AI Drafter 
TaxTMI 
TaxTMI 
2024 (9) TMI 1571
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.... the Assessment Year 2013-14 and 156/Gau/2019 for the Assessment Year 2014-15. 2. Since the facts and issues involved in all these appeals are identical, the said appeals were heard together and are being disposed of by this common judgment and order. 3. For the purpose of the adjudication, the facts of ITA No.2/2024 are being taken into consideration. The appellant, Williamson Financial Services Limited, is a Company (hereinafter to be referred as "the appellant Company"), incorporated under the Companies Act, 1956, engaged in the business of Lease Financing, Financial Advisory and Capital Market Operations, had filed its return of income for the Assessment Year 2013-14 on 26.09.2013 showing a loss of Rs.6,02,59,950/-. The case of the appellant Company was selected for scrutiny through CASS and a notice under Section 143(2) of the Act of 1961 was issued and thereafter, another notice under Section 142(1) of the Act of 1961 was issued asking the Assessee to file certain details and documents for the relevant period. The appellant Company, through its representative, had furnished the details before the Assessing Officer and the Assessing Officer, after considering the same....
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....e total income as appearing in the balance sheet of the assessee, on the first day and the last day of the previous year). C= Rs.9,61,88,95,39/- (the average of * total assets as appearing in the balance sheet excluding the increase on account of revaluation of assets but including the decrease in revaluation of assets) * As per Rule 8D(3), the 'total assets' means, total assets as appearing in the balance sheet excluding the increase on account of revaluation of assets but include the decease on revaluation of assets. (iii) Rs.43,39,402/- (being one half percent of the average of the value of investment of Rs.86,78,80,470/-, income from which does not or shall not form part of total income, as appearing in the balance sheet of the assessee, on the first day and the last of the previous year. Therefore, the interest relatable to the fund in shares, etc works out to Rs.10,62,10,110/- {i.e. the aggregate amount of (i)+(ii)+(iii) as determined above}. Since, assessee has already disallowed Rs.22,548,285/- as expenditure relating to exempt income in its computation already, the balance amount of Rs.8,36,61,825/- is hereby disallowed u/s 14A of the In....
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....(A) held that the disallowance under Section 14A of the Act of 1961 read with Rule 8D of Income Tax Rules, 1962 (hereinafter referred to be as "the Rules of 1962") cannot exceed the income claimed exempt. The operative portion of the order passed by the CIT(A) dated 31.01.2019 is reproduced hereunder: "In view of the above discussion and also the above judgments, I hold that the Ld AO had correctly invoked the provisions of Section 14A of the IT Act, 1961 read with Rule 8D of the IT Rules, 1962 and, therefore, I, hereby confirm the invocation of the provisions of Section 14A of the IT Act, 1961 read with Rule 80D of the IT Rules, 1962. Having held that the provision of Section 14A of the IT Act, 1961 read with Rule 8D of the IT Rules, 1962 are applicable to the appellant, the only question which survives is as to whether the disallowance computed by the AO can exceed the aggregate of expenses claimed by the appellant or otherwise. I find that in the case of Joint Investment Private Limited vs. Commissioner of Income Tax [ITA No.117/2015 dated 25/02/2015], the Hon'ble Delhi High Court has averred as under:- "9. In the present case, the AO has not firstly disclos....
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....LP filed by the Revenue was dismissed by the Hon'ble Supreme Court of India in the case of Pr. CIT vs. Moderate Leasing and Capital Services Pvt. Ltd [Special Leave Petition (Civil) Diary No(s).38584/2018, dated 19/11/2018] and thereby the judgment of the Hon'ble Delhi High Court holding that the disallowance under Section 14A cannot exceed the exempt income has been affirmed by the Hon'ble Apex Court. I therefore direct the Ld AO to restrict the disallowance under Section 14A of the Income claimed exempt. Thus, the above grounds of appeal are answered as under: a. That the AO was right in invocation of provisions of Section 14A read with Rule 8D and that he had rightly done so after recording a due satisfaction. b. That the disallowance made suo-motto by the appellant was incorrect and was never substantiated by the appellant. c. That the disallowance under Section 14A read with Rule 8D cannot exceed the income claimed exempt. In view of the above discussion, the above grounds of appeal are partly allowed. Decision on Ground No.3 During the course of appellate proceedings, no fresh/additional ground of appeal was raised and thi....
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....nce Bill, 2022 whereby it was stated that the amendment shall be applicable from 01.04.2022 and the Assessment year 2022-2023 onwards and thereby whether the said order passed by the learned Tribunal is erroneous in law." 8. Learned counsel for the appellant Company has vehemently argued that the Tribunal has grossly erred in setting aside the orders dated 31.01.2019 passed by the CIT(A) while observing that the Explanation to Section 14A of the Act of 1961 inserted by Finance Act, 2022 being clarificatory in nature has retrospective effect. It is contended that the said finding recorded by the Tribunal is contrary to law because the Ministry of Finance, Union of India, has issued Memorandum Explaining the Provisions in the Finance Bill, 2022 and clarified that the amendment to Section 14A of Income Tax Act whereby explanation is inserted will take effect from 01.04.2022 and will accordingly apply in relation to the assessment year 2022-23 and subsequent assessment years. It is also contended that the various High Courts have held that the Explanation inserted under Section 14A is prospective in nature. 9. In support of his submission, the learned counsel for the appellant ha....
