TMI Blog2022 (7) TMI 1450X X X X Extracts X X X X X X X X Extracts X X X X ..... Sridhar, Advocate For the Respondent : Shri AR. V. Sreenivasan, Addl.CIT ORDER PER MAHAVIR SINGH, VICE PRESIDENT: This appeal by the assessee is arising out of the order of Commissioner of Income Tax (Appeals)-8, Chennai in ITA No. 252/15-16 dated 28.11.2019. The assessment was framed by the ACIT, Circle 16(2), Hyderabad for the assessment years 2012- 13 u/s. 143(3) of the Income Tax Act, 1961 (hereinafter the Act ) vide order dated 18.02.2015. 2. The only issue raised by assessee in this appeal is as regards to the order of CIT(A) confirming the action of AO in disallowing expenses i.e., interest expenses under Rule 8D(2)(ii) amounting to Rs. 32,06,464/- and administrative expenses being 0.5% of average value of investment under Rule 8D(2)(iii) at Rs. 3,50,442/- thereby total disallowance of Rs. 35,56,906/- relatable to exempt income by invoking the provisions of section 14A of the Act. For this, assessee has raised the following grounds:- 1) Disallowance under Section 14A -Rs. 35,56,906/-: The Appellant has not earned any dividend income during the relevant Previous Year In this regard, the appellant relies upon the decision of M/s. Chettinad Lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect to the absence of tax exempt income in our particular year. It is also absurd to disallow the expenditure for one year for the presence of tax exempt income and to allow expenditure for the absence of tax exempt income in another year from the same investments. In view of the same, it is held that the decision of the Hon'ble Madras High Court in M/s. Redington India Ltd is held as overruled by the decisions of the Apex Court on section 14 in M/s Walfort Share and Stock Brokers P Ltd. (326 ITR 1) (SC), M/s. Godrej Boyce Manufacturing Co. Ltd. (394 ITR 449 (SC) as well as M/s. Maxopp Investments Ltd (Taxsutra 115 SC. 2018), which have had similar facts of tax exempt assets not yielding any income in the respective AYrs. Considering the same, the action of the Assessing Officer in disallowing an amount of Rs. 35,56,906/- u/s 14A is sustained. The grounds are rejected. Aggrieved, assessee is in appeal before the Tribunal. 4. Before us, ld.counsel for the assessee stated that the issue is covered by the decision of Jurisdictional High Court in the case of CIT v. Chettinad Logistics (P) Ltd., (2017) 80 taxmann.com 221, wherein the Hon ble High Court considering the decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vant financial year. 7. Per contra, Sri. T. Ravikumar appearing on behalf of the revenue drew our attention to the marginal notes of s.14 A pointing out that the provision would apply not only where exempted income is 'included' in the total income, but also where exempt income is 'includable' in total income. 8. He relied upon a Circular issued by the Central Board of Direct taxes in Circular No.5 of 2014 dated 11.2.2014 to the effect that s.14A was intended to cover even those situations whether there is a possibility of exempt income being earned in future. The Circular, at paragraph 4, states that it is not necessary for exempt income to have been included in the income of a particular year for the disallowance to be triggered. According to the Learned Standing Counsel, the provisions of s. 14A are made applicable, in terms of sub section (1) thereof to income 'under the act' and not 'of the year' and a disallowance under s. 14A r.w.Rule 8D can thus be effected even in a situation where a tax payer has not earned any taxable income in a particular year. 9. We are unable to subscribe to the aforesaid view. The provisions of section 14A we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asan, Addl.CIT relied on the Tribunal decision of Guwahati Bench, virtual hearing at Kolkata in the case of ACIT vs. Williamson Financial Services Ltd., in ITA Nos. 154 to 156/Gau/2019, order dated 06.07.2022, wherein in the Finance Act, 2022 amendment is brought in section 14A of the Act w.e.f. 01.04.2022 is held to be retrospective. The ld. Senior DR argued that the Guwahati Bench has considered the provisions of section 14A of the Act was introduced in the year 2001 with retrospective effect from the year 1962 to state that no deduction shall be granted towards an expenditure incurred in relation to income which does not form part of the total income. The method of identifying the expenditure incurred is prescribed under Rule 8D of the Income Tax Rules, 1962 (hereinafter the Rules). He argued that from its inception the applicability of this provision has always been a subject matter of litigation and one such point that has been often debated is regarding the disallowance of expenditure in the absence of exempt income. Finally, the Finance Act, 2022 has inserted an explanation to section 14A to clarify that bereft exempt income being earned in any year, the disallowance u/s. 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 717 has held that 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. The relevant extract of the said judgment is reproduced herein below: . .. 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 herein below:- . 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. 9. Though the judgment of this Court has been challenged and is pending adjudication before the Supreme Court, yet there is no stay of the said judgment till date. Consequent ..... X X X X Extracts X X X X X X X X Extracts X X X X
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