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TMI Blog2024 (5) TMI 1540X X X X Extracts X X X X X X X X Extracts X X X X ..... tances of the case and in law, the Ld CIT(A) is justified in deleting the addition made u/s 14A on the ground that the assessee has not earned any exempt income by overlooking the clarification of legislative intent provided the CBDT vide Circular No. 5/2014 dated 11.02.2014 and to this effect an amendment was also made by Finance Act, 2022 by way of insertion of Explanation to Section 14A? 2. Whether the amendment made by the Finance Act, 2022 by way of insertion of Explanation u/s 14A will have effect only from A.Y. 2022-23 and subsequent assessment years or it will have effect even in respect of earlier assessment years pending on or after 01.04.2022?" 3. The brief facts are that Assessee Company is engaged in the business of sellin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 14A inserted by the Finance Act. 2022 can be treated to be clarificatory in nature, the Hon'ble Delhi High Court in the case of M/s. Era Infrastructure (India) Ltd. in ITA No. 204/2022 & CM APPL. 31445/2022 dated 20.07.2022 has held that the provisions cannot be treated to be retrospective. Hence, the claim of the appellant that disallowance u/s. 14A cannot exceed the exempt income is backed by judicial precedence and binding in nature. 12.2. However, it is observed that the assessee had suo-moto disallowed a sum of Rs.10.04,112/- as per Section 14A of the Act in Return of Income filed by the assessee. The assessee is the best judge of his business and accounting treatment given to a transaction. He had a bonafide believe that so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of M/s. Era Infrastructure Ltd wherein, the Hon'ble High Court after analyzing the amendment brought by the Finance Act 2022, in Section 14A by inserting a non-obstante clause and Explanation was inserted with effect from 01/04/2022 and after discussing the various jurisprudents held as under:- "8. Consequently, this Court is of the view that the amendment of section 14A, which is "for removal of doubts cannot be presumed to be retrospective even where such language is used, if it alters or changes the law as it earlier stood". 7. In so far as reliance placed by the ld. AO and ld. CIT(A) of CBDT Circular No.5 of 2014, the same has again been discussed and dealt by the Hon'ble Delhi High Court in PCIT vs. IL & FS Energy Deve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A and Rule 8D particularly when Rule 8D (1) uses the expression „such previous year‟. Further, it does not account for the concept of „real income‟. It does not note that under Section 5 of the Act, the question of taxation of „notional income‟ does not arise. As explained in Commissioner of Income Tax v. Walfort Share and Stock Brokers Pvt. Ltd [2010] 326 ITR 1 (SC), the mandate of Section 14A of the Act is to curb the practice of claiming deduction of expenses incurred in relation to exempt income being taxable income and at the same time avail of the tax incentives by way of exemption of exempt income without making any apportionment of expenses incurred in relation to exempt income. Consequently, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined that deduction is allowable even where income was not actually earned in the AY in question. This aspect of the matter was dealt with by this Court in M/s Cheminvest Ltd. (supra) where it reversed the decision of the Special Bench of the ITAT by observing as under: "20. Since the Special Bench has relied upon the decision of the Supreme Court in Rajendra Prasad Moody (supra), it is considered necessary to discuss the true purport of the said decision. It is noticed to begin with that the issue before the Supreme Court in the said case was whether the expenditure under Section 57 (iii) of the Act could be allowed as a deduction against dividend income assessable under the head "income from other sources". Under Section 57 (iii) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eduction under Section 57(iii) of the Act, where the expression used is "for the purpose of making or earning such income." Section 14A of the Act on the other hand contains the expression "in relation to income which does not form part of the total income." The decision in Rajendra Prasad Moody (supra) cannot be used in the reverse to contend that even if no income has been received, the expenditure incurred can be disallowed under Section 14A of the Act." 23. The decisions of the ITAT in ACIT v. Ratan Housing Development Ltd. (supra) and Relaxo Footwear Ltd. v. Addl. CIT (supra), to the extent that they are inconsistent with what has been held hereinbefore do not merit acceptance. Further, the mere fact that in the audit report for the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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