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TMI Blog2023 (11) TMI 933X X X X Extracts X X X X X X X X Extracts X X X X ..... r.w.Rule 8D of Income tax Rules in a situation where there is no exempt income earned by the assessee. Now it has become law of the land by virtue of the findings of the Hon ble SC that there cannot be any disallowance u/s 14A r.w. Rule 8D of Income-tax Rules in a situation where the assessee has not earned any exempted income until and unless there is some change under the provisions of law. The fact that the assessee has not earned exempt income has nowhere been disputed by the Ld. DR appearing on behalf of the revenue. Accordingly, we hold that there is no error causing any prejudice to the interest of revenue in the assessment framed u/s 143(3) of the Act. Scope of amendment under the provision of section 14A by way insertion of an explanation clarifying that the disallowance needs to be made u/s 14A even there is no exempt income earned by the assessee - We find that such amendment is not applicable for the year under consideration by virtue of the order of the ITAT in the case of DCIT Vs. M/s CLP India Pvt. Ltd [ 2022 (11) TMI 422 - ITAT AHMEDABAD] - Appeal of assessee allowed. - Shri Waseem Ahmed, Accountant Member And Shri T.R Senthil Kumar, Judicial Member ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and, the Ld. DR submitted that the assessment has been framed by the AO without proper inquiries and therefore the action taken by the Ld. PCIT u/s 263 of the Act, is well within his jurisdiction. The Ld. DR in support of his claim has relied on judgment of the Hon ble Bombay High Court in the case of Vedanta Ltd vs. CIT reported in 124 taxmann.com 435. 7. We have heard the rival contentions of both the parties and perused the materials available on record. In revising the Assessment Order u/s 263 of the Act, the twin conditions need to be satisfied being erroneous in so far prejudicial to the interest of revenue. If any of the condition is missing, then the assessment cannot be revised u/s 263 of the Act. Admittedly, in the given case, there is no exempted income u/s 10(34) of the Act for the year under consideration. The Hon ble Courts time and again held that there cannot be any disallowance under the provision of section 14A r.w.Rule 8D of Income tax Rules in a situation where there is no exempt income earned by the assessee. We also rely on the judgment of Hon ble Jurisdictional High Court in the case of Corrtech Energy Pvt. Ltd (Supra) wherein it was held as under: In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on ble SC that there cannot be any disallowance u/s 14A r.w. Rule 8D of Income-tax Rules in a situation where the assessee has not earned any exempted income until and unless there is some change under the provisions of law. The fact that the assessee has not earned exempt income has nowhere been disputed by the Ld. DR appearing on behalf of the revenue. Accordingly, we hold that there is no error causing any prejudice to the interest of revenue in the assessment framed u/s 143(3) of the Act. 8.2 At this stage, it is necessary to deal with the amendment under the provision of section 14A of the Act by way insertion of an explanation clarifying that the disallowance needs to be made under section 14A of the Act even there is no exempt income earned by the assessee. However, we find that such amendment is not applicable for the year under consideration by virtue of the order of the ITAT in the case of DCIT Vs. M/s CLP India Pvt. Ltd. in ITA No. 290/AHD/2020 for the AY 2015 vide order dated 4-11-2022 wherein it was held as under: 7. The other arguments of the Ld. D.R. namely the Amendment namely insertion of Explanation to Section 14A made by the Finance Act 2022 will be applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. In order to make the intention of the legislation clear and to make it free from any misinterpretation, it is proposed to insert an Explanation to section 14A of the Act to clarify that notwithstanding anything to the contrary contained in this Act, the provisions of this section shall apply and shall be deemed to have always applied in a case where exempt income 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 exempt income. 5. This amendment will take effect from 1st April, 2022, 6. It is also proposed to amend sub-section (1) of the said section, so as to include a non-obstante clause in respect of other provisions of the Income-tax Act and provide that no deduction shall be allowed in relation to exempt income, notwithstanding anything to the contrary contained in this Act. 7. This amendment will take effect from 1st April, 2022 and will accordingly apply in relation to the assessment year 2022-23 and subsequent assessment years. (emphasis supplied) 6. Furthermore, the Supreme Court in Sedco Forex Interna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red in India and forms part of the service contract of employment, shall be regarded as income earned in India. The Finance Act, 1999 which followed the Bill incorporated the substituted Explanation to Section 9(l)(ii) without any change. 13. The Explanation as introduced in 1983 was construed by the Kerala High Court in CIT v. S.R. Patton [(1992) 193 ITR 49 (Ker)] while following the Gujarat High Court's decision in S.G. Pgnatale [(1980) 124 ITR 391 (Guj)] to hold that the Explanation was not declaratory but widened the scope of Section 9(l)(ii). It was further held that even if it were assumed to be clarificatory or that it removed whatever ambiguity there was in Section 9(l)(ii) of the Act, it did not operate in respect of periods which were prior to 1-4-1979. It was held that since the Explanation came into force from 1-4-1979, it could not be relied on for any purpose for an anterior period. 14. In the appeal preferred from the decision by the Revenue before this Court, the Revenue did not question this reading of the Explanation by the Kerala High Court, but restricted itself to a question of fact viz. whether the Tribunal had correctly found that the sala ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1997) 1 SCC 352, 354; CIT v. Podar Cement (P) Ltd., (1997) 5 SCC 482, 506]. 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 . (emphasis supplied) 7. The aforesaid proposition of law has been reiterated by the Supreme Court in M.M Aqua Technologies Ltd. V. Commissioner of Income Tax, Delhi-Ill, 2021 SCC Online SC 575. The relevant portion of the said judgment is reproduced hereinbelow:- 22. Second, a retrospective provision in a tax act which is for the removal of doubts cannot be presumed to be retrospective, even where such language is used, if it alters or changes the law as it earlier stood. This was stated in Sedco Forex International Drill. Inc. v. CIT, (2005) 12 SCC 717 as follows: 17. As was affirmed by this Court in Goslino Mario [(2000) 10 SCC 165] a cardinal principle of the tax law is that the law to be applied is that which is in force in the relevant assessment year unless otherwise provided expressly or by necessary implication. (See also Reliance Jute and Industries Ltd. v. CIT [(1980) 1 SCC 139].) An Explanation to a statutory ..... X X X X Extracts X X X X X X X X Extracts X X X X
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