AI Drafter 
TaxTMI 
TaxTMI 
2024 (11) TMI 1191
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....common order for the sake of convenience. 3. The common grievance in all the six appeals by the assessee relate to the disallowance of expenditure u/s 14A r.w.r. 8D. The common factor in the appeals by the assessee is that the assessee has not earned any exempt income during the captioned assessment years. The basis for the impugned disallowance by the AO is the amendment brought in the Act which according to the AO was effective from the AYs under consideration whereas the contention of the assessee is that the amendment is prospective and is effective from 01/04/2022 and, therefore, not applicable in the captioned AYs and since it is an admitted fact that the assessee has not earned any exempt income during the captioned AYs under consideration, there is no question of any disallowance u/s 14A r.w.r. 8D. 4. After giving a thoughtful consideration to the orders of the authorities below and after finding that the assessee has not earned any exempt income during the captioned AYs, we are of the considered view that the issue is no more res integra in light of plethora of judgments of the various Hon'ble High Courts. 5. The Hon'ble High Court of Delhi in the case of PCIT vs.....
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....im India (P.) Ltd. (Supra) has been overruled and atleast requires reconsideration. 6. We have considered the said judgments, but do not think that there is any ground or reason to not follow the clear and categorical ratio of the decisions of the Delhi High Court in Cheminvest Ltd. (Supra) and Holcim India (P.) Ltd. (Supra)." 6. The Hon'ble High Court of Madras in the case of Commisioner of Income-tax, Central 1, Chennai v. Chettinad Logistics (P.) Ltd., reported in [2017] 80 taxmann.com 221 (Madras), considering the similar issue held as follows:- "10. In the instant case, there is no dispute that no income i.e., dividend, which did not form part of total income of the Assessee was earned in the relevant assessment year. 10.1 Therefore, to our minds, the addition made by the Assessing Officer by relying upon Section 14 A of the Act, was completely contrary to the provisions of the said Section. 10.2 Mr.Senthil Kumar, who appears for the Revenue, submitted that the Revenue could disallow the expenditure even in such a circumstance by taking recourse to Rule 8D. 10.3 According to us, Rule 8D, only provides for a method to determine th....
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....ntemplated even in a situation where no exempt income has admittedly been earned by the assessee in the relevant financial year. 7. Per contra, Sri. T. Ravikumar appearing on behalf of the revenue drew our attention to the marginal notes of s.14 A pointing out that the provision would apply not only where exempted income is 'included' in the total income, but also where exempt income is 'includable' in total income. 8. He relied upon a Circular issued by the Central Board of Direct taxes in Circular No.5 of 2014 dated 11.2.2014 to the effect that s.14A was intended to cover even those situations whether there is a possibility of exempt income being earned in future. The Circular, at paragraph 4, states that it is not necessary for exempt income to have been included in the income of a particular year for the disallowance to be triggered. According to the Learned Standing Counsel, the provisions of s.14A are made applicable, in terms of sub section (1) thereof to income 'under the act' and not 'of the year' and a disallowance under s.14A r.w.Rule 8D can thus be effected even in a situation where a tax payer has not earned any taxable....
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....was the AY being considered in the said case. 14. According to us, this was not the argument, put forth, before the Division Bench. As a matter of fact, the Revenue relied heavily on Rule 8D. 14.1 Mr.Ravikumar, who appeared for the Revenue, in that matter and who is present in this Court, informs us that he had in fact argued that the Rule was clarifactory in nature and would apply retrospectively, and that, the Division Bench, therefore, discussed the impact of Rule 8D of the Rules. 15. However, it is, our view, as indicated above, independent of the reasoning given in Redington (India) Ltd. case (supra) that Rule 8D cannot be read in a manner, which takes it beyond the scope and content of the main provision, which is, Section 14 A of the Act. 15.1 Therefore, as adverted to above, Rule 8D, cannot come to the rescue of the Revenue. 15.2 In any event, the Tribunal, via, the impugned judgment has remitted the matter to the Assessing Officer. 15.3 Therefore, for the foregoing reasons, we are of the view, that no interference is called for qua the impugned judgment." 6.1. The SLP of the revenue was dismissed by the Hon'ble Supre....
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....antum of disallowance to Rs. 1,16,03,269/- for the grounds and reasons mentioned in the appellate order. 6. Aggrieved by the reduction in the quantum of disallowance revenue preferred appeal before the Tribunal. The Tribunal considered the contention of the assessee that no exempt income was claimed by the assessee under section 14A of the Act and, therefore, no disallowance could have been made by the Assessing Officer by invoking section 14A together with Rule 8D(2)(ii) of the Income-tax Rules, 1962. Tribunal relied upon the decision of the Delhi High Court in the case of Cheminvest Ltd. v. CIT [2015] 61 taxmann.com 118/234 Taxman 761/378 ITR 33 (Delhi); the decision of the Punjab and Haryana High Court in CIT v. Lakhani Marketing Inc. [2014] 49 taxmann.com 257/226 Taxman 45 (Mag.); and decision of the Allahabad High Court in the case of CIT v. Shivam Motors (P.) Ltd. [2015] 55 taxmann.com 262/230 Taxman 63 (All.) and observed that there is uniformity in the view that in case there is no exempt income claimed by the assessee in the return of income, no disallowance can be made by the revenue. Consequently, vide order dated 18-10-2016 Tribunal dismissed the appeal of the ....
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....er, within the memorandum explaining the provision of Finance Bill, 2022, it has been categorically mentioned that "This amendment will take effect from 01/04/2022". Accordingly, appeals of the assessee are allowed. 9. Coming to the captioned appeals of the revenue, the solitary grievance is the deletion of the addition on account of ESOP expenses. For the sake of our convenience and at the concession of the rival representatives, we are taking the issue with respect to the facts of AY 2014-15. 10. On going through the notes on financial statements submitted by the assessee, the AO noticed that the assessee has paid Rs. 9,05,18,445/- to M/s. KKR Holding on account of Employees Stock Option. The assessee was asked to explain the allowability of ESOP expenses. The assessee explained as under:- "The said plan which is called as equity incentive plan is launched by KKR Holding LP (KKRH) a group entity of KCM. Under the said plan awards in the form of shares/ units of Kohlberg Kravis Roberts & Co. LP (KKRCo.LP), the ultimate holding company of the KKR group, is granted to employees of KKRCOLP & its group entities (which includes KCM). The said plan is offered to employees....