SC dismisses Revenue’s SLP on delay; confirms no Section 14A disallowance without exempt income
Issue
Whether the Supreme Court should entertain a Special Leave Petition (SLP) filed by the Revenue with a significant delay, challenging the High Court’s ruling that no disallowance under Section 14A can be made if the assessee has not earned any exempt income.
Facts
High Court Ruling: The High Court had previously held that the provisions of Section 14A of the Income-tax Act, 1961 (read with Rule 8D), regarding the disallowance of expenditure, are not applicable if the assessee has not earned any exempt income during the relevant year.
ITAT Order: The underlying order from the Income Tax Appellate Tribunal (ITAT) was actually an order of remand, sending the matter back to the Assessing Officer for verification.
Revenue’s Appeal: The Revenue filed a Special Leave Petition (SLP) before the Supreme Court challenging the High Court’s decision.
Procedural Delay: There was a significant delay of 469 days in filing the SLP by the Revenue.
Decision
Unexplained Delay: The Supreme Court noted that the delay of 469 days in filing the petition had not been explained satisfactorily by the Revenue.
Nature of Order: The Court observed that the ITAT’s order was merely a remand to the Assessment Officer, suggesting that the matter was still open for factual verification at the lower level.
Dismissal: Consequently, the Supreme Court dismissed the SLP on the grounds of delay and the nature of the lower authority’s order.
Result: The High Court’s position (no exempt income = no disallowance) stands undisturbed in this specific instance.
Key Takeaways
No Exempt Income, No Disallowance: This dismissal reinforces the settled judicial view that Section 14A disallowance cannot be triggered if there is no actual tax-free income earned by the assessee in the relevant financial year.
Strict Limitation: The Supreme Court continues to take a strict stance against government litigation filed with excessive, unexplained delays (Condonation of Delay is not automatic).
Remand Matters: The Supreme Court is generally disinclined to interfere in cases where the Tribunal has simply remanded the matter back to the Assessing Officer for fresh adjudication.