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TMI Blog2022 (8) TMI 904X X X X Extracts X X X X X X X X Extracts X X X X ..... see any infirmity in the conclusion drawn by the CIT(A) for non applicability of Section 14A of the Act in the facts of the case. The judgment rendered in Joint Investment Pvt. Ltd. [ 2015 (3) TMI 155 - DELHI HIGH COURT] thus clinches the issue in favor of assessee. Thus, the CIT(A) has rightly restricted the disallowance to the extent of the exempt income. Significantly, the Hon'ble Delhi High Court in the case of PCIT vs. M/s. ERA Infrastructure (India) Ltd. [ 2022 (7) TMI 1093 - DELHI HIGH COURT] had the occasion to examine the law on applicability of Section 14A having regard to the newly inserted Explanation to Section 14A as codified by Finance Act, 2022. The Hon'ble High Court held that the aforesaid Explanation cannot b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration has made investment amounting to Rs. 5,02,00,95,000/- in the optionally convertible preference shares of M/s. Hindustan Clean Energy Ltd. but has not received any exempt income from such investment. The AO's view is that Section 14A is attracted in this case inspite of the fact that no exempt income has been earned during the year under consideration. The basis for making addition by AO is his interpretation of Sec. 14A and CBDT's circular on the applicability of Sec. 14A. The disallowance made by AO has been challenged on various grounds but written submission is confined mainly to the ground that this is a case where no exempt income has been received during the year under consideration and hence no disallowance is called f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion between the exempt income earned in the AY and the expenditure incurred to earn it. In other words, the expenditure as claimed by the Assessee has to be in relation to the income earned in 'in such previous year'. 6.3 In this judicial pronouncement, CBDT'S Circular dt. 11/02/2014 has also been discussed to hold that said circular cannot override the expressed provisions of Section 14A read with Rule 8D. The Hon'ble Court has observed that the CBDT's Circular does not refer to Rule 8D(1) of the Rules at all but only refers to the word includible occurring in the title to Rule 8D as well as in the title to Section 14A. The Circular concludes that it is not necessary that exempt income should necessarily be incl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat where no exempt income was earned in relevant assessment year by assessee, section 14A could not be invoked, was dismissed by Hon'ble Supreme Court in favor of assessee in its decision dated 02.07.2018 [95 taxmann.com 250(SC)]. 6.4 In view of the fact that appellant did not earn any exempt income during the year, taking cognizance of the above judicial decisions, it is held that no disallowance u/s. 14A is called for in this case. Keeping in view of the above, the addition made by the AO amounting to Rs. 1,65,16,139/- u/s. 14A r.w. Rule 8D is hereby deleted. The ground of appeal is allowed. 4. We have heard the rival submission on the issue. It was pointed out on behalf of the assessee that the assessee has not earned any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon'ble Supreme Court in CIT vs. Chettinad Logistics (P.) Ltd. (2018) 95 taxmann.com 250 (SC). Hence, in conformity with the judicial precedents, we find substantial merit in the conclusion drawn by the CIT(A) which essentially holds that Section 14A of the Act can be triggered only if assessee seeks to square off expenditure against the income which does not form part of total income under the Act and Section 14A of the Act cannot be invoked where no exempt income was earned in the relevant assessment years. Thus, without going into other aspect of contentions, in consonance with the judicial precedents, we do not see any infirmity in the conclusion drawn by the CIT(A) for non applicability of Section 14A of the Act in the facts of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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