Section 14A disallowance fails without exempt income; prospective amendment from 01.04.2022 did not apply.

Section 14A disallowance was held unsustainable where the assessee earned no exempt income during the relevant assessment year, following precedents that no disallowance can arise in the absence of exempt income. The amendment making such disallowance mandatory from 01.04.2022 was treated as prospective and not applicable to the year in question, so the deletion of the disallowance was upheld.

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Issues: Whether disallowance under section 14A of the Income-tax Act, 1961 could be sustained where no exempt income was earned during the relevant assessment year, notwithstanding the amendment with effect from 01.04.2022.

Analysis: The assessee had not earned any exempt income during the year. The appellate authority deleted the disallowance by following judicial precedents holding that section 14A disallowance is not attracted in the absence of exempt income. The amendment making such disallowance mandatory from 01.04.2022 was treated as prospective and not applicable to the year under consideration.

Conclusion: The disallowance under section 14A was not sustainable for the relevant assessment year and the deletion was upheld.

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