M/S JSW INFRASTRUTURE LIMITED,MUMBAI V. DCIT CIRCLE-5(2)(1), MUMBAI

ITA 6015/MUM/2024

AI Insights

The case involves M/s JSW Infrastructure Ltd., which appealed against the order of the Commissioner of Income-tax (Appeals) confirming the disallowance made by the Assessing Officer under Section 14A of the Income Tax Act, 1961. The disallowance was related to expenses incurred in relation to investments yielding exempt income. The primary legal contention was whether the disallowance under Section 14A could be made even when no exempt income was earned during the year, following the amendment by the Finance Act, 2022. The Tribunal examined various judicial precedents and the legislative intent behind the amendment, ultimately deciding in favor of the assessee.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 32087 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-01-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2018-2019
• Other Referred Cases: PCIT vs. Ballarpur Industries Ltd., Cheminvest Ltd. vs. Commissioner of Income Tax-VI, Assistant Commissioner Of Income Tax vs. K Raheja Corporate Services Private Limited, Principal Commissioner of Income Tax vs. Era Infrastructure India Ltd.
• Laws Referred To: Income Tax Act 1961, Income Tax Rules 1962
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KANUPRIYA DAMOR
• Assessee Lawyers: VINITA NARA
• Keywords: Set aside; Retrospective amendment; Earning of tax free income; Competent authority; Rule 8D
• Section: 143(3); 119; 14A

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “F” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI RAJ KUMAR CHAUHAN (JUDICIAL MEMBER) ITA No. 6015/MUM/2024 Assessment Year: 2018-19 M/s JSW Infrastructure Ltd., JSW Centre Bandra Kurla Complex, Bandra (East), Mumbai-400051. Vs. Dy. CIT, Circle 5(2)(1), Aayakar Bhavan, Maharishi Karve Road, New Marine Lines, Churchgate, Mumbai-400020. PAN NO. AABCJ 6721 D Appellant Respondent Assessee by : Ms. Vinita Nara Revenue by : Ms. Kanupriya Damor, Sr. DR Date of Hearing : 02/01/2025 Date of pronouncement : 23/01/2025 ORDER PER OM PRAKASH KANT, AM This appeal by the assessee is directed against order dated 14.10.2024 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2018-19, raising following grounds: 1. On the facts and circumstances of the case as well as in law, the Learned CIT(A) has erred Assessing Officer disallowing sum of Rs.4,74,31,032/ the Income Tax Act 1961 by invoking the rule 8D of Income Tax Rules, 1962, without considering the facts and circumstances of the case. 2. On the facts and circumstances of the case as well as in law, the Learned CIT(A) has erred in confirming the action of Learned Assessing 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 infrastructu relevant assessment year under co return of income on 28.11.20 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 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 pr 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 the investments and thereafter made addition for the 1% of the annual average of such investments, which was worked out to M/s JSW Infrastructure Ltd. ITA No. 6015/MUM/2024 On the facts and circumstances of the case as well as in law, the Learned CIT(A) has erred in confirming the action of the Learned Assessing Officer disallowing sum of Rs.4,74,31,032/ - u/s.14A of the Income Tax Act 1961 by invoking the rule 8D of Income Tax Rules, 1962, without considering the facts and circumstances of the s and circumstances of the case as well as in law, the Learned CIT(A) has erred in confirming the action of Learned Assessing officer in making disallowance u/s.14A of the Act without appreciating the fact that no exempt income was earned by the during the year under consideration. 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. D elevant assessment year under consideration, the assessee filed return of income on 28.11.2018 declaring total income at . The return of income filed by the assessee was selected for scrutiny assessment and statutory notices under tax Act, 1961 (in short ‘the Act’) were issued and 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 the investments and thereafter made addition for the 1% of the annual average of such investments, which was worked out to M/s JSW Infrastructure Ltd. 2 ITA No. 6015/MUM/2024 On the facts and circumstances of the case as well as in law, the in confirming the action of the Learned u/s.14A of the Income Tax Act 1961 by invoking the rule 8D of Income Tax Rules, 1962, without considering the facts and circumstances of the s and circumstances of the case as well as in law, the Learned CIT(A) has erred in confirming the action of Learned Assessing officer in making disallowance u/s.14A of the Act without appreciating the fact that no exempt income was earned by the Briefly stated, facts of the case are that the assessee a domestic company was engaged in the business of developing and re project including port etc. During the he assessee filed 18 declaring total income at . The return of income filed by the assessee was selected for scrutiny assessment and statutory notices under Act’) were issued and 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 ovisions 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 investments and thereafter made addition for the 1% of the annual average of such investments, which was worked out to Rs.4,74,31,032/- and added to the total income returned by the assessee. In the assessment order passed u/s 143(3) of the on 08.03.2021, the Assessing Officer made disallowance Rs.4,74,31,032/- u/s 14A of the Act r.w.r. 8D of the Income Rules, 1962. 3. On further appeal, the Ld. CIT(A) referred to the amendment brought by the Finance Act, 2022 to hold that disall 14A of the Act shall be operative even when there is no exempt income earned in the particular year. The Ld. CIT(A) held the decision of the Hon’ble Delhi High Court in the case of Infrastructure Ltd. (supra) the Ld. CIT(A) is reproduced as under: “(iii) Though, it is fairly admitted that the above said amendment brought out by the Finance Act 2022 has been subject matter of substantial litigation and various Tribunals and Courts have given contrary opinions as to whether the applicability of the amendment is retrospective or prospective. It is noted that the Hon'ble Delhi High Court in the case of Commissioner of Income Tax vs. Era Infrastructure (India) Ltd. Delhi International Airport Pvt. Ltd. (Delhi High Court) (2022)144 taxmann.com 80 (Del) has held the amendment to be prospective. However, it is trite that any legislation or instrument having the force of law, which is clarificatory or explanatory in nature a and which seeks to clear doubts or correct an obvious omission in a statute, would generally be retrospective in operation, as reiterated by Hon'ble Supreme Court from time to time including in its recent judgment dated 16.05.2023 in the case of UNIVERSITY of Sanskrit & Ors. Vs. Dr. Manu & An in CIVIL APPEAL NO. 3752 OF 2023. The various case laws interpreting section 14A amendment to be prospective based only on the stated date of application to be w.e.f. 01 clearly ignored that the substantive wordings of the amendment and the Explanatory Memorandum to the Finance Act which unequivocally shows intention of the legislature in favour of making the amendment clarificatory in nature and retros The judicial forums holding the amendment to be prospective, M/s JSW Infrastructure Ltd. ITA No. 6015/MUM/2024 and added to the total income returned by the In the assessment order passed u/s 143(3) of the on 08.03.2021, the Assessing Officer made disallowance u/s 14A of the Act r.w.r. 8D of the Income On further appeal, the Ld. CIT(A) referred to the amendment brought by the Finance Act, 2022 to hold that disall 14A of the Act shall be operative even when there is no exempt income earned in the particular year. The Ld. CIT(A) held the decision of the Hon’ble Delhi High Court in the case of Infrastructure Ltd. (supra) as per incurium. The relevant the Ld. CIT(A) is reproduced as under: (iii) Though, it is fairly admitted that the above said amendment brought out