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TMI Blog2024 (6) TMI 1291X X X X Extracts X X X X X X X X Extracts X X X X ..... ion ignoring the fact that the assessee had investments which has potential to earn exempt income. b. Whether on the facts and under the circumstances of the case, and in law, the Ld. CIT(A) was justified in deleting the disallowance on account of expenditure u/s. 14A of the Act read with rule 8D of the IT Rules, 1962, covered under clause (f) of explanation 1 to section 115JB(2) of Income Tax Act, 1961?cts culled out form the proceedings before the lower authority regarding the filing of returns. The return of income was selected for Limited scrutiny and accordingly a notice u/s. 143(2) of the Act was issued to the assessee company on 10.08.2018 and the same has been duly served on the assessee. Subsequently, notices u/s.142(1) of "the Act" have been issued to the assessee through ITBA e-assessment portal from time to time, calling for certain details/ information." 4. Both the appeals are taken together as they belong to the same party on identical facts and the grounds of appeal are also same. 5. The appellant is a private limited company and engaged in port related activities and provided management consultancy, has e-filed return of income for A.Y. 2017-18 on 31.10.2018 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l year. It is further observed that the Hon'ble Supreme Court of India in case of M/s. Maxopp Investment Ltd. 91 Taxman 154 was pleased to hold that if expenditure incurred on earning dividend income, which is attributable to dividend income, has to be disallowed and cannot be treated as business expenditure in respect of the issues of strategic investment and stock in trade. Therefore, the strategic investments are not exempted from the definition of investment for applicability of Section 14A r.w.r. 8D of the Income Tax Rules, 1962. The following portion of the Ld. AO's order is relevant for appreciation of facts, is reproduced as under: 4.6. Further, clause (f) of Explanation 1 to section 115JB of the Act provides that the amount or amounts of expenditure relatable to any income to which section 10 (other than the provisions contained in clause (38) thereof) or section or section 12 apply has to be added to the net profit for the purpose of computation of Book Profit u/s.115JB of the Act. Having regard to the above provisions of the Act, the amount of Rs. 2,77,00,000/- is hereby added back to the book profit u/s.115JB of the Act. Reliance in this regard is placed on the decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the exempt income u/s 14A of the Act. Therefore, the AO invoked the provisions of section 14A and made the disallowance of Rs. 2,77,00,000/- under Rule 8D of Income Tax Rules. 4.8 I have perused the material placed on record. In the impugned assessment years, the assessee submitted that No Dividend Income or Long-Term Capital gains on sale or Redemption is earned either on the Investment in Unquoted Equity Shares of Subsidiary nor Unquoted Growth Mutual Funds has been earned by the appellant, the income which is exempt u/s 14A of the Act. The above facts were not disputed by the AO. The AO made the addition placing reliance on the Circular No.5/2014 of the CBDT dated 11.02.2014. Hon'ble High Court of Delhi in the case of Pr. Commissioner of Income Tax Vs. IL &FS Energy Development Company Ltd. reported in 250 Taxman 0174 considered the Board Circular and held that the Circular cannot override the express provisions of section 14A r.w. Rule 8D of I.T. Rules. After considering various decisions, Hon'ble High Court of Delhi held that no disallowance u/s 14A of the Act was called for in case of no exempt income earned by the assessee, in the relevant assessment years. 4. