Section 14A disallowance triggers only when exempt income is actually received or receivable; Finance Act 2022 not retrospective

HC held that Section 14A disallowance applies only where exempt income was actually received or was receivable in the relevant previous year; mere scope or potential of such income does not form part of "total income" for triggering disallowance. The court followed a prior Division Bench decision and further held that the Finance Act, 2022 amendment to Section 14A, being clarificatory, cannot be presumed retrospective if it changes the existing law. Consequently, no substantial question of law arose.

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Issues:
1. Condonation of delay in re-filing the appeal.
2. Challenge to the Impugned Order by the Income Tax Appellate Tribunal (ITAT) regarding disallowance of interest expenses under Section 14A of the Income Tax Act, 1961.
3. Interpretation of the term "in relation to" in Section 14A of the Act.
4. Consideration of legislative intent and CBDT Circular No. 5/2014.
5. Analysis of the Division Bench judgment in Cheminvest Ltd. vs. CIT.
6. Impact of the amendment to Section 14A by the Finance Act, 2022.
7. Determination of whether a substantial question of law arises for consideration.

Analysis:
1. The Court condoned the delay in re-filing the appeal after considering the averments in the application.
2. The appeal challenged the ITAT's order regarding the disallowance of interest expenses related to exempt income under Section 14A of the Act for the Assessment Year 2010-11. The Appellant argued that a direct nexus between the expenditure and earning of exempt income is required, emphasizing the term "in relation to."
3. The Appellant contended that the ITAT erred in deleting the disallowance without considering the legislative intent of Section 14A, as clarified by CBDT Circular No. 5/2014.
4. The Court referred to the Cheminvest Ltd. judgment, stating that Section 14A does not apply if no exempt income is received or receivable during the relevant year.
5. In light of the amendment to Section 14A by the Finance Act, 2022, the Court held that such amendments, even for "removal of doubts," are not presumed to be retrospective if they alter the existing law.
6. Ultimately, the Court found no substantial question of law for consideration in the appeal and dismissed the same based on the precedents and interpretations provided.

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