by the Finance Act 2022 has been subject matter of substantial litigation and various Tribunals and Courts have given opinions as to whether the applicability of the amendment is retrospective or prospective. It is noted that the Hon'ble Delhi High Court in the case of Commissioner of Income Tax vs. Era Infrastructure (India) Ltd. (2022) 448 ITR 674 (Del) and PCIT Vs i International Airport Pvt. Ltd. (Delhi High Court) (2022)144 taxmann.com 80 (Del) has held the amendment to be prospective. However, it is trite that any legislation or instrument having the force of law, which is clarificatory or explanatory in nature and purport and which seeks to clear doubts or correct an obvious omission in a statute, would generally be retrospective in operation, as reiterated by Hon'ble Supreme Court from time to time including in its recent judgment dated 16.05.2023 in the case of SREE SANKARACHARYA UNIVERSITY of Sanskrit & Ors. Vs. Dr. Manu & An in CIVIL APPEAL NO. 3752 OF 2023. The various case laws interpreting section 14A amendment to be prospective based only on the stated date of application to be w.e.f. 01-04-2022 have been hyper technical and clearly ignored that the substantive wordings of the amendment and the Explanatory Memorandum to the Finance Act which unequivocally shows intention of the legislature in favour of making the amendment clarificatory in nature and retrospective in operation. The judicial forums holding the amendment to be prospective, M/s JSW Infrastructure Ltd. 3 ITA No. 6015/MUM/2024 and added to the total income returned by the In the assessment order passed u/s 143(3) of the Act on 08.03.2021, the Assessing Officer made disallowance of u/s 14A of the Act r.w.r. 8D of the Income-tax On further appeal, the Ld. CIT(A) referred to the amendment brought by the Finance Act, 2022 to hold that disallowance u/s 14A of the Act shall be operative even when there is no exempt income earned in the particular year. The Ld. CIT(A) held the decision of the Hon’ble Delhi High Court in the case of Era . The relevant finding of (iii) Though, it is fairly admitted that the above said amendment brought out by the Finance Act 2022 has been subject matter of substantial litigation and various Tribunals and Courts have given opinions as to whether the applicability of the amendment is retrospective or prospective. It is noted that the Hon'ble Delhi High Court in the case of Commissioner of Income Tax vs. Era (2022) 448 ITR 674 (Del) and PCIT Vs i International Airport Pvt. Ltd. (Delhi High Court) (2022)144 taxmann.com 80 (Del) has held the amendment to be prospective. However, it is trite that any legislation or instrument having the force nd purport and which seeks to clear doubts or correct an obvious omission in a statute, would generally be retrospective in operation, as reiterated by Hon'ble Supreme Court from time to time including in its recent SREE SANKARACHARYA UNIVERSITY of Sanskrit & Ors. Vs. Dr. Manu & An in CIVIL APPEAL NO. 3752 OF 2023. The various case laws interpreting section 14A amendment to be prospective based only on the stated date of hyper technical and clearly ignored that the substantive wordings of the amendment and the Explanatory Memorandum to the Finance Act which unequivocally shows intention of the legislature in favour of making pective in operation. The judicial forums holding the amendment to be prospective, have apparently 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 henc per incurium, thus not laying any law. judicial finality on the issue yet. Post on this issue has been admitted by the Hon'ble Apex Court in case of Delhi International Airport (P.) Ltd. [202 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 an 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 assessee has not earned any exempt income during the relevant financial year under consideration. Upon examination decisions on the issue Court, in the case of taxmann.com 13 (Bombay), categorically held that no disallowance under Section 14A can be made in the absence of exempt income earned by the assessee. Similarly, the Hon’ble Delhi High Court, in Section 14A is inapplicable when no exempt income is earned during the relevant asses Madras High Court, in taxmann.com 250, echoed this position, a finding which was later affirmed by the dismissal of the Special Leave Petition (SLP) by M/s JSW Infrastructure Ltd. ITA No. 6015/MUM/2024 have apparently 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.” 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 assessee has not earned any exempt income during the relevant cial year under consideration. Upon examination decisions on the issue , we note that the Hon’ble Bombay High Court, in the case of PCIT v. Ballarpur Industries Ltd. taxmann.com 13 (Bombay), categorically held that no er Section 14A can be made in the absence of exempt income earned by the assessee. Similarly, the Hon’ble Delhi High Court, in Cheminvest Ltd. 378 ITR 33, also ruled that Section 14A is inapplicable when no exempt income is earned during the relevant assessment year. Further, the Hon’ble Madras High Court, in Chettinad Logistics (P.) Ltd. taxmann.com 250, echoed this position, a finding which was later affirmed by the dismissal of the Special Leave Petition (SLP) by M/s JSW Infrastructure Ltd. 4 ITA No. 6015/MUM/2024 have apparently not discussed on record decisions of Hon SC on interpretation of Statute, hence the concerned orders, with e rendered Furthermore, there is no amendment SLP of the revenue on this issue has been admitted by the Hon'ble Apex Court in case of 2] 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 d 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 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 even when the assessee has not earned any exempt income during the relevant cial year under consideration. Upon examination of various , we note that the Hon’ble Bombay High PCIT v. Ballarpur Industries Ltd., [2017] 85 taxmann.com 13 (Bombay), categorically held that no er Section 14A can be made in the absence of exempt income earned by the assessee. Similarly, the Hon’ble 378 ITR 33, also ruled that Section 14A is inapplicable when no exempt income is earned sment year. Further, the Hon’ble Chettinad Logistics (P.) Ltd. [2018] 95 taxmann.com 250, echoed this position, a finding which was later affirmed by the dismissal of the Special Leave Petition (SLP) by Hon’ble Supreme Court. Subseque introduced an amendment to Section 14A, effective from 1st April 2022, stipulating that disallowance under this provision shall apply even if no exempt income is earned during the year. The crux of the matter revolves around th prospective application of this amendment. deliberated upon by the Hon’ble Delhi High Court in Infrastructure Ltd.,(2022) 448 ITR 674, amendment is prospective in nature. CIT(A) in impugned order High Court is sub-silentio our consideration before us is firstly, whether the ld CIT(A) justified in his finding of holding the o Court as per incuriam 14A is prospective or retrospective ? 