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Delhi High Court – Orders
Pr. Commissioner Of Income Tax-1, Delhi vs Acb (India) Power Ltd on 22 August, 2025
Author: V. Kameswar Rao
Bench: V. Kameswar Rao
$~22
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ ITA 331/2025
PR. COMMISSIONER OF INCOME TAX-1, DELHI .....Appellant
Through: Mr. Sanjay Kumar, Sr. Standing
Counsel, Ms Monica Benjamin, and
Ms Easha, Jr. SCs.
versus
ACB (INDIA) POWER LTD. .....Respondent
Through: Ms Ananya Kapoor and Mr. Sumit
Lalchandani, Advs.
CORAM:
HON'BLE MR. JUSTICE V. KAMESWAR RAO
HON'BLE MR. JUSTICE VINOD KUMAR
ORDER
% 22.08.2025
CM APPL. 51953/2025
CM APPL. 51954/2025
1. These are two applications seeking the condonation of 20 days delay
in filing the appeal and also 72 days delay in refilling the appeal.
2. For the reasons stated in the applications, we allow the delay in
refilling as well as the delay in filing the appeal.
3. Accordingly, the applications are disposed of as allowed.
ITA 331/2025
4. This appeal has been filed with the following prayers:
“(a) To frame the substantial questions of law
mentioned in para 2 of the appeal;
(b) To frame other substantial Questions of
law which may arise from the impugned
order;
(c) To set aside the impugned order dated
26.11.2024 of the ITAT in ITA No.
2294/Del/2024;”
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5. This appeal lays a challenge to the order dated 26.11.2024 in ITA No.
2294/DEL/2024 relating to the Assessment Year 2017-18, captioned DCIT,
Circle 1 (1), v. ACB (India) Power Limited.
6. At the outset, Mr. Sanjay Kumar, Sr. Standing Counsel appearing for
the Appellant/Revenue states that the issue which arises for consideration
relatable to Section 14A of the Act read with Rule 8D of the Income Tax
Rules, 1962 is covered by the judgement in the case of Principal
Commissioner of Income Tax v. Era Infrastructure (India) Ltd., wherein
this court has followed its earlier judgement in the case of Principal CIT vs.
Era Infrastructure (India) Ltd. [2022 SSC OnLine Delhi 2157], wherein
the following has been held:
“5. However a perusal of the Memorandum Explaining the
Provisions in the Finance Bill, 2022 ([2022] 440 ITR (St.)
226 ) 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 and 7 of the Memorandum Explaining the Provisions
in the Finance Bill, 2022 ([2022] 440 ITR (St.) 226 ) are
reproduced hereinbelow (page 252 of 440 ITR (St.)) :
“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,
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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 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 2022-23 and subsequent
assessment years.” (emphasis supplied)
6. Furthermore, the Supreme Court in SedcoForex
International Drill. Inc. v. CIT [2005] 279 ITR 310 (SC) ;
(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 is reproduced
hereinbelow (page 316 of 279 ITR) :
“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 point
before us.
In our view the 1999 Explanation could not apply
to the 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. Pgnatale [1980] 124 ITR 391 (Guj)
was followed in 1989 by a Division Bench of the
Gauhati High Court in CIT v. Goslino Mario
[2000] 241 ITR 314 (Gauhati). It found that the
1983 Explanation had been given effect from
April 1, 1979, whereas the year in question in
that case was 1976-77 and said (page 318) :
‘.. . it is settled law that assessment has
to be made with reference to the law
which is in existence at the relevantThis is a digitally signed order.
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time. The mere fact that the
assessments in question had somehow
remained pending on April 1, 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.’The reasoning of the Gauhati High Court was
expressly affirmed by this court in CIT v. Goslino
Mario [2000] 241 ITR 312 (SC) ; (2000) 10 SCC
165 at page 314. These decisions are thus
authorities for the proposition that the 1983
Explanation expressly introduced with effect from
a particular date would not affect earlier
assessment years.
In this state of the law, on February 27, 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 April 1,
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. 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 CIT v. S. G.
Pgnatale [1980] 124 ITR 391 (Guj) to hold that
the Explanation was not declaratory but widenedThis is a digitally signed order.
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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 April 1,
1979. It was held that since the Explanation came
into force from April 1, 1979, it could not be
relied on for any purpose for an anterior period.
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 it was a question of
fact (CIT v. S. R. Patton [1998] 233 ITR 166 (SC)
; (1998) 8 SCC 608). Given this legislative
history of section 9(1)(ii), we can only assume
that it was deliberately introduced with effect
from April 1, 2000, and, therefore, intended to
apply prospectively (CIT v. Patel Brothers and
Co. Ltd. [1995] 215 ITR 165 (SC) ; (1995) 4 SCC
485, 494). It was also understood as such by the
Central Board of Direct Taxes which issued
Circular No. 779 dated September 14, 1999
([1999] 240 ITR (St.) 3, 10 ) containing
Explanatory Notes on the provisions of the
Finance Act, 1999, in so far as it related to direct
taxes. It said in paragraphs 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 as to specifically provide that
any salary payable for 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 ThisThis is a digitally signed order.
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amendment will take effect from April
1, 2000, and will accordingly, apply in
relation to the assessment year 2000-
2001 and subsequent years.’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.
As was affirmed by this court in Goslino Mario
[2000] 241 ITR 314 (SC), 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
and Industries Ltd. v. CIT [1979] 120 ITR 921
(SC) ; (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 scope of
the main section (see Ku. Sonia Bhatia v. State of
U. P. [1981] AIR 1981 SC 1274 ; (1981) 2 SCC
585. 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 ;Brij Mohan Das
Laxman Das v. CIT [1997] 223 ITR 825 (SC) ;
(1997) 1 SCC 352, CIT v. Podar Cement P. Ltd.
[1997] 226 ITR 625 (SC) ; (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’.” (emphasis supplied)
7. The aforesaid proposition of law has been reiterated by
the Supreme Court in M. M. Aqua Technologies Ltd. v. CIT
[2021] 436 ITR 582 (SC) ; 2021 SCC OnLine SC 575. The
relevant portion of the said judgment is reproduced
hereinbelow (page 597 of 436 ITR) :
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“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 stated in SedcoForex
International Drill. Inc. v. CIT [2005] 279 ITR
310 (SC) (2005) 12 SCC 717 as follows (page
318 of 279 ITR) :
’17. As was affirmed by this court in
CIT v. Goslino Mario [2000] 241 ITR
312 (SC) ; (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 and Industries Ltd. v.
CIT [1979] 120 ITR 921 (SC) ; (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 scope of the
main section (see Ku. Sonia Bhatia v.
State of U. P. (1981) 2 SCC 585, 598).
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] 223 ITR 825 (SC) ; (1997) 1
SCC 352, 354 ; CIT v. Podar Cement
(P.) Ltd. [1997] 226 ITR 625 (SC) ;
(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”.
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18. There was and is no ambiguity in
the main provision of section 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 CIT v. S.
G. Pgnatale [1980] 124 ITR 391 (Guj)
by the High Court of Gujarat, in our
view, correctly, to mean 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 bring 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’.”
7. Following the aforesaid judgement, we dismiss the appeal.
V. KAMESWAR RAO, J
VINOD KUMAR, J
AUGUST 22, 2025
dd
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