TaxTMI 
TaxTMI 
2025 (10) TMI 800
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....sessing officer in making disallowance u/s. 14A of the Act without appreciating the fact that no exempt income was earned by the Appellant during the year under consideration. 2. Briefly stated, facts of the case are that the assessee a domestic company was engaged in the business of developing and running infrastructure project including port etc. During the relevant assessment year under consideration, the assessee filed return of income on 28.11.2018 declaring total income at Rs. 58,80,66,950/ -. The return of income filed by the assessee was selected for scrutiny assessment and statutory notices under the Income-tax Act, 1961 (in short 'the Act') were issued and complied with. During assessment proceedings, the Assessing Officer observed investment in shares yielding exempted dividend income, but no disallowance was made by the assessee u/s 14A of the Act. The Assessing Officer referred to provisions of section 14A(2) of the Act and concluded that disallowance u/s 14A of the Act shall be made even no expenditure has been incurred in relation to income which does not form part of total income. Accordingly, the Assessing Officer computed monthly average of the investme....
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....y not discussed on record decisions of Hon SC on interpretation of Statute, hence the concerned orders, with all humility, are found to be subsilentio and hence rendered per incurium, thus not laying any law. Furthermore, there is no judicial finality on the issue yet. Post-amendment SLP of the revenue on this issue has been admitted by the Hon'ble Apex Court in case of Delhi International Airport (P.) Ltd. [2022] 142 taxmann.com 328 (SC) and is pending adjudication. Therefore, in the absence of any judgment of the Hon'ble Supreme Court or the Jurisdictional High Court on this issue post the amendment vide Finance Act 2022 brought to attention by the appellant and in view of the unambiguous language of the amendment brought out by Finance Act, 2022, section 14A is hereby held to be applicable even in the absence of any exempt income earned during the year." 4. We have heard the rival submissions of the parties and meticulously perused the relevant material on record. The principal issue for determination in the present matter is whether a disallowance under Section 14A Act can be made even when the assessee has not earned any exempt income during the relevant financial y....
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.... the decision of higher court as per incuriam unless a direct decision of higher court or larger bench on the issue has not been considered. The Hon'ble Supreme Court, in Ravinder Singh v. Sukhbir Singh (2013) 9 SCC 245, clarified that a Supreme Court judgment cannot be deemed per incuriam merely due to perceived inadequacies in argument, consideration, or reasoning. Furthermore, in South Central Railway Employees Cooperative Credit Society Employees Union v. B. Yashodabai (2015) 2 SCC 727, it was unequivocally held that High Courts cannot disregard the binding decisions of Hon'ble Supreme Court by terming them per incuriam. Additionally, the Hon'ble Karnataka High Court, in Panchaxari Shidramappa Yeligar v. Shiggaon Taluka Shikshana Samithi (ILR 1998 KAR 3748), decisively opined that a lower court cannot declare a higher court's decision as per incuriam. The relevant finding is reproduced as under: 12. Re: Question No (iii) 12.1. While some of the exceptions to the rule of stare decisis can be applied to all decisions which can be called as precedents, some, like the exception based on per incuriam Rule can be applied only in regard to decisions o....
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....Appeal.' (emphasis supplied) 12.4. In EATON BAKER v. THE QUEEN, 1975 AC 775. the Privy Council observed as follows: Strictly speaking the per incuriam rule as such, while it justifies a Court which is bound by precedent in refusing to follow one of its own previous decisions (YOUNG v. BRISTOL AEROPLANE CO LTD (1944 KB 718), does not apply to decisions of Courts of appellate jurisdiction Superior to that of the Court in which the rule is sought to be invoked (BROOME v. CASSEL & CO 1972 AC 1027). To permit this use of the per incuriam rule would open the door to disregard of precedents by the Court of inferior jurisdiction by the simple device of holding that decisions of superior Courts with which it disagreed must have been given per incuriam." 12.5. In H. MUNISWAMY GOWDA v. MANAGEMENT OF KSRTC AND ANR,, the Learned Chief Justice, speaking for the Division Bench of this Court while stressing the need for Single Judges in follow the decisions of the Full Bench, reiterated the position that the hierarchical system of Courts prevalent in our country mandates upon each lower tier including the High Court to accept loyally the decisions of the higher tiers....
