call for interference.' Ground No. 3 of the Revenue's appeal was dismissed.Conclusion:The appeal of the assessee in ITA No. 581/DEL/2022 was allowed in part for statistical purposes, and the appeal of the Revenue in ITA No. 860/DEL/2022 was dismissed. The order was pronounced in the open court on 15.11.2022.