Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2024 (2) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2024 (2) TMI 337 - AT - Income TaxDisallowance u/s 14A r.w.r. 8D - AO while calculating the disallowance has taken the average value of all the investments including those investments which did not yield any tax exempt dividend income - HELD THAT:- As observed that earlier as per decisions of the various High Courts of the country, the proposition was laid down that where the assessee has not derived any tax exempt income from investments, then no disallowance is attracted u/s 14A of the Act. Disallowance of administration expenditure u/s 14A of the Act r.w.r 8D(2)(iii) of the Income Tax Rules, 1962, the Hon’ble Delhi High Court in the case of “Joint Investments Private Ltd. vs. CIT” [2022 (7) TMI 1093 - DELHI HIGH COURT] and further in the case of ‘ACB India Limited [2015 (4) TMI 224 - DELHI HIGH COURT] has held that for computing the disallowance u/s 14A of the Act r.w.r. 8D(2)(iii) of the Income Tax Rules, 1962, the average value of only the investments yielding non-taxable income have to be considered and not the entire investment. An Amendment has been brought to section 14A of the Act by Finance Act 2022, whereby, an Explanation to section 14A has been inserted, wherein, it has been clarified that notwithstanding anything to the contrary contained in the Act, the provisions to section 14A of the Act shall apply and shall be deemed to have always applied for the purpose of making disallowance in respect of expenditure incurred in relation to earning of tax exempt income irrespective of the fact that any tax exempt income has not actually accrued or received during the relevant year. A/R, has relied upon the recent decision in the case of PCIT Vs. Era Infrastructure (India) Ltd. [2022 (7) TMI 1093 - DELHI HIGH COURT] wherein, it has been held that the aforesaid explanation inserted to Section 14A of the Act is applicable prospectively. Assessing Officer is accordingly directed to consider only the investments yielding tax exempt income for computation of disallowance under Rule 8D(2)(iii) of the Income Tax Rules 1962. Appeal of the assessee stands partly allowed.
|