4.1 The doctrine of higher courts are binding on lower courts and ensures consistency and predictabili the exceptions to this doctrine are equally critical. A judgment is considered is delivered in ignorance of a relevant statutory provision or binding authority. Convers when a particular legal issue is neither expressly addressed nor consciously adjudicated by the court. A balanced application of M/s JSW Infrastructure Ltd. ITA No. 6015/MUM/2024 Court. Subsequently, the Finance Act, 2022, introduced an amendment to Section 14A, effective from 1st April 2022, stipulating that disallowance under this provision shall apply even if no exempt income is earned during the year. The crux of the matter revolves around the retrospective or prospective application of this amendment. This question was deliberated upon by the Hon’ble Delhi High Court in (2022) 448 ITR 674, wherein it is amendment is prospective in nature. But, we find that the Ld. in impugned order has held that said decision of Hon’ble silentio and per incurium. Thus, the issue our consideration before us is firstly, whether the ld CIT(A) justified in his finding of holding the order of Hon’bl per incuriam and secondly, the amendment to section 14A is prospective or retrospective ? The doctrine of stare decisis mandates that decisions of higher courts are binding on lower courts and ensures consistency and predictability in the judicial process. However, the exceptions to this doctrine—per incuriam and are equally critical. A judgment is considered per incuriam is delivered in ignorance of a relevant statutory provision or binding authority. Conversely, a decision is deemed when a particular legal issue is neither expressly addressed nor consciously adjudicated by the court. A balanced application of M/s JSW Infrastructure Ltd. 5 ITA No. 6015/MUM/2024 ntly, the Finance Act, 2022, introduced an amendment to Section 14A, effective from 1st April 2022, stipulating that disallowance under this provision shall apply even if no exempt income is earned during the year. The e retrospective or This question was deliberated upon by the Hon’ble Delhi High Court in Era held that the we find that the Ld. said decision of Hon’ble Thus, the issue for our consideration before us is firstly, whether the ld CIT(A) is rder of Hon’ble Delhi High and secondly, the amendment to section mandates that decisions of higher courts are binding on lower courts and ensures ty in the judicial process. However, and sub silentio— per incuriam when it is delivered in ignorance of a relevant statutory provision or ely, a decision is deemed sub silentio when a particular legal issue is neither expressly addressed nor consciously adjudicated by the court. A balanced application of stare decisis and its exceptions fosters a judicial framework that is both consistent and legally robust 4.2 Thus, normally a higher court as per court or larger bench on the issue has not Hon’ble Supreme Court, in (2013) 9 SCC 245, clarified that a Supreme Court judgment cannot be deemed inadequacies in argument, consideration, or reasoning. Furthermore, in South Central Railway Employees Cooperative Credit Society Employees Union v. B. Yashodabai 727, it was unequivocally held that High Courts cannot disregard the binding decisions of 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 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 of C same Court, and not to decisions of larger Benches of the same Court or the Apex Court. While a decision rendered per incuriam by a coordinate Bench may not be binding as a precedent, a Court in a lower tier (Smaller Bench) can n decided of a decision rendered by the Court in a higher tier M/s JSW Infrastructure Ltd. ITA No. 6015/MUM/2024 and its exceptions fosters a judicial framework that is both consistent and legally robust. normally a lower court should not hold 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. 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. 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 itionally, the Hon’ble Karnataka High Court, in Panchaxari Shidramappa Yeligar v. Shiggaon Taluka Shikshana (ILR 1998 KAR 3748), decisively opined that a lower court cannot declare a higher court's decision as per incuriam 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 of Co-ordinate Branches of the same Court, and not to decisions of larger Benches of the same Court While a decision rendered per incuriam by a coordinate Bench may not be binding as a precedent, a Court in a lower tier (Smaller Bench) can not refuse to follow the ratio decided of a decision rendered by the Court in a higher tier M/s JSW Infrastructure Ltd. 6 ITA No. 6015/MUM/2024 and its exceptions fosters a judicial framework that lower court should not hold the decision of unless a direct decision of higher been considered. The Ravinder Singh v. Sukhbir Singh (2013) 9 SCC 245, clarified that a Supreme Court judgment merely due to perceived inadequacies in argument, consideration, or reasoning. South Central Railway Employees Cooperative (2015) 2 SCC 727, it was unequivocally held that High Courts cannot disregard Court by terming them itionally, the Hon’ble Karnataka High Court, in Panchaxari Shidramappa Yeligar v. Shiggaon Taluka Shikshana (ILR 1998 KAR 3748), decisively opined that a lower court per incuriam. The 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 ordinate Branches of the same Court, and not to decisions of larger Benches of the same Court While a decision rendered per incuriam by a coordinate Bench may not be binding as a precedent, a Court in ot refuse to follow the ratio decided of a decision rendered by the Court in a higher tier (larger Bench of the same Court or the Apex Court) by stating that such decision is rendered per incuriam. of the decisions on this aspect. 12.2. In B.M. LAKHANI v. MALKHAPUR MUNICIPALITY, the Supreme Court held that the High Court could not ignore a decision of the Supreme Court because it thought that the relevant provisions were not brought to the notice of Supreme Court. 12.3. The following ob COLLECTOR OF CENTRAL EXCISE, CHANDAN NAGAR, WEST BENGAL v. DUNLOP INDIA LTD AND ORS \"We desire to add and as was said in Cassesl and Co., Ltd., v. Broome, (1972) AC 1027) we hope it will never be necessary for ' us to say so again that in the hierarchical system of courts, which exists in our country, it is necessary for each lower tier' including the High Court, 'to accept loyally the decisions of the in a hierarchical system of Courts that there are decisions of the Supreme Appellate Tribunal which do not attract the unanimous approval of all members of the judiciary.....But the judicial system only works if someone is once spoken, is loyally accepted, (see observations of Lord Hailsham and Lord Diplock). The better wisdom of the Court below must yield to the higher wisdom of the Court above. That is the strength of the hierarchical judicial system. In Cassel v. Broome, commenting on the Court of appeals' comment that Rookes v. Barnard, 1964 AC 1129, was rendered per incuriam, Lord Diplock observed: \"The Court of appeal found themselves able to disregard the decision of th in ROOKES v. BARNARD by applying to it the label per incuriam. That table is relevant only to the right of an appellate Court to decline to follow one of its own previous decisions, not to its right to disregard a decision of a higher appellate Co High Court to disregard a decision of the Court of 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, wh 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 (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 M/s JSW Infrastructure Ltd. ITA No. 6015/MUM/2024 (larger Bench of the same Court or the Apex Court) by stating that such decision is rendered per incuriam. Let me refer to same of the decisions on this aspect. . In B.M. LAKHANI v. MALKHAPUR MUNICIPALITY, the Supreme Court held that the High Court could not ignore a decision of the Supreme Court because it thought that the relevant provisions were not brought to the notice of Supreme Court. 12.3. The following observations of the Supreme Court in COLLECTOR OF CENTRAL EXCISE, CHANDAN NAGAR, WEST BENGAL v. DUNLOP INDIA LTD AND ORS, are clinching: \"We desire to add and as was said in Cassesl and Co., Ltd., v. ome, (1972) AC 1027) we hope it will never be necessary for ' us to say so again that in the hierarchical system of courts, which exists in our country, it is necessary for each lower tier' including the High Court, 'to accept loyally the decisions of the higher tiers.' 