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he settled principle of law by various Hon'ble High Courts as no exempt income was earned or received for the relevant Previous year. Therefore, the provisions of section 14A r.w.r. 8D was not attracted for both the relevant years of these appeals. The Ld. AR has referred and relied upon the following cases in support of his arguments. * Case No. 1: Principal Commissioner of Income Tax Vs. Era Infrastructure India Ltd. [2022] 141 taxmann.com 288 (Delhi), Order dated 20.07.2022, wherein the Hon'ble High Court was pleased to hold that the amendment of Section 14A by inserting an explanation would take effect from 01.04.2022 and will accordingly applied in relation to the A.Y. 2022-23 and subsequent years. The Hon'ble High Court while referring and relying upon the Hon'ble Supreme Court in Sedco Forex International Drill Inc. Vs. CIT [2005] 149 Taxmann 352/279 ITR 310 has held that 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 changed the law as it earlier stood. The Hon'ble High Court concluded in para 8 as under: "8. Consequently, this Court is of the v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case, and in law, the ITAT is justified in deleting the addition of Rs. 78,84,387/under clause (f) of Explanation 1 to Section 115JB relying upon the decision in the case of Goetze (India) Ltd. v/s. CIT (2009) 32 SOT 101 (Del.), which has been followed by ITAT, Mumbai in the cases referred to in para 5 of the impugned order without appreciating that the above decision in the case of Goetze (India) Ltd. was rendered by the ITAT, Delhi Bench on completely distinguishable set of facts, peculiar to the said case?" 3. So far as Question (a) is concerned, we find that the Tribunal has merely followed the decision of this Court in Godrej & Boyce Manufacturing Co. Ltd. v/s. DCIT 328 ITR 81, directing the Assessing Officer to work out the disallowance on a reasonable basis and not under Rule 8D under the Income Tax Rules for the Assessment Year 200708. The Tribunal has merely followed the decision of the jurisdictional High Court and no fault can be found with the same. Accordingly, no substantial question of law arises in Question (a). Hence dismissed. 4. So far as Question (b) is concerned, the impugned order of the Tribunal followed its decision in M/s. Essar Teleholdings Ltd. v/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . the Ld. CIT(A) has dealt with the said circular in para no. 4.8 as under: -, "4.8. ...The AO made the addition placing reliance on the Circular No.5/2014 of the CBDT dated 11.02.2014. Hon'ble High Court of Delhi in the case of Pr. Commissioner of Income Tax Vs. IL &FS Energy Development Company Ltd. reported in 250 Taxman 0174 considered the Board Circular and held that the Circular cannot override the express provisions of section 14A r.w Rule 8D of I.T. Rules. After considering various decisions, Hon'ble High Court of Delhi held that no disallowance u/s 14A of the Act was called for in case of no exempt income earned by the assessee, in the relevant assessment years." 14. Further in para 4.10 and 4.11 in the order, of the Ld. CIT(A) has observed as under: "4.10 Further, in the case of PCIT Vs Delhi International Airport Pvt. Ltd. (Delhi High Court) Appeal Number: ITA 380/2022 Date of Judgement/Order: 06/10/2022 Related Assessment Year: 2010-11. The Hon'ble (Delhi High Court) observed, present case is covered by the Division Bench judgment in Cheminvest Ltd. vs. CIT, [2015] 61 com 118 (Delhi), wherein this Court has held that the expression 'does not form part of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4A of "the Act" cannot be added for arriving at book profit for the purpose of Section 115JB of "the Act". Para 4 of the judgment can be quoted and relied with profit which is as under: - 4. "So far as Question (b) is concerned, the impugned order of the Tribunal followed its decision in M/s. Essar Teleholdings Ltd. v/s. DCIT in ITA No. 3850/Mum/2010 to held that an amount disallowed under Section 14A of the Act cannot be added to arrive at book profit for purposes of Section 115JB of the Act. The Revenue's Appeal against the order of the Tribunal in M/s. Essar Teleholdings (supra) was dismissed by this Court in Income Tax Appeal No.438 of 2012 rendered on 7th August, 2014. In view of the above, question (b) does not raise any substantial question of law." 5. For the above discussions, we are of the considered view that there is no illegality in the impugned order passed by the Ld. CIT(A) wherein the order of the Ld. AO was set aside and disallowances made by the Ld. AO were deleted. The finding recorded herein with respect to the A.Y. 2017-18 will be applicable mutatis mutandis for the A.Y. 2018-19 also. 6. We do not find any merit in appeal and both the grounds of appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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