Section 14A without exempt income and treaty-based deemed tax credit govern the year; lease amortisation partly remanded.

Amortisation of lease payment was upheld for the Noida Authority lease because the issue was covered against the assessee in an earlier year, while the Visakhapatnam/Tuticorin lease required fresh factual examination and was remanded for de novo consideration. Disallowance under section 14A was deleted because no exempt income had been earned, and the later Finance Act, 2022 amendment did not apply retrospectively to change that position. Deemed tax credit on dividend income under the Omani tax regime was sustained, as treaty provisions and the relevant tax clarification entitled the assessee to that credit.

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Issues: (i) Whether the disallowance of amortisation of lease payment was sustainable in respect of the Noida Authority lease and the Visakhapatnam/Tuticorin lease; (ii) Whether disallowance under section 14A could be made in the absence of exempt income; (iii) Whether deemed tax credit for dividend income received under the Omani tax regime was liable to be deleted.

Issue (i): Whether the disallowance of amortisation of lease payment was sustainable in respect of the Noida Authority lease and the Visakhapatnam/Tuticorin lease.

Analysis: The issue was found to be identical to an earlier year in the assessee's own case. The Noida Authority lease component was treated as covered against the assessee, while the position regarding the Visakhapatnam/Tuticorin land required fresh examination on the facts of the year under appeal. Following the coordinate bench, the matter relating to the latter was sent back for de novo consideration.

Conclusion: The disallowance relating to the Noida Authority lease was upheld, and the issue relating to Visakhapatnam/Tuticorin was remanded to the Assessing Officer.

Issue (ii): Whether disallowance under section 14A could be made in the absence of exempt income.

Analysis: The binding jurisdictional High Court ruling held that no disallowance under section 14A can be made where no exempt income has been earned. The later amendment by the Finance Act, 2022 was also held not to operate retrospectively so as to alter that position for the year in question.

Conclusion: The disallowance under section 14A was deleted and the Revenue's challenge failed.

Issue (iii): Whether deemed tax credit for dividend income received under the Omani tax regime was liable to be deleted.

Analysis: The issue stood covered by the assessee's own case decided by the jurisdictional High Court. The treaty provisions, read with the Omani tax clarification and the applicable domestic provision, entitled the assessee to credit for the deemed tax on dividend income, and the Revenue had no basis to disturb that credit.

Conclusion: The deletion of the deemed tax credit disallowance was upheld and the Revenue's ground was rejected.

Final Conclusion: The assessee obtained only partial relief on the lease amortisation dispute, while the Revenue failed on the section 14A disallowance and the deemed tax credit issue; the matter was finally concluded accordingly.

Ratio Decidendi: A binding jurisdictional decision on exempt income and treaty-based tax credit governs the year in appeal, and where the factual matrix is partly covered by an earlier year and partly requires fresh examination, the covered portion may be sustained while the remaining portion is remitted for de novo consideration.

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