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....nce Bill, 2022 reveals that it explicitly stipulates that the amendment made to Section 14A will take effect from 1st April, 2022 and will apply in relation to the assessment year 2022-23 and subsequent assessment years. The relevant extract of Clauses 4, 5, 6 & 7 of the Memorandum of Finance Bill, 2022 are reproduced hereinbelow: "4. In order to make the intention of the legislation clear and to make it free from any misinterpretation, it is proposed to insert an Explanation to section 14A of the Act to clarify that notwithstanding anything to the contrary contained in this Act, the provisions of this section shall apply and shall be deemed to have always applied in a case where exempt income has not accrued or arisen or has not been received during the previous year relevant to an assessment year and the expenditure has been incurred during the said previous year in relation to such exempt income. 5. This amendment will take effect from 1st April, 2022. 6. It is also proposed to amend sub-section (1) of the said section, so as to include a non-obstante clause in respect of other provisions of the Income-tax Act and provide that no deduction shall be all....
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....tion 5 of the Bill expressly stated that with effect from 1-4-2000, the substituted Explanation would read: "Explanation .-- For the removal of doubts, it is hereby declared that the income of the nature referred to in this clause payable for -- (a) service rendered in India; and (b) the rest period or leave period which is preceded and succeeded by services rendered in India and forms part of the service contract of employment, shall be regarded as income earned in India." The Finance Act, 1999 which followed the Bill incorporated the substituted Explanation to Section 9(1)(ii) without any change. 13. The Explanation as introduced in 1983 was construed by the Kerala High Court in CIT v. S.R. Patton [(1992) 193 ITR 49 (Ker)] while following the Gujarat High Court's decision in S.G. Pgnatale [(1980) 124 ITR 391 (Guj)] to hold that the Explanation was not declaratory but widened the scope of Section 9(1)(ii). It was further held that even if it were assumed to be clarificatory or that it removed whatever ambiguity there was in Section 9(1)(ii) of the Act, it did not operate in respect of periods which were prior to 1-4-1979. It was hel....
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....he main provision or an Explanation can add to and widen the scope of the main section [See Sonia Bhatia v. State of U.P., (1981) 2 SCC 585, 598 : AIR 1981 SC 1274, 1282 para 24] . If it is in its nature clarificatory then the Explanation must be read into the main provision with effect from the time that the main provision came into force [See Shyam Sunder v. Ram Kumar, (2001) 8 SCC 24 (para 44); Brij Mohan Das Laxman Das v. CIT, (1997) 1 SCC 352, 354; CIT v. Podar Cement (P) Ltd., (1997) 5 SCC 482, 506] . But if it changes the law it is not presumed to be retrospective, irrespective of the fact that the phrases used are "it is declared" or "for the removal of doubts"." (emphasis supplied) 7. The aforesaid proposition of law has been reiterated by the Supreme Court in M.M Aqua Technologies Ltd. V. Commissioner of Income Tax, Delhi-III, 2021 SCC OnLine SC 575. The relevant portion of the said judgment is reproduced hereinbelow :- "22. Second, a retrospective provision in a tax act which is "for the removal of doubts" cannot be presumed to be retrospective, even where such language is used, if it alters or changes the law as it earlier stood. This was s....
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.... and is pending adjudication before the Supreme Court, yet there is no stay of the said judgment till date. Consequently, in view of the judgments passed by the Supreme Court in Kunhayammed and Others vs. State of Kerala and Another, (2000) 6 SCC 359 and Shree Chamundi Mopeds Ltd. Vs. Church of South India Trust Association CSI Cinod Secretariat, Madras (1992) 3 SCC 1, the present appeal is dismissed being covered by the judgment passed by the learned predecessor Division Bench in PCIT vs. IL & FS Energy Development Company Ltd (supra) and Cheminvest Limited vs. Commissioner of Income Tax-VI, (2015) 378 ITR 33. 10. Accordingly, the appeal and application are dismissed. However, it is clarified that the order passed in the present appeal shall abide by the final decision of the Supreme Court in the SLP filed in the case of PCIT vs. IL & FS Energy Development Company Ltd (supra). 4.4 Thus, holding of the decision of Hon'ble High Court as per incuriam by the ld CIT(A) was without reading the decision properly and without proper application of mind, particularly referring to judgment dated 16.05.2023 in the case of SREE SANKARACHARYA UNIVERSITY of Sanskrit & Ors. Vs. Dr....