Mr. Vishal Kalra Mr. Amit Kumar, Advs v. THE DEPUTY COMMISSIONER OF INCOME TAX

.....Respondent Through: Mr. Ruchir Bhatia, SSC with Mr. Anant Mann, JSC & Ms. Aditi Sabharwal, Adv. 4 + ITA 162/2022 PETRONET LNG LIMITED .....Appellant Through: Mr. Vishal Kalra & Mr. Amit Kumar, Advs. versus THE DEPUTY COMMISSIONER OF INCOME TAX .....Respondent Through: Mr. Ruchir Bhatia, SSC with Mr. Anant Mann, JSC & Ms. Aditi Sabharwal, Adv. 5 + ITA 165/2022 PETRONET LNG LIMITED .....Appellant Through: Mr. Vishal Kalra & Mr. Amit Kumar, Advs. versus THE DEPUTY COMMISSIONER OF INCOME TAX .....Respondent ITA 161/2022 & other connected matters This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 05/03/2025 at 14:51:12 Through: Mr. Ruchir Bhatia, SSC with Mr. Anant Mann, JSC & Ms. Aditi Sabharwal, Adv. CORAM: HON'BLE MR. JUSTICE YASHWANT VARMA HON'BLE MR. JUSTICE GIRISH KATHPALIA O R D E R 25.02.2025 % 1. The instant appeals preferred by the assessee seek to impugn the order of the Income Tax Appellate Tribunal1 dated 18 March 2021 and posit the following questions of law for our consideration: ITA Nos. 161/2022 & 162/2022 “i. Whether on the facts and circumstances of the case and in law, the order of the Tribunal is perverse as it summarily upholds that the AO has recorded satisfaction the Appellant's claim was incorrect before making disallowance under section 14A of the Act read with Rule 8D(2)(iii) of the Rule? ii. Whether on the facts and circumstances of the case and in law, the order passed by the Tribunal is not just perverse but it lead to gross miscarriage of justice as no reasonable person correctly informed that unlike investment in equity oriented fund(s), the Appellant had invested in debt oriented fund(s), which is nothing but akin to fix deposits and even otherwise the fund manager charges 'fund management charges', no disallowance under section 14A of the Act was warranted? iii. Whether on the facts and circumstances of the case and in Jaw, the Tribunal fell in error by not following the judgment of the co- ordinate Bench in the case of Gujrat Guardian Ltd. vs DCIT: ITA No.5794/Del/2016 (Delhi) which on all fours applicable on the facts of the Appellant's case and thereby the impugned order is antagonistic to the principles of judicial proprietary? iv. Notwithstanding and without prejudice to above, whether on the facts and circumstances of the case and in law, the Tribunal grossly fell in error in not directing the Respondent that even if partial disallowance under section 14A of the Act is upheld, the same is to be apportioned to port, power and re-gasification units eligible to claim deduction under section 80IA of the Act, leading to enhanced deduction under that section?” ITA No. 165/2022 1 Tribunal ITA 161/2022 & other connected matters This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 05/03/2025 at 14:51:12 “i. Whether on the facts and circumstances of the case and in law, the order of the Tribunal is perverse as it summarily upholds that the AO has recorded satisfaction the Appellant‟s claim was incorrect before making disallowance under section 14A of the Act read with Rule 8D(2)(iii) of the Rule? ii. Whether on the facts and circumstances of the case and in law, the order passed by the Tribunal is not just perverse but it led to gross miscarriage of justice as no reasonable person, correctly informed, can ignore the fact that that unlike investment in equity oriented fund(s), the Appellant had invested in debt oriented fund(s), which is nothing but akin to fixed deposits and even otherwise the fund manager charges „fund management charges‟ and accordingly, no disallowance under section 14A of the Act was warranted? iii. Whether on the facts and circumstances of the case and in law, the Tribunal fell in error by not following the judgment of the co- ordinate Bench in the case of Gujrat Guardian Ltd. vs DCIT: ITA No.5794/Del/2016 (Delhi) which on all fours applicable on the facts of the Appellant‟s case and thereby the impugned order is antagonistic to the principles of judicial proprietary? iv. Notwithstanding and without prejudice to above, whether on the facts and circumstances of the case and in law, the Tribunal grossly fell in error in not directing the Respondent that even if partial disallowance under section 14A of the Act is upheld, the same is to be apportioned to port, power and re-gasification units eligible to claim deduction under section 80IA of the Act, leading to enhanced deduction under that section? v. Whether on the facts and circumstances of the case and in law, the order of the Tribunal is perverse as it summarily upholds the disallowance of Corporate Social Responsibility (“CSR”) without appreciating that Explanation-2 to section 37(1) inserted w.e.f. 1.4.2015 by Finance Act (No.2), 2014 was applicable prospectively? vi. Whether on the facts and circumstances of the case and in law, the Tribunal fell in error by not following the judgments of the co- ordinate Bench on the CSR issue thereby making the impugned order antagonistic to the principles of judicial proprietary?”

