TMI Blog2022 (12) TMI 159X X X X Extracts X X X X X X X X Extracts X X X X ..... JM For the Appellant : Sri.V.M.Veeramani, CA For the Respondent : Smt.J.M.Jammuna Devi, Sr.DR ORDER PER GEORGE GEORGE K, JM : This appeal at the instance of the assessee is directed against CIT(A) s order dated 27.07.2020. The relevant assessment year is 2013-2014. 2. Two issues are raised, namely, (i) disallowance of Rs.6,66,499 u/s 14A of the I.T.Act; (ii) disallowance of Rs.10,15,393 u/s 43B(f) of the I.T.Act. We shall adjudicate the above issues as under: Disallowance u/s 14A of the I.T.Act Rs.6,66,499 3. The Assessing Officer had disallowed a sum of Rs.6,66,499 by invoking the provisions of section 14A of the I.T.Act. The A.O. by placing reliance on the CBDT Circular No.5 of 2014 dated 11.02.2014, rejected the plea of the assessee that no disallowance u/s 14A of the I.T.Act is warranted, since for the relevant year it was not in receipt of any exempt income from the investments made. On further appeal, the CIT(A) confirmed the view taken by the A.O. 4. Aggrieved, the assessee has raised this issue before the ITAT. The learned AR contended that when no exempt income is earned during the year, disallowance u/s 14A of the I.T.Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the legislation clear and to make it free from any misinterpretation, it is proposed to insert an Explanation to section 14A of the Act to clarify that notwithstanding anything to the contrary contained in this Act, the provisions of this section shall apply and shall be deemed to have always applied in a case where exempt income has not accrued or arisen or has not been received during the previous year relevant to an assessment year and the expenditure 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. (emphasis supplied) 6. Furthermore, the Supreme Court in Sedco Forex International Drill. Inc. v. CIT, (2005) 12 SCC 71 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loyment, shall be regarded as income earned in India. The Finance Act, 1999 which followed the Bill incorporated the substituted Explanation to Section 9(1)(ii) without any change. 13. The Explanation as introduced in 1983 was construed by the Kerala High Court in CIT v. S.R. Patton [(1992) 193 ITR 49 (Ker)] while following the Gujarat High Court's decision in S.G. Pgnatale [(1980) 124 ITR 391 (Guj)] to hold that the Explanation was not declaratory but widened the scope of Section 9(1)(ii). It was further held that even if it were assumed to be clarificatory or that it removed whatever ambiguity there was in Section 9(1)(ii) of the Act, it did not operate in respect of periods which were prior to 1- 4-1979. It was held that since the Explanation came into force from 1-4-1979, it could not be relied on for any purpose for an anterior period. 14. In the appeal preferred from the decision by the Revenue before this Court, the Revenue did not question this reading of the Explanation by the Kerala High Court, but restricted itself to a question of fact viz. whether the Tribunal had correctly found that the salary of the assessee was paid by a foreign company. This Court di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 506] . But if it changes the law it is not presumed to be retrospective, irrespective of the fact that the phrases used are it is declared or for the removal of doubts . (emphasis supplied) 7. The aforesaid proposition of law has been reiterated by the Supreme Court in M.M Aqua Technologies Ltd. V. Commissioner of Income Tax, Delhi-III, 2021 SCC OnLine SC 575. The relevant portion of the said judgment is reproduced hereinbelow:- 22. Second, a retrospective provision in a tax act which is for the 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. This was stated in Sedco Forex International Drill. Inc. v. CIT, (2005) 12 SCC 717 as follows: 17. As was affirmed by this Court in Goslino Mario [(2000) 10 SCC 165] a cardinal principle of the tax law is that the law to be applied is that which is in force in the relevant assessment year unless otherwise provided expressly or by necessary implication. (See also Reliance Jute and Industries Ltd. v. CIT [(1980) 1 SCC 139].) An Explanation to a statutory provision may fulfil the purpose of clearing up an ambiguity in the main provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e disallowance made by the A.O. 10. Aggrieved, the assessee has raised this issue before the Tribunal. The learned AR s limited contention is that disallowance u/s 43B(f) of the I.T.Act is to be restricted to only a sum of Rs.5,73,740. 11. The learned DR was duly heard. 12. We have heard rival submissions and perused the material on record. During the course of hearing, the learned AR candidly admits that there is no grievance insofar as the disallowance u/s 43B(f) of the I.T.Act is concerned. However, the learned AR submitted that the disallowance should be restricted to Rs.5,73,740. The contentions of the learned AR for restricting the disallowance to Rs.5,73,740, are as follows:- The CIT(A) went wrong in confirming the disallowance of Rs.10,15,393 made by the assessing officer without considering the Ground no.5 of the Grounds of Appeal. The disallowance of Rs.10,15,393 was wrong since your appellant had debited to Profit and Loss Account for the year only a sum of Rs.6,08,591 and hence the disallowance should have been restricted to the amount claimed in the profit and loss account. Further, your appellant had paid a sum of Rs.34,851 during the year against the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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