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TMI Blog2024 (9) TMI 1051X X X X Extracts X X X X X X X X Extracts X X X X ..... Sanjay Awasthi, Accountant Member For the Assessee : P.K. Himmat Singhka, AR. For the Department : Prabir Gupta Choudhury, Addl. CIT. ORDER PER SANJAY AWASTHI, ACCOUNTANT MEMBER: In this case, the appellant filed his return of income on 25.08.2014 showing an income of 8,72,340/-. The Assessing Officer (hereinafter referred to as ld. 'AO') found that there were investments to the tune of Rs. 29,95,83,000/- which had the potential to yield exempt income in the shape of dividends. Admittedly, during the year under consideration no exempt income was received by this assessee but the ld. AO relied on CBDT Circular No. 5/2014 dated 11.02.2014 to apply the provisions of Section 14A of the Income Tax Act, 1961 (in short the 'Act') ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowance under section 14A in absence of any exempt income during an assessment year: Section 14A of the Act provides that no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income that does not form part of the total income as per the provisions of the Act (exempt income). 2. Over the years, disputes have arisen in respect of the issue whether disallowance under section 14A of the Act can be made in cases where no exempt income has accrued, arisen or received by the assessee during an assessment year. 3. CBDT issued Circular No. 5/2014, dated 11/02/2014, clarifying that Rule 8D read with section 14A of the Act provides for disallowance of the expenditure even where tax payer in a particular ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iture 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. 6.3.3 It is to be noted here that though it has been specifically mentioned in respect of insertion of non-obstante clause in sub-section (1) t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eserves relief. The relevant extracts from the three authorities are as under: (i) Eveready Industries India Ltd.: 33. From the assessment order as also from the facts on record it appeared that during the relevant year the appellant did not earn any dividend from its investments made in shares of other bodies corporate. We also note that barring investment of about Rs. 5 lacs, the investments held by the appellant were in foreign subsidiaries from which no exempt dividend could have been earned. We also note that in the course of assessment the AO had specifically required the assessee to explain why disallowance u/s 14A of the Act should not be made. The assessee vide its letter dated 14.12.2016 had explained before the AO that no disallo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by the AO while passing the order u/s 143(3) of the Act was not only permissible in law but the said course was in conformity with the view expressed by the jurisdictional high court. Accordingly the impugned order of the Ld. Pr. CIT with reference to the reasons set out in clause (c) of the SCN is held to be unsustainable and accordingly set aside. Ground Nos. 8 9 are therefore allowed. (ii) Vardhman Chemtech (P.) Ltd.: Section 14A provides for disallowance of expenditure in relation to income not 'includible' in total income. [Para 7] The Tribunal while relying upon the judgment of this Court in CIT v. Lakhani Marketing Inc. [2014] 49 taxmann.com 257/226 Taxman 48 (Punj. Har.) (Mag.) had held that section 14A cannot be restore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment year 2013-14 - Whether in relevant assessment year, no disallowance could be made under section 14A if no exempt income was earned by assessee - Held, yes [Paras 9 and 10] [The Hon ble High Court relied on the order in the case of IL FS Energy Development Co. Ltd. and Cheminvest Ltd. v. CIT [2015] 378 ITR 33 (Delhi).] 3.1. Accordingly, the appellant gets relief on this point and the addition of Rs. 9,647/- is directed to be deleted. 3.1. Furthermore, the prospective operation of the clarificatory amendment vide Finance Act, 2022 has been dealt with in the case of Pr. CIT vs. Avantha Realty Ltd. reported in [2024] 164 taxmann.com 376 (Calcutta). Some portions from the head notes may be extracted as under: The Tribunal took note of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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