2. We note that while dealing with the disallowance issue flowing from Section 14A of the Income Tax Act, 19612, the Assessing Officer3 had while framing the order of assessment observed as 2 Act 3 AO ITA 161/2022 & other connected matters This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 05/03/2025 at 14:51:12 follows: “Disallowance u/s 14A

32. A perusal of assessee's balance sheet reveals that assessee had investment of Rs. 30,426.21 lacs in shares and mutual funds and has received dividend income of Rs. 2986.44 lacs on it. Assessee was asked to explain why expenses in relation to income which does not form part of total income may not be disallowed as per provisions of Section 14A of the Act. The assessee vide its reply filed on 13.09.2011 submitted that the company did not incur any expenditure in connection with earning dividend income and therefore, no disallowance was made by it u/s 14A of the Act. The assessee further submitted that it had not appointed any specific employees for the purpose of making investment decision and managing the investment portfolio. The assessee's reply dt. 29.11.2011 in this regard is re-produced below- • Our detailed submissions dated 13 September 2011 that PLL has not incurred any expenditure in connection with the earning of dividend which is exempt from tax under the provisions of the Act and accordingly, no disallowance under section 14A of the Act read with Rule 8D of the Rules is warranted in the instant case. • Our submissions dated 22 September 2011 offering suo-moto disallowance of Rs 230,000 under section 14A of the Act to buy peace of mind having regard to the unwarranted litigation on the similar issue by the Revenue authorities.

33. Assessee's reply is duly considered. Assessee has made investment to the tune of Rs. 54731.74 lacs and has earned income on it of Rs. l862.94 lacs which does not form part of total income. Assessee' submission that it has not employed any specific person to take investment decisions or to manage such investments may be correct but it cannot be accepted that in the process of making decision for such huge investments none of its senior managerial person was involved and it has not used its official machinery for investment portfolio. supervision and management of Investments are not automotive activities which do not require any human decision or supervision. These decision are very important decision and are taken at the highest level of management. Investment requires constant supervision. Assessee has to properly account for various investments as well as resultant income from it. All these activities require use of its manpower and official machinery. In view of this, it is not acceptable that no expenditure was incurred in this regard. Since, use of official machinery cannot be denied; part of expenses should have been apportioned to the income which does not form part of total income. Thus, I am not that no satisfied with the correctness of assessee's claim ITA 161/2022 & other connected matters This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 05/03/2025 at 14:51:12 expenditure was incurred for making investment or for earning exempt income.”

3. It is the aforesaid findings which have come to be affirmed by the Tribunal in the order impugned before us. Having gone through the observations that were ultimately rendered by the AO, we find that these appeals fail to raise any substantial questions of law. It becomes pertinent to note that this is not a case where the AO failed to assign or ascribe appropriate reasons on the basis of which it found itself unable to accede to the submission of the assessee that no expenses had been incurred at all. It also appears to have borne in consideration the quantum of the investments made and the returns which were earned therefrom. We thus find no justification to interfere with the plausible view which was taken. It, in any case, fails to raise any substantial question of law. 4. Insofar as question (iv) is concerned, although it was vehemently urged that this ground formed part of the memo of appeal that was presented before the Tribunal, we find no such contention having been either urged or addressed and which may have been recorded by the Tribunal. If it were the stand of the appellant that although such a contention was in fact addressed but the Tribunal has failed to record the same, the remedy clearly lies elsewhere. That cannot be a ground which we could possibly countenance or entertain. 5. The appeal fails and shall consequently stand dismissed. FEBRUARY 25, 2025/kk YASHWANT VARMA, J GIRISH KATHPALIA, J. ITA 161/2022 & other connected matters This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 05/03/2025 at 14:51:12