TaxTMI 
TaxTMI 
2022 (9) TMI 877
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....essment was concluded by making the above disallowances/additions. The assessee filed an appeal before the CIT(Appeals), who upheld the order of the AO. Aggrieved, the assessee is in appeal before the Tribunal. Disallowance u/s. 14A r.w.s Rule 8D 4. During the assessment proceedings, the AO noticed that the assessee has made huge investments in the equity shares of various concerns. The AO invoked the provisions of section 14A and called for details from the assessee. The assessee submitted that no expenditure relatable to exempt income was debited to the P&L Account and that the company has advanced money out of noninterest funds and hence disallowance u/s. 14A is not applicable. However, the AO proceeded to compute the disallowance u/s. 14A r.w. Rule 8D(2)(ii) and Rule 8D2(iii) and made a disallowance of Rs.84,78,588. Aggrieved, the assessee preferred an appeal before the CIT(Appeals). 5. Before the CIT(Appeals), the assessee submitted that the interest debited to the P&L account is attributable entirely towards the purpose of business of the assessee. The assessee further submitted that the entire investment is out of the internal approvals the break-up of which is as g....
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....cation 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 IL & FS Energy Development Co. Ltd. (supra)". 10. The Hon'ble Delhi Court in the above has also considered the amendment to section 14A and has held that the explanation inserted to section 14A vide Finance Act 2022 is prospective in nature. The relevant observations are reproduced here under - "5. However a perusal of the Memorandum of the Finance Bill, 2022 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 & 7 of the Memorandum of Finance 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 h....
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....ghts of the assessees at hand. " 11. The reasoning of the Gauhati High Court was expressly affirmed by this Court in CIT v. Goslino Mario [(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 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: "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.....
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....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 also Reliance Jute and Industries Ltd. v. CIT [(1980) 1 SCC 139 : 1980 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 UP., (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 Kumar, (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....
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....ing 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 amendment of section 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. 11. Considering the fact that the assessee has not earned any exempt income during the year under consideration and respectfully following the decision of the Hon'ble Delhi High Court in the case of Era Infrastructure India Ltd. (supra) we hold that no disallowance is warranted u/s.14A and delete the disallowance made in this regard. This ground is allowed in favour of assessee. Prior period expenses 12. The AO noticed from the Form 3CD report of the assessee that an amount of Rs.25,51,882 is shown as project expenses debited to the P&L account which is relating to prior period. The AO therefore disallowed the same for the reason that it is not allowable being a prior period expenditure. 13. The CIT(Appeals) conf....
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....see has purchased the shares at a price lower than the market value and therefore invoked the provisions of section 56(2)(viia) of the Act to make an addition of Rs.6,95,35,940 under the head 'income from other sources' by holding as under:- "7.1 The assessee company during the assessment year 2012-13 invested in equity shares of two companies namely, M/s. Zebra Cross Resorts Pvt. Ltd and M/s. Waterline Hotels Pvt. Ltd. In both these companies, the assessee has purchased shares at a price lower than the market value of the shares as under: Sl. Name of the company PAN No. of Shares Face Value Premium As per Market Value Premium Paid Premium Paid below the FMV Shortfall to be brought to tax 1 M/s Zebra Cross Resorts Pvt. Ltd AAACZ3383N 49930 10 448 190 258 1,28,81,940 2 M/s. Waterline Hotels Private Limited 13.00,000 10 208.58 165 43.58 5,66,54,000 Total 6,95,35,940 7.2 The assessee was asked to explain why the provisions of section 56(2)(viia) of the Income-tax Act, 1961 should not be attracted in its case and the shortfall in payment of premium to the FMV of the....
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....fied in section 14, items A to E. (2) In particular, and without prejudice to the generality of the provisions of sub-section (1), the following incomes, shall be chargeable to income-tax under the head "Income from other sources", namely :- **** ***** (viia) where a firm or a company not being a company in which the public are substantially interested, receives, in any previous year, from any person or persons, on or after the 1st day of June, 2010 but before the 1st day of April, 2017, any property, being shares of a company not being a company in which the public are substantially interested,- (i) without consideration, the aggregate fair market value of which exceeds fifty thousand rupees, the whole of the aggregate fair market value of such property; (ii) for a consideration which is less than the aggregate fair market value of the property by an amount exceeding fifty thousand rupees, the aggregate fair market value of such property as exceeds such consideration : Provided that this clause shall not apply to any such property received by way of a transaction not regarded as transfer under clause (via) or clause (v....