TaxTMI 
TaxTMI 
TaxTMI 
2024 (3) TMI 537
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng grounds of appeals:- "1. The order u/s. 263 is bad in law. 2. The learned Principal CIT has erred in law as well as on facts in not considering the submission of the appellant that the order passed by the A.O. u/s. 143(3) was neither erroneous nor prejudicial to the interest of revenue and provisions of Section 263 of the Act were not applicable to the case of the appellant. 3. The learned Principal CIT has erred in law as well as on facts in setting aside the assessment order passed by the A.O. u/s. 143(3) and directing to reframe the assessment to the limited extent of examining the applicability of provisions of Section 14A of the Act. 4. The learned Principal CIT has erred in law as well as on facts in not accepting the submi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l before us against the aforesaid order passed by the PCIT. Before us, the assessee submitted that during the year under consideration the assessee has earned exempt income of Rs. 100 only from it's investments. This is evident from the copy of acknowledgement of return of income, computation of income and audited financial statements for the year under consideration. The first contention of the Counsel for the assessee was that in the instant facts, it is a well established principle of law that disallowance under Section 14A of the Act cannot exceed the exempt income. This view is supported by the decision of Hon'ble Supreme Court in the case of PCIT vs. State Bank of Patiala 99 taxmann.com 286 (SC), wherein the Hon'ble Apex Court dismiss....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion, the question of disallowance of the expenditure incurred to earn exempt income in terms of Section 14A read with rule 8D would not arise. Further, the Delhi High Court held that CBDT Circular dated 11.02.2014 does not refer to Rule 8D(1) of the Rules at all, but only refers to the word "includible" occurring in the title to Rule 8D as well as the title to Section 14A of the Act. Further, the Counsel for the assessee also placed reliance on PCIT vs. Vardhman Chemtech Pvt. Ltd. 102 taxmann.com 132, wherein the Punjab & Haryana High Court held that the Hon'ble Supreme Court in the case of Commissioner of Central Excise vs. M/s. Ratan Melting & Wire Industries in Civil Appeal No. 4022 of 1999 dated 14.02.2008, has categorically held that d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....but the observations of ITAT, Guwahati Bench in the case of Williamson Financial Services Ltd. (supra) shall apply and accordingly these provisions, being clarificatory in nature would apply for the instant year as well. Accordingly, as per the D.R. in light of the aforesaid decision, the assessment order is erroneous and prejudicial to the interest of the Revenue. 6. We have heard the rival contentions and perused the material on record. 7. We observe that various Courts have consistently taken a position that no disallowance can be made under Section 14A in case the assessee has not earned any exempt income. The Hon'ble Supreme Court in the case of State Bank of Patiala (2018) 99 taxmann.com 286 (SC) held that where High Court took a vi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on 14A will not apply where no exempt income is received or receivable during relevant previous year. The Ahmedabad ITAT in the case of Edelweiss Financial Advisors Ltd. (2021) 124 taxmann.com 361 (Ahmedabad - Trib.) held that disallowance of expenses under Section 14A r.w.r 8D could not exceed amount of exempted income. The Ahmedabad ITAT in the case of Addlife Investments (P.) Ltd. (2021) 124 taxmann.com 572 (Ahmedabad - Trib.) held that disallowances made under Section 14A r.w.r 8D could not exceed amount of exempt income earned by assessee during year. In the case of Asian Grantio India Ltd (2020) 113 taxmann.com 445 (Ahmedabad - Trib.), the Ahmedabad ITAT held that Disallowance of expenses under Section 14A r.w.r. 8D of 1962 Rules cann....