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....2 and MA No.5/GTY/2022, has dismissed the Miscellaneous Applications filed on behalf of the appellants while holding that the Delhi High Court is of a non-jurisdictional High Court and therefore, its decision is not binding upon the Tribunal. It is submitted by the learned counsel for the appellant that though the same Bench of the Tribunal, on 09.11.2022 has held that the decision of the Delhi High Court is binding on it, however, on 02.01.2023, the same Bench of the Tribunal has declared that the judgment of Delhi High Court is not binding upon it. It is submitted that the said conduct of the members of the Tribunal is liable to be condemned. Learned counsel for the appellant has, therefore, prayed that the present appeals may kindly be allowed and the impugned order passed by the Tribunal may kindly be set aside and substantial questions of law may be answered accordingly. 12. Learned counsel for the Revenue has frankly admitted that in view of the Memorandum Explaining the Provisions of the Finance Bill, 2022, issued by the Ministry of Finance, it is now settled that the Explanation inserted to Section 14A of the Act of 1961, is prospective in nature and cannot be made ef....
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....ion 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 have always applied in a case where exempt income 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 exempt income. 5. This amendment will take effect from 1st April, 2022. 6. It is also proposed to amend sub-section (1) of the said section, so as to include 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." 14. Taking note of above, the Division Bench of Delhi High Court in "Pr. CIT Vs. Era Infrastructure (India) Ltd., Judgment dated 20.07.2022" (supra), considering the question whether the Explanation inserted to Section 14A of ....
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....e reason that it had not come into effect then. Prior to introducing the 1999 Explanation, the decision in CIT v. S.G. Pgnatale [(1980) 124 ITR 391 (Guj)] was followed in 1989 by a Division Bench of the Gauhati High Court in CIT v. Goslino Mario [(2000) 241 ITR 314 (Gau)] . It found that the 1983 Explanation had been given effect from 1-4-1979 whereas the year in question in that case was 1976-77 and said (page 318) : '......It is settled law that assessment has to be made with reference to the law which is in existence at the relevant time. The mere fact that the assessments in question had somehow remained pending on 1-4-1979, cannot be cogent reason to make the Explanation applicable to the cases of the present assessees. This fortuitous circumstance cannot take away the vested rights of the assessees at hand.' 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. In this state of ....
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.... The Act has expanded the existing Explanation which states that salary paid for services rendered in India shall be regarded as income earned in India, so as to specifically provide that any salary payable for the rest period or leave period which is both preceded and succeeded by service in India and forms part of the service contract of employment will also be regarded as income earned in India. 5.3 This amendment will take effect from 1-4-2000, and will accordingly, apply in relation to Assessment Year 2000- 2001 and subsequent years.' The departmental understanding of the effect of the 1999 Amendment even if it were assumed not to bind the respondents under Section 119 of the Act, never the less affords a reasonable construction of it, and there is no reason why we should not adopt it. 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] .) A....
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....he phrases used are "it is declared" or "for the removal of doubts". 18. There was and is no ambiguity in the main provision of Section 9(1)(ii). It includes salaries in the total income of an assessee if the assessee has earned it in India. The word "earned" had been judicially defined in S.G. Pgnatale [(1980) 124 ITR 391 (Guj)] by the High Court of Gujarat, in our view, correctly, to mean as income "arising or accruing in India". The amendment to the section by way of an Explanation in 1983 effected a change in the scope of that judicial definition so as to include with effect from 1979, "income payable for service rendered in India". 19. When the Explanation seeks to give an artificial meaning to "earned in India" and brings about a change effectively in the existing 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) 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 lang....
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....td. (supra) reads as under: "Substantial questions Nos. D & E pertain to the deletion of the disallowance made under Section 14A of the Act. The learned Tribunal took note of the decision of the High Court of Delhi in Era Infrastructure (India) Ltd. (supra), which had taken note of the decision in the case of Cheminvest Ltd. (supra), wherein it was held that amendment by the Finance Act, 2022 of Section 14 A of the Act by inserting a non-obstante clause and explanation we take effect from 01.04.22 and cannot be presumed to have retrospective effect and, therefore, on facts the amendment cannot be applied to the assessment year under consideration. We find no error in such conclusion arrived at by the learned Tribunal. Accordingly, substantial questions of law No.D & E are decided against the revenue." 18. Later on, the Delhi High Court, in Uniparts India Ltd. (supra), has made a specific statement that so far as the applicability of Explanation inserted to Section 14A by Finance Bill, 2022 is concerned, it is settled that the same will apply prospectively. 19. The High Court of Madhya Pradesh has also followed the same view in Principal Commissioner of Incom....