TMI Blog2024 (3) TMI 537X X X X Extracts X X X X X X X X Extracts X X X X ..... 14A could not be made. Disallowance under Section 14A cannot exceed exempt income earned by assessee; thus where assessee had suo motu disallowed total exempt income under Section 14A, no further disallowance could be made by invoking Section 14A of the Act. See ABCI Infrastructure (P.) Ltd.[ 2023 (4) TMI 527 - ITAT GUWAHATI] Accordingly, in light of the aforesaid decisions, and the plain language of the Finance Act, 2022, which has held that the amendment shall apply from 01.04.2022, in our view, it cannot be held that while passing the assessment order, the Assessing Officer took a view which is contrary to the law thereby making the order erroneous and prejudicial to the interest of the Revenue. Further, notably, the decision of Williamson Financial Services Ltd. [ 2022 (7) TMI 451 - ITAT GAUHATI] on which reliance has sought to be placed by the D.R. had not been passed even on the date of passing of assessment order (30.12.2019) and also on the date passing of 263 order (02.02.2022). Further, the view taken by the Assessing Officer finds direct support from the decisions rendered by Hon ble Supreme Court on this issue and therefore, in our considered view, the assessment order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ides for disallowance of expenditure even when the taxpayer in a particular year has not earned any exempt income. Accordingly, the PCIT worked out the amount of disallowance Rule 8D r.w.s. 14A of the Act and was of the considered view that in terms of the above provisions, total disallowance under Section 14A of the Act amounting to Rs. 39,34,885/- should have been made by the Assessing Officer. Accordingly, PCIT was of the view that this has rendered the assessment order erroneous and prejudicial to the interests of the Revenue. 4. The assessee is in appeal before us against the aforesaid order passed by the PCIT. Before us, the assessee submitted that during the year under consideration the assessee has earned exempt income of Rs. 100 only from it s investments. This is evident from the copy of acknowledgement of return of income, computation of income and audited financial statements for the year under consideration. The first contention of the Counsel for the assessee was that in the instant facts, it is a well established principle of law that disallowance under Section 14A of the Act cannot exceed the exempt income. This view is supported by the decision of Hon ble Supreme C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verrule the Circulars issued by the Boards. Accordingly, the Counsel for the assessee submitted that in the instant facts in view of the above decisions, it is not a fit case for initiating 263 proceedings, since the Assessing Officer took a legally plausible view as duly supported by decision rendered by Hon ble Supreme Court of India and accordingly, the aforesaid order is neither erroneous nor prejudicial to the interest of the Revenue. 5. In response, the Ld. D.R. placed reliance in the case of ACIT vs. Williamson Financial Services Ltd. 140 taxmann.com 164 (Guwahati Tribunal) in which the ITAT has held that Explanation inserted by Finance Act, 2022 to Section 14A w.e.f. 01.04.2022 providing that provisions shall apply whether or not exempt income has accrued, arisen or received, is clarificatory in nature and thus, applicable retrospectively. The Ld. D.R. submitted that in this case the ITAT has correctly observed that whether Parliament has brought in Explanation to Section 14A of the act to remove prevailing doubts about interpretation of provisions of Section 14A and to overcome interpretation given by various High Courts regarding applicability of provisions of Section 14A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visages that there should be an actual receipt of income which is not includible in total income; hence, Section 14A will not apply where no exempt income is received or receivable during relevant previous year. The Ahmedabad ITAT in the case of Edelweiss Financial Advisors Ltd. (2021) 124 taxmann.com 361 (Ahmedabad - Trib.) held that disallowance of expenses under Section 14A r.w.r 8D could not exceed amount of exempted income. The Ahmedabad ITAT in the case of Addlife Investments (P.) Ltd. (2021) 124 taxmann.com 572 (Ahmedabad - Trib.) held that disallowances made under Section 14A r.w.r 8D could not exceed amount of exempt income earned by assessee during year. In the case of Asian Grantio India Ltd (2020) 113 taxmann.com 445 (Ahmedabad - Trib.) , the Ahmedabad ITAT held that Disallowance of expenses under Section 14A r.w.r. 8D of 1962 Rules cannot be made in absence of exempt income. 8. We further observe that the Delhi High Court in the case of Era Infrastructure India Ltd. 141 taxman.com 289 (Delhi High Court) has held that the amendment brought in by the Finance Act, 2022, to Section 14A by inserting a non-obstante clause and Explanation will take effect from 01.04.2022 and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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