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TMI Blog2024 (11) TMI 1191X X X X Extracts X X X X X X X X Extracts X X X X ..... ethora of judgments of the various Hon ble High Courts. The Hon ble High Court of Delhi in the case of PCIT vs. McDonald s India (P) Ltd. [ 2018 (11) TMI 1057 - DELHI HIGH COURT] had the occasion to consider a similar issue and decided in favour of the assessee and against the revenue. Contention of the revenue that post amendment, brought by Finance Act, 2022, the provisions of Section 14A has been amended and disallowance can be made even if there is no exempt income - The Hon ble High Court of Delhi in the case of PCIT vs. Era Infrastructure (India) Ltd [ 2022 (7) TMI 1093 - DELHI HIGH COURT] has held that Amendment made by Finance Act, 2022 to section 14A by inserting a non-obstante clause and Explanation will take effect from 1-4-2022 and cannot be presumed to have retrospective effects . Moreover, within the memorandum explaining the provision of Finance Bill, 2022, it has been categorically mentioned that This amendment will take effect from 01/04/2022 . Accordingly, appeals of the assessee are allowed. Addition on account of ESOP expenses - CIT(A) deleted the additions - HELD THAT:- Since the decision of the Special Bench of the ITAT Bangalore in Biocon Ltd [ 2013 (8) TMI 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4A of the Act on the ground the respondent-assessee had not earned any exempt income during the assessment year. 3. The Tribunal in the impugned order on the said aspect has observed: 4. Having heard both the sides and perused the relevant material on record, we find that the legal position is no more res integra in view of the judgment of the Hon'ble jurisdictional High Court in the case Cheminvest Ltd v. CIT (2015) 378 ITR 33 (Del), wherein it has been held that if there is no exempt income, there can be no question of making any disallowance u/s 14A. Similar view has been taken by the Hon'ble jurisdictional High Court in CIT v. Holcim India P. Ltd. (2014) 90CCH 081-Del-HC. In view of these binding precedents providing for not making any disallowance u/s 14A in the absence of any exempt income, we hold in principle that no disallowance be made in case of Nil exempt income. 4. The impugned order and reasoning follows the judgment of the Delhi High Court in Cheminvest Ltd. v. CIT [2015] 378 ITR 33/234 Taxman 761/61 taxmann.com 118 and CIT v. Holcim India (P.) Ltd. [2015] 57 taxmann.com 28 (Delhi). Similar view has been taken by several High Court including the Punjab Haryan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dinate Bench of this Court, vide judgment dated 23.12.2016, rejected the plea of the Revenue advanced in that behalf. 11.2 As a matter of fact, a perusal of the judgment would show that the Revenue had sought to argue that because exempt income could be earned in future years, therefore, recourse could be taken to the provisions of Section 14A of the Act, to disallow expenditure. In other words the stand taken by the Revenue was irrespective of the fact whether or not income was earned in the concerned assessment year expenditure under Section 14A could be disallowed against anticipated income. 11.3 Pertinently, the Division Bench in Redington (India)Ltd. (supra) case has repelled this precise argument. 12. The Division Bench, in our view, quiet correctly held that, the computation of total income, in terms of Section 5 of the Act, is made qua real income and not, vis- a-vis, notional income. 12.1 The Division Bench went on to hold that Section 4 of the Act brings to tax, that income, which is relatable to the assessment year in issue. The Division Bench, thus, held that where no exempt income is earned in the previous year, relevant to the assessment year in issue, provisions of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s.14A was inserted providing that no deduction shall be allowable in respect of expenditure incurred in relation to the earning of income exempt from taxation. As observed by the Supreme Court in the judgment in the case of Commissioner of Income-tax v. Walfort Share and Stock Brokers (P) Ltd. [2010] 326 ITR 1 '.... The mandate of s.14A is clear. It desires to curb the practice to claim deduction of expenses incurred in relation to exempt income against taxable income and at the same time avail of the tax incentive by way of an exemption of exempt income without making any apportionment of expenses incurred in relation to exempt income.' 