'It is inevitable in a hierarchical system of Courts that there are decisions of the Supreme Appellate Tribunal which do not attract the unanimous approval of all members of the judiciary.....But the judicial system only works if someone is allowed to have the last word and that last word, once spoken, is loyally accepted, (see observations of Lord Hailsham and Lord Diplock). The better wisdom of the Court below must yield to the higher wisdom of the Court above. That is the strength of the ierarchical judicial system. In Cassel v. Broome, commenting on the Court of appeals' comment that Rookes v. Barnard, 1964 AC 1129, was rendered per incuriam, Lord Diplock observed: \"The Court of appeal found themselves able to disregard the decision of th in ROOKES v. BARNARD by applying to it the label per incuriam. That table is relevant only to the right of an appellate Court to decline to follow one of its own previous decisions, not to its right to disregard a decision of a higher appellate Court or to the right of a judge of the High Court to disregard a decision of the Court of 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 M/s JSW Infrastructure Ltd. 7 ITA No. 6015/MUM/2024 (larger Bench of the same Court or the Apex Court) by stating Let me refer to same . In B.M. LAKHANI v. MALKHAPUR MUNICIPALITY, the Supreme Court held that the High Court could not ignore a decision of the Supreme Court because it thought that the relevant provisions were not servations of the Supreme Court in ASST COLLECTOR OF CENTRAL EXCISE, CHANDAN NAGAR, WEST \"We desire to add and as was said in Cassesl and Co., Ltd., v. ome, (1972) AC 1027) we hope it will never be necessary for ' us to say so again that in the hierarchical system of courts, which exists in our country, it is necessary for each lower tier' including the High higher tiers.' 'It is inevitable in a hierarchical system of Courts that there are decisions of the Supreme Appellate Tribunal which do not attract the unanimous approval of all members of the judiciary.....But the judicial system only allowed to have the last word and that last word, once spoken, is loyally accepted, (see observations of Lord Hailsham and Lord Diplock). The better wisdom of the Court below must yield to the higher wisdom of the Court above. That is the strength of the ierarchical judicial system. In Cassel v. Broome, commenting on the Court of appeals' comment that Rookes v. Barnard, 1964 AC 1129, was rendered per incuriam, Lord Diplock observed: \"The Court of appeal found themselves able to disregard the decision of this House in ROOKES v. BARNARD by applying to it the label per incuriam. That table is relevant only to the right of an appellate Court to decline to follow one of its own previous decisions, not to its right to disregard a urt or to the right of a judge of the High Court to disregard a decision of the Court of Appeal.' (emphasis supplied) 12.4. In EATON BAKER v. THE QUEEN, 1975 AC 775. the ile 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 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 higher tiers. 12.6. Question No. (iii) is therefore answered in the negative. 4.3 In Era Infrastructure (India) Ltd. High Court explicitly considered the amendment to Section 14A and held that it applies prospectively. The High Court relied upon the Memorandum of the Finance Bill, 2022, which unambiguously stated that the amendment would take from 1st April 2022 and apply to assessment year 2022 onwards. Furthermore, reliance jurisprudence, including the Hon'ble Supreme Court's rulings in Sedco Forex International Drill. Inc. v. CIT M.M Aqua Technologies Ltd. v. CIT which emphasize that retrospective application of a statutory provision, is permissible only if the legislative intent is explicit or the provision is clarificatory in nature. Hon’ble High Court is reproduced as under: 4. Learned counsel for the petitioner also submits that in view of the amendment made by the by inserting a non obstante clause and an explanation after the proviso, a change in law has been brought about and consequently, the M/s JSW Infrastructure Ltd. ITA No. 6015/MUM/2024 the Court of inferior jurisdiction by the simple device of holding that superior Courts with which it disagreed must have been H. MUNISWAMY GOWDA v. MANAGEMENT OF KSRTC AND , , the Learned Chief Justice, speaking for the Division Bench of 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 12.6. Question No. (iii) is therefore answered in the negative. Era Infrastructure (India) Ltd. (supra), the Hon'ble Delhi High Court explicitly considered the amendment to Section 14A and held that it applies prospectively. The High Court relied upon the Memorandum of the Finance Bill, 2022, which unambiguously stated that the amendment would take from 1st April 2022 and apply to assessment year 2022 onwards. Furthermore, reliance is placed on settled jurisprudence, including the Hon'ble Supreme Court's rulings in Sedco Forex International Drill. Inc. v. CIT (2005) 12 SCC 717 and qua Technologies Ltd. v. CIT 2021 SCC OnLine SC 575, which emphasize that retrospective application of a statutory is permissible only if the legislative intent is explicit or the provision is clarificatory in nature. The relevant finding of ’ble High Court is reproduced as under: 4. Learned counsel for the petitioner also submits that in view of the amendment made by the Finance Act, 2022 to Section 14A by inserting a non obstante clause and an explanation after the proviso, a change in law has been brought about and consequently, the M/s JSW Infrastructure Ltd. 8 ITA No. 6015/MUM/2024 the Court of inferior jurisdiction by the simple device of holding that superior Courts with which it disagreed must have been H. MUNISWAMY GOWDA v. MANAGEMENT OF KSRTC AND , , the Learned Chief Justice, speaking for the Division Bench of 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 decisions of the 12.6. Question No. (iii) is therefore answered in the negative. (supra), the Hon'ble Delhi High Court explicitly considered the amendment to Section 14A and held that it applies prospectively. The High Court relied upon the Memorandum of the Finance Bill, 2022, which unambiguously stated that the amendment would take effect from 1st April 2022 and apply to assessment year 2022–23 and placed on settled jurisprudence, including the Hon'ble Supreme Court's rulings in (2005) 12 SCC 717 and 2021 SCC OnLine SC 575, which emphasize that retrospective application of a statutory is permissible only if the legislative intent is explicit or The relevant finding of 4. Learned counsel for the petitioner also submits that in view of the Section 14A of the Act by inserting a non obstante clause and an explanation after the proviso, a change in law has been brought about and consequently, the judgments relied upon by the authorities below including PCIT vs. IL & FS Energy Development C amendment to Section 14A \"Amendment of section 14A In section 14A of the Income (a) in sub-section (1), for the words \"For the purposes of\", the words \"Notwithstanding anything to the contrary contained in this Act, for the purposes of\" shall be s (b) after the proviso, the following Explanation shall be inserted, namely: \"[Explanation.--For the removal of doubts, it is hereby clarified that notwithstanding anything to the contrary contained in this Act, the provisions of this section s always applied in a case where the income, not forming part of the total income under this Act, 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 income not forming part of the total income.]\" 5. However a perusal of the Memorandum of the Finance Bill, 2022 reveals that it explicitly stipulates that the amendment made to 14A will take effect from 1st April, 2022 and will apply in relation to the assessment year 2022 relevant extract of Clauses 4, 5, 6 & 7 of the Memorandum of F 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 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. M/s JSW Infrastructure Ltd. ITA No. 6015/MUM/2024 judgments relied upon by the authorities below including PCIT vs. IL & FS Energy Development Company Ltd (supra) are no longer good law. The Section 14A of the Act is reproduced hereinbelow: section 14A. of the Income-tax Act, - section (1), for the words \"For the purposes of\", the words \"Notwithstanding anything to the contrary contained in this Act, for the purposes of\" shall be substituted; (b) after the proviso, the following Explanation shall be inserted, namely: For the removal of doubts, it is hereby clarified 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 the income, not forming part of the total income under this Act, has not accrued or arisen or has not been received during the previous year relevant to an assessment year and the iture has been incurred during the said previous year in relation to such income not forming part of the total income.]