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TMI Blog2024 (6) TMI 930X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 1961 ("the Act"). 2. The assessee has raised the following grounds of appeal for Assessment Year 2018-19:- "1. Disallowance of Rs. 68,13,600 u/s 14A r.w.r. 8D(2)(ii) is liable to be deleted for the following reasons since the undisputedly the appellant had NIL exempt income and that the entire investments are made in port related strategic entities out of its own funds. a) As duly mentioned in Paragraph No. 8.7 of the impugned order, the issue of whether the Explanation to section 14A inserted w.e.f. 01.04.2022 is prospective or retrospective is not settled and Hon'ble High Court of Delhi has held it to be applicable prospectively, namely w.e.f. AY 2022-23, which subsequent to the subject AY 2018-19. b) This disallowance is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of PCIT v State Bank of Patiala [2018] 99 Taxmann.com 285 (Haryana) affirmed by the Hon'ble Apex Court reported as [2018] 99 taxmann.com 286 (SC), since the undisputedly the appellant had NIL exempt income. c) This disallowance is made @ 1% of the "average of Opening balance and Closing balance of Investments" which is other than what is prescribed in rule 8D((2)(ii), namely @ 1% of the "annual average of the monthly averages of the opening and closing balances of the value of investment". 2. Addition of Rs. 5,35,626 u/s 41(1) is liable to be deleted for the following reasons. a) This addition is made solely based on the ledger sheets provided by 2 parties for the relevant previous year without verifying whether each of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see which is a Government of India undertaking filed its return of income for Assessment Year 2020-21 on 30/03/2021. Case selected for complete scrutiny followed by issuance of notice u/s 143(2) & 142(1) of the Act. So far as the issue relating to addition u/s 41(1) of the Act is concerned at Rs. 5,35,626/-, the ld. Assessing Officer was in possession of information as per which M/s. Premco Rail Engineers Ltd. and Ripley & Company Limited, booked the expenditure under the head bad debts written off at Rs. 1,00,000/- and Rs. 4,35,626/- claimed to be irrecoverable from the assessee company. Based on this information, the ld. Assessing Officer asked the assessee to reply as to whether it had booked any income in the books of accounts. However, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ited, have been filed demonstrating that last transactions which took place with M/s. Premco Rail Engineers Ltd. was upto FY 2013-14 and that with Ripley & Company Limited was upto FY 2017-18 and also as on the opening of the financial year 2019-20, relevant to Assessment Year 2020-21, there is no opening credit balance in the name of these two parties. Further no transactions were carried out during the year and, therefore, as on 31/03/2020, there is Nil balance in the account of both these companies. Therefore, in absence of any liability in the books of accounts, provisions of Section 41(1) of the Act cannot be invoked as the same refers to cessation of trading liability. In other words, liability standing in the books is sine qua non be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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