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TMI Blog2024 (9) TMI 87X X X X Extracts X X X X X X X X Extracts X X X X ..... a Infrastructure (India) Ltd[ 2022 (7) TMI 1093 - DELHI HIGH COURT] held that it is settled law that the assessment has to be made with reference to the law, which is in existence at the relevant time. Thus we find the facts and circumstances before the Hon ble High Court are similar to the facts on hand, since the year under consideration before us is 2017-18 and has no applicability of Explanation inserted to section 14A of the Act. Therefore, we hold that exercise of jurisdiction by the ld. PCIT under section 263 of the Act is not justified and accordingly the revision order passed under section 263 of the Act is set aside. Thus, grounds raised by the assessee are allowed. - Shri S.S. Viswanethra Ravi, Judicial Member And Shri Jagadish, Accountant Member For the Appellant : Shri S. Muralidhar, F.C.A. For the Respondent : Shri R. Clement Ramesh Kumar, CIT ORDER PER S.S. VISWANETHRA RAVI, JUDICIAL MEMBER: This appeal by the assessee is directed against the order dated 30.03.2024 passed by the ld. Principal Commissioner of Income Tax, Madurai under section 263 of the Income Tax Act, 1961 [ Act in short] for the assessment year 2017-18. 2. The assessee raised 9 grounds amongst whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inserting Explanation to section 14A of the Act by Finance Act, 2022 is applicable for assessment year 2022-23 and not to the assessment years prior to the amendment. 5. The ld. DR Shri R. Clement Ramesh Kumar, CIT vehemently opposed the submissions of the ld. AR and argued that the Assessing Officer did not apply his mind while completing the original assessment concerning the issue raised by the ld. PCIT under section 263 of the Act and the ld. PCIT rightly held the said assessment order is erroneous and prejudicial to the interest of the Revenue. Further, he argued that the amendment made to section 14A of the Act by Finance Act, 2022 is retrospective effect even though the assessee has not earned any exempt income during the year under consideration. He vehemently argued that the Assessing Officer is required to be made disallowance as required under law as contemplated in Finance Act, 2022. Further, he takes support of Circular No. 5/2014 issued by the CBDT on 11.02.2024, which clearly explains that the disallowance is required to be made even if there is no exempt income. He vehemently argued that the decision of the Hon ble High Court of Madras in the case of Redington India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made with reference to the law, which is in existence at the relevant time. For better understanding, the relevant part of the order from para 4 to 6 are reproduced herein below: 4. Learned counsel for the petitioner also submits that in view of the amendment made by the Finance Act, 2022 to Section 14A of the Act by inserting a non obstante clause and an explanation after the proviso, a change in law has been brought about and consequently, the judgments relied upon by the authorities below including PCIT vs. IL FS Energy Development Company Ltd (supra) are no longer good law. The amendment to Section 14A of the Act is reproduced hereinbelow:- Amendment of section 14A. In section 14A of the Income-tax Act, - (a) in sub-section (1), for the words For the purposes of , the words Notwithstanding anything to the contrary contained in this Act, for the purposes of shall be substituted; (b) after the proviso, the following Explanation shall be inserted, namely:- [Explanation.--For the removal of doubts, it is hereby clarified 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 ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents have urged the point before us. 10. In our view the 1999 Explanation could not apply to assessment years for the simple reason that it had not come into effect then. Prior to introducing the 1999 Explanation, the decision in CIT v. S.G. Pgnatale [(1980) 124 ITR 391 (Guj)] was followed in 1989 by a Division Bench of the Gauhati High Court in CIT v. Goslino Mario [(2000) 241 ITR 314 (Gau)]. It found that the 1983 Explanation had been given effect from 1.4.1979 whereas the year in question in that case was 1976-77 and said: (ITR p. 318) It is settled law that assessment has to be made with reference to the law which is in existence at the relevant time. The mere fact that the assessments in question has (sic) somehow remained pending on 1-4-1979, cannot be cogent reason to make the Explanation applicable to the cases of the present assessees. This fortuitous circumstance cannot take away the vested rights of the assessees at hand. 11. The reasoning of the Gauhati High Court was expressly affirmed by this Court in CIT v. Goslino Mario [(2000) 10 SCC 165 : (2000) 241 ITR 312] . These decisions are thus authorities for the proposition that the 1983 Explanation expressly introduced w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... insofar as it related to direct taxes. It said in paras 5.2 and 5.3. 5.2 The Act has expanded the existing Explanation which states that salary paid for services rendered in India shall be regarded as income earned in India, so as to specifically provide that any salary payable for the rest period or leave period which is both preceded and succeeded by service in India and forms part of the service contract of employment will also be regarded as income earned in India. 5.3 This amendment will take effect from 1-4-2000, and will accordingly, apply in relation to Assessment Year 2000-2001 and subsequent years. 16. The departmental understanding of the effect of the 1999 Amendment even if it were assumed not to bind the respondents under Section 119 of the Act, nevertheless affords a reasonable construction of it, and there is no reason why we should not adopt it. 17. As was affirmed by this Court in Goslino Mario [(2000) 10 SCC 165 : (2000) 241 ITR 312] 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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