\" 5. However a perusal of the Memorandum of the Finance Bill, 2022 reveals that it explicitly stipulates that the amendment made to 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 F 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 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 5. This amendment will take effect from 1st April, 2022. M/s JSW Infrastructure Ltd. 9 ITA No. 6015/MUM/2024 judgments relied upon by the authorities below including PCIT vs. IL & FS ompany Ltd (supra) are no longer good law. The of the Act is reproduced hereinbelow:- section (1), for the words \"For the purposes of\", the words \"Notwithstanding anything to the contrary contained in this Act, for the (b) after the proviso, the following Explanation shall be inserted, namely:- For the removal of doubts, it is hereby clarified that notwithstanding anything to the contrary contained in this Act, the hall apply and shall be deemed to have always applied in a case where the income, not forming part of the total income under this Act, has not accrued or arisen or has not been received during the previous year relevant to an assessment year and the iture has been incurred during the said previous year in relation to 5. However a perusal of the Memorandum of the Finance Bill, 2022 reveals that it explicitly stipulates that the amendment made to Section will take effect from 1st April, 2022 and will apply in relation to the 23 and subsequent assessment years. The relevant extract of Clauses 4, 5, 6 & 7 of the Memorandum of Finance \"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 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 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 6. It is also proposed to amend include a non-obstante clause in respect of other provisions of the Income-tax Act relation to exempt income contained in this Act. 7. This amendment will take effect from 1st April, 2022 and will accordingly apply in relation to the assessment year 2022 subsequent assessment years.\" (emphasis supplied) 6. Furthermore, the Supreme Court in Sedco Forex International Drill. v. CIT, (2005) 12 SCC 717 has held that 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. The relevant extract of reproduced herein below: \"9. The High Court did not refer inclusion of salary for the field break periods in the assessable income of the employees of the appellant. However, the respondents have urged the point before us. 10. In our view the 1999 Explanation could not ap years for the simple reason that it had not come into effect then. Prior to introducing the 1999 Explanation, the decision in Pgnatale [(1980) 124 ITR 391 (Guj)] was followed i Bench of the Gauhati High Court in 314 (Gau)] . It found that the 1983 Explanation had been given effect from 1-4-1979 whereas the year in question and said: (ITR p. 318) \"[I]t is settled law that assessment has to be made with reference to the law which is in existence at the relevant time. The mere fact that the assessments pending on 1-4-1979, cannot be cogent reason to make the Explanation applicable to the cases of the present assessees. This fortuitous circumstance cannot take away the vested rights of the assessees at hand.\" M/s JSW Infrastructure Ltd. ITA No. 6015/MUM/2024 6. It is also proposed to amend sub-section (1) of the said section, so as to obstante clause in respect of other provisions of and provide that no deduction shall be allowed in relation to exempt income, notwithstanding anything to the contrary contained in this Act. 7. This amendment will take effect from 1st April, 2022 and will accordingly apply in relation to the assessment year 2022 subsequent assessment years.\" (emphasis supplied) more, the Supreme Court in Sedco Forex International Drill. , (2005) 12 SCC 717 has held that 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. The relevant extract of the said judgment reproduced herein below: \"9. The High Court did not refer to the 1999 Explanation in upholding the inclusion of salary for the field break periods in the assessable income of the employees of the appellant. However, the respondents have urged the 10. In our view the 1999 Explanation could not apply to assessment years for the simple reason that it had not come into effect then. Prior to introducing the 1999 Explanation, the decision in [(1980) 124 ITR 391 (Guj)] was followed in 1989 by a Division Bench of the Gauhati High Court in CIT v. Goslino Mario 314 (Gau)] . It found that the 1983 Explanation had been given effect 1979 whereas the year in question in that case (ITR p. 318) \"[I]t is settled law that assessment has to be made with reference to the law which is in existence at the relevant time. The mere fact that the assessments in question has (sic) somehow remained 1979, cannot be cogent reason to make the Explanation applicable to the cases of the present assessees. This fortuitous circumstance cannot take away the vested rights of the assessees at M/s JSW Infrastructure Ltd. 10 ITA No. 6015/MUM/2024 section (1) of the said section, so as to obstante clause in respect of other provisions of and provide that no deduction shall be allowed in , notwithstanding anything to the contrary 7. This amendment will take effect from 1st April, 2022 and will accordingly apply in relation to the assessment year 2022-23 and more, the Supreme Court in Sedco Forex International Drill. Inc. , (2005) 12 SCC 717 has held that 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 said judgment is to the 1999 Explanation in upholding the inclusion of salary for the field break periods in the assessable income of the employees of the appellant. However, the respondents have urged the ply to assessment years for the simple reason that it had not come into effect then. Prior to introducing the 1999 Explanation, the decision in CIT v. S.G. n 1989 by a Division [(2000) 241 ITR 314 (Gau)] . It found that the 1983 Explanation had been given effect in that case was 1976-77 (ITR p. 318) \"[I]t is settled law that assessment has to be made with reference to the law which is in existence at the relevant time. The mere in question has (sic) somehow remained 1979, cannot be cogent reason to make the Explanation applicable to the cases of the present assessees. This fortuitous circumstance cannot take away the vested rights of the assessees at 11. The reasoning of the Gauhati High Court was expressly affirmed by this Court in CIT v. Goslino Mario 312] . These decisions are thus authorities for the proposition that t 1983 Explanation expressly introduced with effect from a particular date would not effect the earlier assessment years. 12. In this state of the law, on 27 substituted the Explanation to to by us as the 1999 Explanation). that with effect from 1 \"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 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 substituted Explanation to 13. The Explanation as introduced in 1983 was construed by the Kerala High Court in CIT v. S.R. Patton 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) 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 held that since the Explanation came into force from 1-4-1979, it could not be relied on for any purpose for an anterior period. 14. In the appeal preferred from the decision by the Revenue before this Court, the Revenue did not question thi the Kerala High Court, but restricted itself to a question of fact viz. whether the Tribunal had correctly found that the salary of the assessee was paid by a foreign company. This Court dismissed the appeal holding that it was a question of fact. ( 15. Given this legislative history of that it was deliberately introduced with effect from 1 M/s JSW Infrastructure Ltd. ITA No. 6015/MUM/2024 e reasoning of the Gauhati High Court was expressly affirmed by CIT v. Goslino Mario [(2000) 10 SCC 165 : (2000) 241 ITR 312] . These decisions are thus authorities for the proposition that t 1983 Explanation expressly introduced with effect from a particular date would not effect the earlier assessment years. 