TaxTMI 
TaxTMI 
TaxTMI 
2024 (9) TMI 1051
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....ividends. 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 through which even investments which have not yie....
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....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 intention of the legislature. To illustrate, if during a previous year, an assessee incurs an expens....
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....owed 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 written that the amendment will take effect on 1st April 2022." 2. Before us, ld. Counsel for the assessee placed a short paperbook in wh....
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....ote 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 considering the submissions of the assessee, the assessment order was passed u/s 143(3) of the Act in which no disallowance u/s 14A was made. We thus find that it wa....
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....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, the revenue relied upon the CBDT Circular dated 11-2-2014 to contend that section 14A can be invoked even in the year in which no exempt income had been earned. Accordingly, the Tribunal had dismissed the appeal of the revenue hol....
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....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 Tribunal took note of the decision of the High Court of Delhi in Pr. CIT (Central) v. Era Infrastructure (India) Ltd. [2022] 141 taxmann.com 289/288 Taxman 384/448 ITR 674, which had taken note of the decision in the case of Cheminvest Ltd. v. CIT-IV [2015] 61 taxmann.com 118/234 Taxman 761/....