TaxTMI 
TaxTMI 
2024 (9) TMI 1051
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....al to yield exempt income in the shape of dividends. Admittedly, during the year under consideration no exempt income was received by this assessee but the ld. AO relied on CBDT Circular No. 5/2014 dated 11.02.2014 to apply the provisions of Section 14A of the Income Tax Act, 1961 (in short the 'Act') read with Rule 8D of the Income Tax Rules, 1962 to make an addition of Rs. 12,39,765/- (impugned assessment). 1.1. Aggrieved with this action of ld. AO, the appellant approached the ld. Commissioner of Income Tax (Appeals)-NFAC, Delhi [hereinafter referred to as ld. 'CIT(A)'] who confirmed the action of the ld. AO by an additional line of argument based on the amendment to Section 14A of the Act by the Finance Act, 2022 thro....
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....e as per the provisions of the Act (exempt income). 2. Over the years, disputes have arisen in respect of the issue whether disallowance under section 14A of the Act can be made in cases where no exempt income has accrued, arisen or received by the assessee during an assessment year. 3. CBDT issued Circular No. 5/2014, dated 11/02/2014, clarifying that Rule 8D read with section 14A of the Act provides for disallowance of the expenditure even where tax payer in a particular year has not earned any exempt income. However, still some courts have taken a view that if there is no exempt income during a year, no 32 disallowance under section 14A of the Act can be made for that year. Such an interpretation is not in line with the....
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....lude a non-obstante clause in respect of other provisions of the Income-tax Act and provide that no deduction shall be allowed in relation to exempt income, notwithstanding anything to the contrary contained in this Act. 7. This amendment will take effect from 1st April, 2022 and will accordingly apply in relation to the assessment year 2022-23 and subsequent assessment years. 6.3.3 It is to be noted here that though it has been specifically mentioned in respect of insertion of non-obstante clause in sub-section (1) that amendment will take effect from 1st April 2022 and will accordingly apply in relation to A.Y 2022-23 and subsequent assessment years, whereas in respect of explanation as noted vide para 5, it is simply wr....
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....record it appeared that during the relevant year the appellant did not earn any dividend from its investments made in shares of other bodies corporate. We also note that barring investment of about Rs. 5 lacs, the investments held by the appellant were in foreign subsidiaries from which no exempt dividend could have been earned. We also note that in the course of assessment the AO had specifically required the assessee to explain why disallowance u/s 14A of the Act should not be made. The assessee vide its letter dated 14.12.2016 had explained before the AO that no disallowance u/s 14A was warranted since during the relevant year it did not earn any tax free dividend. The relevant letter is available at Page 23 of the paper book. After cons....
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....course was in conformity with the view expressed by the jurisdictional high court. Accordingly the impugned order of the Ld. Pr. CIT with reference to the reasons set out in clause (c) of the SCN is held to be unsustainable and accordingly set aside. Ground Nos. 8 & 9 are therefore allowed." (ii) Vardhman Chemtech (P.) Ltd.: "* Section 14A provides for disallowance of expenditure in relation to income not 'includible' in total income. [Para 7] * The Tribunal while relying upon the judgment of this Court in CIT v. Lakhani Marketing Inc. [2014] 49 taxmann.com 257/226 Taxman 48 (Punj. & Har.) (Mag.) had held that section 14A cannot be restored to in the year in which no exempt income had been earned. However,....
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....13-14 - Whether in relevant assessment year, no disallowance could be made under section 14A if no exempt income was earned by assessee - Held, yes [Paras 9 and 10] [The Hon'ble High Court relied on the order in the case of IL & FS Energy Development Co. Ltd. and Cheminvest Ltd. v. CIT [2015] 378 ITR 33 (Delhi).] 3.1. Accordingly, the appellant gets relief on this point and the addition of Rs. 9,647/- is directed to be deleted." 3.1. Furthermore, the prospective operation of the clarificatory amendment vide Finance Act, 2022 has been dealt with in the case of Pr. CIT vs. Avantha Realty Ltd. reported in [2024] 164 taxmann.com 376 (Calcutta). Some portions from the head notes may be extracted as under: "* The Tri....