TaxTMI 
TaxTMI 
TaxTMI 
2025 (10) TMI 41
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.... 3. The Appellant has not earned any exempt income from its subsidiary or associated companies during the relevant assessment year, nor in the preceding years Furthermore, the Appellant has not incurred any expenditure either directly or indirectly in relation to such exempt income 4. The Rule BD provides only a method of determining the amount of expenditure incurred in relation to income which does not form part of the total income, and it cannot go beyond what is provided in section 144. 5. The amendment to section14A in the Finance Act, 2022 is prospective in its operation, and cannot be made applicable to the Assessment year 2020-21, the subject appeal year. 6. The appellant holds substantial reserves, which is multiple times of the value of the investments made and hence Section 144 cannot be invoked. On the facts and in the circumstances of the case and in law the Assessing Officer (the Learned PCIT), erred in making the disallowance of expenditure without appreciating the facts and figures of the case." 3. Brief facts of the case are that, the assessee viz., "Biophore India Pharmaceuticals Private Limited" filed it's return of inco....
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....4A read with Rule 8D of I.T. Rules, 1962 does not arise. The assessee further submitted that, during the course of assessment proceedings, the Assessing Officer called-for necessary information with regard to substantial amount of investments/advances/loans in the assets side of the balance-sheet and corresponding income including exempt income, for which, the assessee-company has filed complete details of nature of investments, source of investment and also explained that, the assessee-company does not earn any exempt income, which was claimed u/sec.10(34) of the Act. The Assessing Officer after considering the relevant facts and the explanation of assessee-company, completed the assessment without proposing any addition. Therefore, it cannot be said that, the assessment order passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of Revenue. 6. The learned PCIT after considering the relevant submissions of the assessee-company and also taking note of provisions of section 263 of the Act observed that, the assessee-company company has huge investment in unlisted equities amounting to Rs. 32,51,28,088/-, out of which, it will derive exempt i....
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....y information with regard to substantial amount of investments/advances/loans in the assets side of the balance-sheet and corresponding income including exempt income, for which, the assessee-company has filed complete details of nature of investments, source of investment and also explained that, the assessee-company does not earn any exempt income, which was claimed u/sec.10(34) of the Act. The Assessing Officer after considering the relevant facts and the explanation of assessee-company, completed the assessment without proposing any addition. Therefore, it cannot be said that, the assessment order passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of Revenue. He accordingly submitted that, in absence of any exempt income, the question of disallowance of expenses relatable to exempt income does not arise. The Assessing Officer after considering the relevant facts, has rightly accepted the claim of the assessee-company and, therefore, it cannot be said that, the assessment order passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of Revenue on this issue. In this regard, he relied on the decision o....
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.... received during the previous year and, therefore, it means that the amendment is retrospective. The Learned CIT-DR accordingly submitted that the CPC has rightly invoked amended provisions and set-aside the assessment order and, therefore, the order of the learned PCIT should be upheld. 10. We have heard both the parties, perused the material on record and the orders of the authorities below. The learned PCIT invoked jurisdiction under section 263 of the Act and set-aside the assessment order passed by the Assessing Officer under section 143(3) read with section 144B of the Act dated 09.09.2022 on the ground that, the order passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of Revenue. The learned PCIT has discussed the issue of disallowance u/sec.14A read with Rule 8D of I.T. Rules, 1962 and observed that, the investment made by the assessee-company are capable of earning exempt income in future and this fact has not been examined by the Assessing Officer. Otherwise, there is no finding from the PCIT that, the assessee-company has earned exempt income for the year under consideration from the said investment and also incurred various e....
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....s. 99,990/- and no other investment was made apart from this for the impugned assessment year 2020-2021 and the sources of the same was from reserves/surplus funds and there was no interest cost. However, the learned PCIT noted in para- 7.11 of the order that as could be seen from the balance-sheet as on 31.03.2020 that, the assessee has huge investment in unlisted equities amounting to Rs. 32,51,28,088/- and these investments are capable of generating the income in future and since the assessee has not disallowed the associated expenses against these investments and no separate accounts for expenses related to these investments are maintained by the assessee and that, the assessee has maintained common pool of funds for it's regular business, the learned PCIT has disallowed 1% of average investment i.e. Rs. 32,50,783/- out of Rs. 32,50,28,098/-. It was the argument of the Counsel for the Assessee that, the appellant holds substantial reserves, which is multiple times of the value of the investments made. This indicates that the investments were financed by internal resources rather than borrowed funds. As a result, the assessee possesses sufficient funds, comprising Share Capital ....
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.... (supra) Hon'ble Delhi High Court considered the effect of amendment made by the Finance Act, 2022 to section 14A of the Act by insertion of a non obstante clause and explanation after the proviso, subsequent to the decision of the Hon'ble Delhi High Court in the case of PCIT vs. IL&FS Energy Development Co. Ltd., (2017) 84 taxmann.com 186, Hon'ble Delhi High Court and also the memorandum of Finance Bill, 2022 accordingly to clauses 5 to 7 thereof. The Hon'ble High Court analysed the same in the light of the decision of the Hon'ble Supreme Court in the case of Sedco Forex International Drill. Inc. vs. CIT (2005) 149 Taxman 352 reiterated in M.M. Aqua Technologies Ltd. vs. CIT (2021) 129 taxmann.com 145 and held that the amendment of section 14A of the Act which is 'for removal of doubt' cannot be presumed to be retrospective even where such language is used, if it alters or changes law as it earlier stood. 8. Thereupon the Hon'ble High Court followed the decision of IL&FS Energy Development Co. Ltd., (supra) and concluded that no disallowance under section 14A of the Act can be made if the assessee had not earned any exempt income during the year un....