2024 (8) TMI 550 - AT - Income Tax

Tribunal Confirms Removal of Tax Disallowance Due to No Exempt Income for Assessment Year 2020-21.

The ITAT Mumbai affirmed the Ld.CIT(A)'s decision to remove the disallowance made by the AO under Section 14A of the Income Tax Act for AY 2020-21, as the ... Addition u/s. 14A r.w.r.8D - Assessee earned any exempt income or not? - CIT(A) deleted the disallowance made by the AO - HELD THAT:- Assessee has not earned any exempt income during the year under consideration. Accordingly, CIT(A) has deleted the disallowance, by following the decisions M/S. NIRVED TRADERS PVT. LTD. [2019 (4) TMI 1738 - BOMBAY HIGH COURT] AND M/S. CHETTINAD LOGISTICS PVT. LTD. [2017 (4) TMI 298 - MADRAS HIGH COURT] Even though the amendment has been made in section 14A of the Act w.e.f. 01-04-2022 making it mandatory to make disallowance u/s. 14A of the Act even if the exempt income is not earned, the same has been held to be prospective in nature as per the decision of Era Infrastructure (India) Ltd.[2022 (7) TMI 1093 - DELHI HIGH COURT] - Decided against revenue. The Appellate Tribunal ITAT Mumbai upheld the decision of the Ld.CIT(A) to delete the disallowance made by the AO u/s. 14A of the Income Tax Act for AY 2020-21 as the assessee did not earn any exempt income. The Ld.CIT(A) cited relevant court decisions and ruled that the amendment to Section 14A making disallowance mandatory, even without exempt income, is prospective. The appeal by the Revenue was dismissed.