TaxTMI 
TaxTMI 
2024 (3) TMI 1538
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....inafter referred to as 'the CIT(A)']. Since similar grounds of appeal were raised in both the appeals, the same were heard together and are being disposed by way of a common order. Assessment Year 2018-19 (ITA No. 2853/MUM/2023) 2. We would first take up appeal for the Assessment Year 2018-19 filed by the Revenue challenging the order, dated 28/06/2023 passed by the CIT(A) whereby the Ld. CIT(A) had allowed the appeal of the Assessee against the Assessment Order, dated 09/04/2021 passed under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act'). 3. The Revenue has raised the following grounds in A.Y. 2018-19: 1. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in dele....
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....harges paid for the demat account; the expenses incurred for earning exempt income were the debited separately to the Profit & Loss Account; none of the expenses debited to the Profit & Loss Account pertain to the activity of earning exempt income; no interest cost was debited to the Profit and Loss account; and the investments yielding exempt income were made out of interest free own funds. It was contended on behalf of the Assessee, that in view of the aforesaid facts no further disallowance (in addition to the suo moto disallowance of INR 4,13,683/-) made by the Assessee under Section 14A of the Act was warranted. On are without prejudice basis, it was submitted on behalf of the Assessee, that even otherwise the Assessing Officer has err....
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....4,13,683/- (salary Rs. 3,68,719/- + Demat charges Rs. 44,964/-). The other expenses debited relate to its main business activity i.e. financial services and has no correlation to exempt income. The expenditure of Rs. 4,13,683/- has been debited separately to P&L a/c and not mixed with expenses related to financial services. Separate ledger a/c is maintained for with expenditure. b) Thus, disallowance u/s 14A in Rule 8D cannot be made due to following reasons: ● All investments made out of own funds and no borrowed funds used and no interest debited to P&L a/c. ● Expenditure related to earning exempt income of Rs. 4,13,683/- has been debited separately in P&L a/c. ● Separate ledger is mai....
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.... also placed on following judgments ● Era Infrastructure (India) Ltd in 288 Taxman 384 (Del). ● Delhi International Airport Private Limited (2022) in 144 taxmann.com 80 (Del.) ● Hon'ble Jurisdictional Bombay High court in HDFC Bank Limited in 366 ITR 505. c) xx xx d) In view of above discussion the amount of investments to be considered for disallowances u/s 14A r.w. Rule 8D works out to Rs. 43,47,41,271/- and not Rs. 1,59,53,65,244/- as calculated by the AO. Even for the sake of argument the disallowance as per Rule 8D(2)(ii) will work out to 1% of average of monthly average investment i.e. Rs. 43,47,412/- and not Rs. 1,59,53,652/- as disallowed by the AO. 7.7. In view....
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.... Rules were to be invoked, only the investments yielding exempt income during the relevant previous year should be taken into consideration. On perusal of the order passed by CIT(A) we find that the CIT(A) accepted both the aforesaid contentions. On perusal of paragraph 7.5 of the order passed by CIT(A) it can be seen that the CIT(A) has concluded that disallowance under Section 14A of the act cannot be made in view of the facts and circumstances of the case noted therein. Thereafter, in paragraph 7.6 of the order impugned, the CIT(A) has accepted the alternative submission of the Assessee that even if provisions contained in Rule 8D of the IT Rules were to be applied, only the investments yielding exempt income during the relevant previ....
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....orming part of the total income. 9. The contention of the Revenue was that the above Explanation, though introduced with effect from 01/04/2022, would also apply retrospectively to Assessment Year 2018-2019. In this regard we note that during the appellate before proceedings before CIT(A), reliance on behalf of the Assessee on the judgment of Hon'ble Delhi High Court in the case of Principal Commissioner of Income-Tax (Central) -2 Vs. M/s Era Infrastructure India Ltd: 448 ITR 674 (Delhi) [20-07-2022]. In that case the Hon'ble Delhi High Court has rejected has rejected the contention of the Revenue that amendments to Section 14A introduced by the Finance Act 2022 shall have retrospective effect. Accordingly, we do not find any infirmity i....