12. In this state of the law, on 27-2-1999 the Finance Bill, 1999 substituted the Explanation to Section 9(1)(ii) (or what has been referred to by us as the 1999 Explanation). Section 5 of the Bill expressly stated that with effect from 1-4-2000, the substituted Explanation would read: 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 ed 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 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 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 of the Act, it did not operate in respect of periods which 1979. It was held that since the Explanation came into 1979, it could not be relied on for any purpose for an 14. In the appeal preferred from the decision by the Revenue before this Court, the Revenue did not question this reading of the Explanation by the Kerala High Court, but restricted itself to a question of fact viz. whether the Tribunal had correctly found that the salary of the assessee was paid by a foreign company. This Court dismissed the appeal holding was a question of fact. (CIT v. S.R. Patton [(1998) 8 SCC 608] .) 15. Given this legislative history of Section 9(1)(ii), we can only assume that it was deliberately introduced with effect from 1 M/s JSW Infrastructure Ltd. 11 ITA No. 6015/MUM/2024 e reasoning of the Gauhati High Court was expressly affirmed by [(2000) 10 SCC 165 : (2000) 241 ITR 312] . These decisions are thus authorities for the proposition that the 1983 Explanation expressly introduced with effect from a particular date 1999 the Finance Bill, 1999 (or what has been referred of the Bill expressly stated 2000, the substituted Explanation would read: For the removal of doubts, it is hereby declared that the income of the nature referred to in this clause payable for-- (b) the rest period or leave period which is preceded and succeeded by ed in India and forms part of the service contract of employment, shall be regarded as income earned in India.\" which followed the Bill incorporated the without any change. 13. The Explanation as introduced in 1983 was construed by the Kerala R 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 further held that even if it were assumed to be clarificatory or that it removed whatever ambiguity there was of the Act, it did not operate in respect of periods which 1979. It was held that since the Explanation came into 1979, it could not be relied on for any purpose for an 14. In the appeal preferred from the decision by the Revenue before this s reading of the Explanation by the Kerala High Court, but restricted itself to a question of fact viz. whether the Tribunal had correctly found that the salary of the assessee was paid by a foreign company. This Court dismissed the appeal holding [(1998) 8 SCC 608] .) , we can only assume that it was deliberately introduced with effect from 1-4- 2000 and therefore intended to apply prospectively [See Ltd., (1995) 4 SCC 485, 494 (para 18) : (1995) 215 ITR 165] . It was also understood as such by CBDT which issued Circular No. 779 dated 14 on the provisions of the taxes. It said in paras 5.2 and 5.3. \"5.2 The Act has expanded the existing Explanation which states that salary paid for services rendered in India shall be regarded as income earned in India, so a the rest period or leave period which is both preceded and succeeded by service in India and forms part of the service contract of employment will also be regarded as income earned in India. 5.3 This amendment will take effect from 1 apply in relation to Assessment Year 2000 16. The departmental understanding of the effect of the 1999 Amendment even if it were assumed not to bind the respondents u the Act, nevertheless affords a reasonable construction of it, and there is no reason why we should not adopt it. 17. As was affirmed by this Court in Goslino Mario [(2000) 10 SCC 165 : (2000) 241 ITR 312] a cardinal principle of the ta be applied is that which is in force in the relevant assessment year unless otherwise provided expressly or by necessary implication. (See also Reliance Jute and Industries Ltd. v SCC (Tax) 67] .) An Explanation to a statutory provision may fulfil the purpose of clearing up an ambiguity in the main provision or an Explanation can add to and widen the scope of the main section [See Sonia Bhatia v. State of U.P. 1274, 1282 para 24] . Explanation must be read into the main provision with effect from the time that the main p Kumar, (2001) 8 SCC 24 (para 44); (1997) 1 SCC 352, 354; 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 M/s JSW Infrastructure Ltd. ITA No. 6015/MUM/2024 therefore intended to apply prospectively [See CIT v. Patel Bros Ltd., (1995) 4 SCC 485, 494 (para 18) : 5) 215 ITR 165] . It was also understood as such by CBDT which issued Circular No. 779 dated 14-9-1999 containing Explanatory Notes on the provisions of the Finance Act, 1999 insofar as it related to taxes. It said in paras 5.2 and 5.3. has expanded the existing Explanation which states that salary paid for services rendered in India shall be regarded as income earned in India, so as to specifically provide that any salary payable for the rest period or leave period which is both preceded and succeeded by service in India and forms part of the service contract of employment will also be regarded as income earned in India. endment will take effect from 1-4-2000, and will accordingly, apply in relation to Assessment Year 2000-2001 and subsequent years.\" 16. The departmental understanding of the effect of the 1999 Amendment even if it were assumed not to bind the respondents under Section 119 of the Act, nevertheless affords a reasonable construction of it, and there is no reason why we should not adopt it. 17. As was affirmed by this Court in Goslino Mario [(2000) 10 SCC 165 : (2000) 241 ITR 312] a cardinal principle of the tax law is that the law to be applied is that which is in force in the relevant assessment year unless otherwise provided expressly or by necessary implication. (See Reliance Jute and Industries Ltd. v. CIT [(1980) 1 SCC 139 : 1980 An Explanation to a statutory provision may fulfil the purpose of clearing up an ambiguity in the main provision or an Explanation can add to and widen the scope of the main section 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 , (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\".\" M/s JSW Infrastructure Ltd. 12 ITA No. 6015/MUM/2024 CIT v. Patel Bros. & Co. 5) 215 ITR 165] . It was also understood as such by CBDT which 1999 containing Explanatory Notes insofar as it related to direct has expanded the existing Explanation which states that salary paid for services rendered in India shall be regarded as income s to specifically provide that any salary payable for the rest period or leave period which is both preceded and succeeded by service in India and forms part of the service contract of employment will 2000, and will accordingly, 2001 and subsequent years.\" 16. The departmental understanding of the effect of the 1999 Amendment nder Section 119 of the Act, nevertheless affords a reasonable construction of it, and there is 17. As was affirmed by this Court in Goslino Mario [(2000) 10 SCC 165 : x law is that the law to be applied is that which is in force in the relevant assessment year unless otherwise provided expressly or by necessary implication. (See [(1980) 1 SCC 139 : 1980 An Explanation to a statutory provision may fulfil the purpose of clearing up an ambiguity in the main provision or an Explanation can add to and widen the scope of the main section , (1981) 2 SCC 585, 598 : AIR 1981 SC If it is in its nature clarificatory then the Explanation must be read into the main provision with effect from the Shyam Sunder v. Ram Brij Mohan Das Laxman Das v. CIT, , (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\" (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 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 wh such language is used, if it alters or changes the law as it earlier stood. This was stated in Sedco Forex International SCC 717 as follows: 17. As was affirmed by this Co cardinal principle of the tax law is that the law to be applied is that which is in force in the relevant assessment year unless otherwise provided expressly or by necessary implication. (See also and Industries Ltd. v. CIT statutory provision may fulfil the purpose of clearing up an ambiguity in the main provision or an Explanation can add to and widen the sc the main section [See it is in its nature clarificatory then the Explanation must be read into the main provision with effect from the time that force [See Shyam Sunder v. Ram Kumar Das Laxman Das v. CIT (1997) 5 SCC 482]. 