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2022 (8) TMI 904 - AT - Income TaxDisallowance u/s 14A r.w.r 8D - CIT-A restricted the disallowance to the extent of the exempt income - HELD THAT:- As in conformity with the judicial precedents, we find substantial merit in the conclusion drawn by the CIT(A) which essentially holds that Section 14A of the Act can be triggered only if assessee seeks to square off expenditure against the income which does not form part of total income under the Act and Section 14A of the Act cannot be invoked where no exempt income was earned in the relevant assessment years. Thus, without going into other aspect of contentions, in consonance with the judicial precedents, we do not see any infirmity in the conclusion drawn by the CIT(A) for non applicability of Section 14A of the Act in the facts of the case. The judgment rendered in Joint Investment Pvt. Ltd. [2015 (3) TMI 155 - DELHI HIGH COURT] thus clinches the issue in favor of assessee. Thus, the CIT(A) has rightly restricted the disallowance to the extent of the exempt income. Significantly, the Hon'ble Delhi High Court in the case of PCIT vs. M/s. ERA Infrastructure (India) Ltd. [2022 (7) TMI 1093 - DELHI HIGH COURT] had the occasion to examine the law on applicability of Section 14A having regard to the newly inserted Explanation to Section 14A as codified by Finance Act, 2022. The Hon'ble High Court held that the aforesaid Explanation cannot be presumed to be retrospective in operation. As a corollary, the law prevailing prior to the insertion of Explanation would continue to apply and shall not be guided by the Explanation being prospective. We therefore see no reason to interfere with the order of the CIT(A) which is in sync with extant law as expounded by judicial precedents. Appeal of revenue dismissed.
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