TaxTMI 
TaxTMI 
2025 (7) TMI 1856
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....he income, not forming part of the total income under this Act, 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 income not forming part of the total income. (2) disallowance in question had been made/upheld by the Authorities below, by making a reference to (i) instruction of CBDT issued vide its Circular no.5 of 2014; and (ii) provision contained in 8D(2)(ii) of the Income Tax Rules 1962; which have been erroneously referred to and applied in the instant case. the Boards instruction as well as Income-tax Rules referred to by the authorities below, are not applicable as in same, number of judicial pronouncements, to the effect that no disallowance under section 14A would be made, in the cases where there were no exempt income are available on record; 4. Even the instruction issued by CBDT, as has been referred to in the Order passed by the Id. CIT(A), should be treated to have been overruled by large number of case laws which are to the effect that no such disallowance under section 14A was ca....
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.... 3. The solitary effective ground in this appeal is against the impugned disallowance made by the assessing authority by invoking the provisions of Section 14A of the Act. 4. Apropos to the grounds of appeal, Ld. Counsel for the assessee vehemently argued that the authorities below grossly erred in making the disallowance and sustaining the same. Further, he contended that the Ld. CIT(A) in utter disregard to the binding precedents and without adverting to the applicability of such precedents sustained the impugned disallowance. He strongly placed reliance on the judgment of the Hon'ble Delhi High Court rendered in the case of PCIT (Central) vs Era Infrastructure (India) Ltd (IT Appeal No.204 of 2022). Ld. Counsel has also placed reliance on various other judgments to buttress the contention that the Assessing Officer failed to record his satisfaction with regard to the claim of the assessee that there was no expenditure incurred in relation to the income which do no form total income and for this proposition, he has relied upon the following decisions of the Co-ordinate Benches are as under:- i. M/s. Leayan Global Pvt Ltd vs DCIT in ITA. No.768/LKW/2017 ii. ....
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.... only dispute in the present case is with regard to disallowance made by invoking the provisions of Section 14A of the Act. There is no dispute with regard to the fact that the assessee has not earned any exempt income during the relevant financial year. The claim of the assessee is that when he has not claimed any exempt income so there is no question of disallowance of expenditure in terms of Rule 8D of the Rules. In this background, we need to examine the correctness of the finding of the lower authorities. The Ld. CIT(A) sustained the disallowance of expenditure by observing as under: - "5.1 Held: I have considered the submissions made by the appellant on the basis of circumstances and facts of the case along with the order of the AO and perused the material available on record. The contention of the appellant is basically that since there is no exempt income, no disallowance is called for u/s 14A of the Act. It is not out of place to mention that Section 14A has been amended by Finance Act, 2022 with effect from 01.04.2022 wherein the following explanation has been inserted: - Explanation.-For the removal of doubts, notwithstanding anything to the contrary co....
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.... taxpayer. Section 14A(2) of the Act provides for determining the quantum of such expenditure which shall not be allowed as a deduction. That is the machinery provision in so far as Section 14A of the Act is concerned. In that provision, it has been provided that if the A.O. is not satisfied with the correctness of the computations made by the taxpayer, he/she shall compute the quantum in accordance with the method that may be Prescribed. For this matter, Rule 8D has already been prescribed. Section 14A(3) further provides that even in a case where the taxpayer claims that no expenditure was incurred, the tax authority has to presume the incurring of such expenditure as provided under Section 14A(2) read with Rule prescribed. Therefore, it becomes clear that even in a case where the taxpayer claims that no expenditure was So incurred, the statute has provided for a presumptive expenditure which has to be disallowed by the force of the statute. Hence, as per the provisions of Act and the investment details submitted by the assessee company, inadmissible expenditure in this case is worked out in accordance with the Section 14A of the Act r.w. Rule 8D of the....
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....up an ambiguity in the main provision or an Explanation can add to and widen the scope of the main section [See Sonia Bhatia v. State of U.P., (1981) 2 SCC 585]. If it is in its nature clarificatory then the Explanation must be read into the main provision with effect from the time that the main provision came into force [See Shyam Sunder v. Ram Kumar, (2001) 8 SCC 24; Brij Mohan Das Laxman Das v. CIT, (1997) 1 SCC 352; CIT v. Podar Cement (P) Ltd., (1997) 5 SCC 482]. But if it changes the law it is not presumed to be retrospective, irrespective of the fact that the 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 serv....