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\". 18. There was and is no ambiguity in the main provision of 9(1)(ii). It includes salaries in the total income of an assessee if the assessee has earned it in India. The word \"earned\" had been judicially defined in S.G. Pgnatale [(1980) 124 ITR 391 (Guj)] by the High Court of Gujarat, in our view, correctly, to mean as income \"arising or accruing in India\". The amendment to the section by way of an Explanation in 1983 effected a change in the scope of that with effect from 1979, \"income payable for service rendered in India\". 19. When the Explanation seeks to give an artificial meaning to \"earned in India\" and brings about a change effectively in the existing law and in M/s JSW Infrastructure Ltd. ITA No. 6015/MUM/2024 (emphasis supplied) 7. The aforesaid proposition of law has been reiterated by the Supreme M.M Aqua Technologies Ltd. V. Commissioner of Income Tax, , 2021 SCC OnLine SC 575. The relevant portion of 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 wh such language is used, if it alters or changes the law as it earlier stood. This was stated in Sedco Forex International Drill. Inc. v. CIT SCC 717 as follows: 17. As was affirmed by this Court in Goslino Mario [(2000) 10 SCC 165] a cardinal principle of the tax law is that the law to be applied is that which is in force in the relevant assessment year unless otherwise provided expressly or by necessary implication. (See also and Industries Ltd. v. CIT [(1980) 1 SCC 139].) An Explanation to a statutory provision may fulfil the purpose of clearing up an ambiguity in the main provision or an Explanation can add to and widen the sc the main section [See Sonia Bhatia v. State of U.P., (1981) 2 SCC 585]. 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 Shyam Sunder v. Ram Kumar, (2001) 8 SCC 24; Das Laxman Das v. CIT, (1997) 1 SCC 352; CIT v. Podar Cement (P) Ltd. (1997) 5 SCC 482]. 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\". re was and is no ambiguity in the main provision of . It includes salaries in the total income of an assessee if the assessee has earned it in India. The word \"earned\" had been judicially defined in S.G. Pgnatale [(1980) 124 ITR 391 (Guj)] by the High Court of Gujarat, in our view, correctly, to mean as income \"arising or accruing in India\". The amendment to the section by way of an Explanation in 1983 effected a change in the scope of that judicial definition so as to include with effect from 1979, \"income payable for service rendered in India\". 19. When the Explanation seeks to give an artificial meaning to \"earned in India\" and brings about a change effectively in the existing law and in M/s JSW Infrastructure Ltd. 13 ITA No. 6015/MUM/2024 7. The aforesaid proposition of law has been reiterated by the Supreme M.M Aqua Technologies Ltd. V. Commissioner of Income Tax, relevant portion of the said \"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. Inc. v. CIT, (2005) 12 urt in Goslino Mario [(2000) 10 SCC 165] a cardinal principle of the tax law is that the law to be applied is that which is in force in the relevant assessment year unless otherwise provided expressly or by necessary implication. (See also Reliance Jute An Explanation to a statutory provision may fulfil the purpose of clearing up an ambiguity in the main provision or an Explanation can add to and widen the scope of , (1981) 2 SCC 585]. If it is in its nature clarificatory then the Explanation must be read into the the main provision came into , (2001) 8 SCC 24; Brij Mohan CIT v. Podar Cement (P) Ltd., (1997) 5 SCC 482]. But if it changes the law it is not presumed to be retrospective, irrespective of the fact that the phrases used are \"it is re was and is no ambiguity in the main provision of Section . It includes salaries in the total income of an assessee if the assessee has earned it in India. The word \"earned\" had been judicially defined in S.G. Pgnatale [(1980) 124 ITR 391 (Guj)] by the High Court of Gujarat, in our view, correctly, to mean as income \"arising or accruing in India\". The amendment to the section by way of an Explanation in 1983 judicial definition so as to include with effect from 1979, \"income payable for service rendered in India\". 19. When the Explanation seeks to give an artificial meaning to \"earned in India\" and brings about a change effectively in the existing law and in addition is stated to come into force with effect from a future date, there is no principle of interpretation which would justify reading the Explanation as operating retrospectively.\" (emphasis supplied) 8. Consequently, this Court is of the view that the 14A, which is \"for 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. 9. Though the judgment of this Court has been challenged and is pending adjudication before the Supreme Court, yet there is no stay of judgment till date. the Supreme Court in Another, (2000) 6 SCC 359 and Shree Chamundi Mopeds Ltd. Vs. Church of South India Trust Asso 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 ( Commissioner of Income Tax 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 incuriam by the ld CIT(A) properly and without referring to judgment dated 16.05.2023 in the case of SREE SANKARACHARYA UNIVERSITY of Sanskrit & Ors. Vs. Dr. Manu & Another in CIVIL APPEAL NO. 3752 OF 2023 subsequent to the decision of Hon’b of the above, it is impermissible for the learned CIT(A) to disregard the binding decision M/s JSW Infrastructure Ltd. ITA No. 6015/MUM/2024 addition is stated to come into force with effect from a future date, there is no principle of interpretation which would justify reading the Explanation as operating retrospectively.\" (emphasis supplied) 8. Consequently, this Court is of the view that the amendment of , which is \"for 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. dgment of this Court has been challenged and is pending adjudication before the Supreme Court, yet there is no stay of Consequently, in view of the judgments passed by eme Court in Kunhayammed and Others vs. State of Kerala and 2000) 6 SCC 359 and Shree Chamundi Mopeds Ltd. Vs. Church of South India Trust Association CSI Cinod Secretariat, Madras 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 sion of the Supreme Court in the SLP filed in the case of PCIT vs. IL & FS Energy Development Company Ltd (supra). Thus, holding of the decision of Hon’ble High Court as by the ld CIT(A) was without reading the decision without proper application of mind judgment dated 16.05.2023 in the case of SREE SANKARACHARYA UNIVERSITY of Sanskrit & Ors. Vs. Dr. Manu in CIVIL APPEAL NO. 3752 OF 2023, subsequent to the decision of Hon’ble High Court (supra) of the above, it is impermissible for the learned CIT(A) to nding decision of Hon’ble Delhi High Court in M/s JSW Infrastructure Ltd. 14 ITA No. 6015/MUM/2024 addition is stated to come into force with effect from a future date, there is no principle of interpretation which would justify reading the amendment of Section , which is \"for removal of doubts\" cannot be presumed to be retrospective even where such language is used, if it alters or changes dgment of this Court has been challenged and is pending adjudication before the Supreme Court, yet there is no stay of the said Consequently, in view of the judgments passed by Kunhayammed and Others vs. State of Kerala and 2000) 6 SCC 359 and Shree Chamundi Mopeds Ltd. Vs. Church ciation 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 supra) and Cheminvest Limited vs. 10. Accordingly, the appeal and application are dismissed. However, it is clarified that the order passed in the present appeal shall abide by the sion of the Supreme Court in the SLP filed in the case of PCIT vs. Thus, holding of the decision of Hon’ble High Court as per was without reading the decision proper application of mind, particularly judgment dated 16.05.2023 in the case of SREE SANKARACHARYA UNIVERSITY of Sanskrit & Ors. Vs. Dr. Manu , which being le High Court (supra). In light of the above, it is impermissible for the learned CIT(A) to Hon’ble Delhi High Court in Era Infrastructure Ltd.