2023 (4) TMI 734

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....ment by ITO, Ward-9(1), Kolkata u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the "Act"), dated 23.12.2019. 2. Assessee has taken four grounds of appeal, all of which relate to disallowance of Rs. 5,49,842/- made under section 14A of the Act read with rule 8D(iii) of the Income-tax Rule, 1962 (hereinafter referred to as 'the Rules'). 3. Brief facts of the case are that assessee filed its return of income on 30.10.2017, reporting loss of Rs. 10,68,128/- and a book profit of Rs. 7,66,234/-. Case of the assessee was selected for complete scrutiny which, inter alia, included the point relating to expenses incurred for earning exempt income. Ld. AO completed the assessment by making a disallowance of Rs. 5,49,842/- un....

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....el thus asserted that assessee had not claimed any exempt income in the return form and is therefore not exiggible to any disallowance under section 14A of the Act read with rule 8D. He further submitted that assessee had not earned any income which is exempt and not includible in the total income of the assessee for the year. 5. In respect of various judgements relied upon by the Ld. CIT(A),ld. Counsel submitted that these are not applicable to the facts of the present case as in all those decisions, the issue was related to the assessee having made investments which yielded tax-free dividend income and the disallowance was made towards earning of such exempt income. It is strongly contended by the Ld. Counsel that assessee has not earn....

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....me has resulted to the assessee, then also disallowance can be made under section 14A of the Act, we find that this aspect has been considered by the Hon'ble Delhi High Court in its decision dated 20.07.2022 in the case of PCIT v. Era Infrastructure (India) Limited [ITA No. 204/2022 & CM Application No. 31445/2022]. This decision by the Hon'ble Delhi High Court has been dealt and considered by the Coordinate Bench of ITAT Kolkata in the case of Babul Fiscal Services (P) Ltd v. ACIT in ITA No. 318/Kol/2022 dated 02.08.2022 holding that no disallowance is required to be made in the case of the assessee because it has not earned any tax-free income and allowed the appeal of the assessee by deleting the addition so made. 9. Relevant extracts....

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....ng 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 the income, not forming part of the total income under this Act, 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 income not forming part of the total income.]" 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. 9. Though the judgment of this Cour....