10. The provision this is clearly relatable to the earning of actual income and not notional or anticipated income. The submission of the Department to the effect that s.14A would be attracted even to exempt income 'includable' in total income would entail the assessment of notional income, assumed to be exempt in the future, in the present assessment year. The computation of total income in terms of s.5 of the Act is on real income and there is no sanction in law for the assessment of admittedly notional income, particularly in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the IT Rules, 1962? (ii) Whether on the facts and in the circumstances of the case and in law, Hon'ble ITAT was justified in confirming the order of the Ld. CIT(A) to restrict the disallowance to Rs. 1.16 crore without appreciating the fact that by doing this, Hon'ble ITAT has allowed the application of rule 8D(2)(ii) of the IT Rules, 1962 in the case of the assessee even when it has not earned any exempt income? 7.1. And the Hon ble High Court answered as under:- 4. Respondent in its return of income for the assessment year under consideration declared total loss of Rs. (-) 10,16,33,795/-. The case was selected for scrutiny and thereafter subjected to scrutiny assessment. Assessing Officer noted that assessee had made investment of Rs. 7.90 Crores in shares of Kohinor CTNL Infrastructure Co. Ltd. which was held to be strategic investment for which assessee would receive future benefits. Notwithstanding the fact that the assessee had earned no exempt income for the relevant previous year, Assessing Officer made disallowance to the extent of Rs. 6,95,98,750/- under section 14A of the Act. 5. Aggrieved by the aforesaid, assessee preferred appeal before the Commissioner of Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in the total income during the relevant previous year for the purpose of disallowing any expenditure incurred in relation to the said income. It was clarified that section 14A will not apply if no exempt income is received or receivable during the relevant previous year. 9. This view has been followed in several decisions by this Court. In fact in Pr. CIT v. Man Infraprojects Ltd. [IT Appeal No. 259 of 2017, dated 9-4-2019], this Court followed the decision of the Delhi High Court in Cheminvest Ltd. (supra). It was further noted in MAN Infraprojects Ltd. that the decision of the Delhi High Court was challenged by the revenue before the Supreme Court by fling SLP but the SLP was dismissed. 10. In the light of the above, we hold that no substantial question of law arises from the order of the Tribunal. The appeal is devoid of merit and is accordingly, dismissed. 8. Considering the facts of the case in totality, in light of the decisions discussed hereinabove, we direct the AO to delete the impugned disallowance from the captioned assessment years. 8.1. Before parting, the contention of the revenue that post amendment, brought by Finance Act, 2022, the provisions of Section 14A of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AT Bangalore in the case of Biocon Ltd. (supra). The AO sought directions from the JCIT u/s 144A of the Act and the JCIT directed the AO that since the revenue has preferred the appeal against the order of the Special bench of ITAT Bangalore in the case of Biocon Ltd. (supra), the AO may decide accordingly. Finding that the issue was sub judice before the Hon ble High Court, the AO made addition of ESOP expenses. 12. When the addition was agitated before the ld. CIT(A), the decision of the Hon ble High Court had come and following the same, the ld. CIT(A) deleted the additions. 13. Since the decision of the Special Bench of the ITAT Bangalore has been affirmed by the Hon ble Karnataka Hight Court, which has been rightly followed by the ld. CIT(A), we do not find any reason to interfere with the findings of the ld. CIT(A). Accordingly, the captioned appeals by the revenue are dismissed. 14. In the result, appeals filed by the assessee in I.T.A. No. 4246/Mum/2024, I.T.A. No. 4248/Mum/2024, I.T.A. No. 4249/Mum/2024, I.T.A. No. 4250/Mum/2024, I.T.A. No. 4252/Mum/2024 I.T.A. No. 4254/Mum/2024 are allowed and the appeals filed by the revenue in I.T.A. No. 4364/Mum/2024, I.T.A. No. 4365/M ..... X X X X Extracts X X X X X X X X Extracts X X X X
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