(supra) silentio. The judicial disciplin established precedents unless specifically overturned or superseded by a competent authority. CIT(A) are accordingly deserves to be rejected. 4.5 As far as issue in dispute in the matter is concerned that the Co-ordinate Benc decisions of the Hon’ble Delhi High Court in the case of Era Infrastructure Ltd. (supra) amendment to section 14A of the Act as prospective. The rele finding of the Tribunal in the case of M/s Welspun Steel Ltd. in ITA No. 2137/Mum/2021 for assessment year 2015 reproduced as under: “6. We have considered the rival submissions and perused the material on record. It is admitted position that th High Court and the Hon'ble Supreme Court have clearly held that disallowance under Section 14A of the Act cannot exceed the amount of exempt income earned by the Assessee during the relevant previous year. The stand of the Revenue is that amendments to Section 14A introduced by the Finance Act 2022 apply retrospectively and therefore, the aforesaid judgments no longer hold good. Whereas the contention of the Assessee is that the said amendments to Section 14A of the Act are prospective in nature and therefore, the order of CIT(A), passed by following the binding judgments of the Hon'ble Jurisdictional High Court, cannot be set aside by the applying the amended provisions of Section 14A of the Act. 7. We note that the Mumbai Bench of the Trib of Assistant Commissioner of Income Tax Capital Ventures (P.) Ltd.: [2022] 140 taxmann.com 1 (Mumbai Trib.)[29-06-2022] and also in the case of Assistant Commissioner Of Income Tax Vs. K Raheja Corporate Ser No. 2521 to 25271, held that the amendments to Section 14A introduced by the Finance Act 2022 shall apply from Assessment M/s JSW Infrastructure Ltd. ITA No. 6015/MUM/2024 (supra), on the ground of per incuriam . The judicial discipline necessitates adherence to established precedents unless specifically overturned or superseded by a competent authority. The said observations are accordingly deserves to be rejected. As far as issue in dispute in the matter is concerned ordinate Benches of the Tribunal have followed decisions of the Hon’ble Delhi High Court in the case of Era Infrastructure Ltd. (supra) and held the applicability of the amendment to section 14A of the Act as prospective. The rele finding of the Tribunal in the case of M/s Welspun Steel Ltd. in ITA No. 2137/Mum/2021 for assessment year 2015 reproduced as under: We have considered the rival submissions and perused the material on record. It is admitted position that the Hon'ble Bombay High Court and the Hon'ble Supreme Court have clearly held that disallowance under Section 14A of the Act cannot exceed the amount of exempt income earned by the Assessee during the relevant previous year. The stand of the Revenue is that amendments to Section 14A introduced by the Finance Act 2022 apply retrospectively and therefore, the aforesaid judgments no longer hold good. Whereas the contention of the Assessee is that the said amendments to Section 14A of the Act are prospective in ature and therefore, the order of CIT(A), passed by following the binding judgments of the Hon'ble Jurisdictional High Court, cannot be set aside by the applying the amended provisions of Section We note that the Mumbai Bench of the Tribunal has, in the case of Assistant Commissioner of Income Tax- Circle 3(1)(1) Vs Capital Ventures (P.) Ltd.: [2022] 140 taxmann.com 1 (Mumbai 2022] and also in the case of Assistant Commissioner Of Income Tax Vs. K Raheja Corporate Services Private Limited [ITA No. 2521 to 25271, held that the amendments to Section 14A introduced by the Finance Act 2022 shall apply from Assessment M/s JSW Infrastructure Ltd. 15 ITA No. 6015/MUM/2024 per incuriam or sub- adherence to established precedents unless specifically overturned or The said observations of ld As far as issue in dispute in the matter is concerned, we note of the Tribunal have followed the decisions of the Hon’ble Delhi High Court in the case of Era held the applicability of the amendment to section 14A of the Act as prospective. The relevant finding of the Tribunal in the case of M/s Welspun Steel Ltd. in ITA No. 2137/Mum/2021 for assessment year 2015-16 is We have considered the rival submissions and perused the e Hon'ble Bombay High Court and the Hon'ble Supreme Court have clearly held that disallowance under Section 14A of the Act cannot exceed the amount of exempt income earned by the Assessee during the relevant previous year. The stand of the Revenue is that amendments to Section 14A introduced by the Finance Act 2022 apply retrospectively and therefore, the aforesaid judgments no longer hold good. Whereas the contention of the Assessee is that the said amendments to Section 14A of the Act are prospective in ature and therefore, the order of CIT(A), passed by following the binding judgments of the Hon'ble Jurisdictional High Court, cannot be set aside by the applying the amended provisions of Section unal has, in the case Circle 3(1)(1) Vs Bajaj Capital Ventures (P.) Ltd.: [2022] 140 taxmann.com 1 (Mumbai - 2022] and also in the case of Assistant Commissioner vices Private Limited [ITA No. 2521 to 25271, held that the amendments to Section 14A introduced by the Finance Act 2022 shall apply from Assessment Year 2022-23 and onwards. the case of Principal Commissioner of Income M/s Era Infrastructure India Ltd: [ITA No. 204 of 2022, decided on 20.07.2022] has rejected the contention of the Revenue that amendments to Section 14A introduced by the Finance Act 2022 shall have retrospective effect. Accordingly, the Revenue is dismissed. 4.6 Respectfully, following the finding of the Tribunal (supra) we set aside the finding of the Ld. CIT(A) on the issue in dispute and delete the addition made by the Assessing Officer. The ground No. 1 and 2 of the appeal of the assessee are accordingly allowed. 5. In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on Sd/- (RAJ KUMAR CHAUHAN JUDICIAL MEMBER Mumbai; Dated: 23/01/2025 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// M/s JSW Infrastructure Ltd. ITA No. 6015/MUM/2024 23 and onwards. Further, Hon'ble Delhi High Court in the case of Principal Commissioner of Income-Tax (Central) M/s Era Infrastructure India Ltd: [ITA No. 204 of 2022, decided on 20.07.2022] has rejected the contention of the Revenue that amendments to Section 14A introduced by the Finance Act 2022 shall have retrospective effect. Accordingly, Ground No.1 raised by the Revenue is dismissed.” following the finding of the Tribunal (supra) we set aside the finding of the Ld. CIT(A) on the issue in dispute and delete the addition made by the Assessing Officer. The 2 of the appeal of the assessee are accordingly In the result, the appeal of the assessee is allowed. nounced in the open Court on 23/01/2025. - Sd/ RAJ KUMAR CHAUHAN) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT MEMBER Copy of the Order forwarded to : BY ORDER, (Assistant Registrar) ITAT, Mumbai M/s JSW Infrastructure Ltd. 16 ITA No. 6015/MUM/2024 Further, Hon'ble Delhi High Court in Tax (Central) -2 Vs. M/s Era Infrastructure India Ltd: [ITA No. 204 of 2022, decided on 20.07.2022] has rejected the contention of the Revenue that amendments to Section 14A introduced by the Finance Act 2022 Ground No.1 raised by following the finding of the Tribunal (supra), we set aside the finding of the Ld. CIT(A) on the issue in dispute and delete the addition made by the Assessing Officer. The 2 of the appeal of the assessee are accordingly In the result, the appeal of the assessee is allowed. /01/2025. Sd/- OM PRAKASH KANT) ACCOUNTANT MEMBER BY ORDER, (Assistant Registrar) ITAT, Mumbai "