9911796707
TMI Blog2024 (11) TMI 1191X X X X Extracts X X X X X X X X Extracts X X X X ..... . The common grievance in all the six appeals by the assessee relate to the disallowance of expenditure u/s 14A r.w.r. 8D. The common factor in the appeals by the assessee is that the assessee has not earned any exempt income during the captioned assessment years. The basis for the impugned disallowance by the AO is the amendment brought in the Act which according to the AO was effective from the AYs under consideration whereas the contention of the assessee is that the amendment is prospective and is effective from 01/04/2022 and, therefore, not applicable in the captioned AYs and since it is an admitted fact that the assessee has not earned any exempt income during the captioned AYs under consideration, there is no question of any disallowance u/s 14A r.w.r. 8D. 4. After giving a thoughtful consideration to the orders of the authorities below and after finding that the assessee has not earned any exempt income during the captioned AYs, we are of the considered view that the issue is no more res integra in light of plethora of judgments of the various Hon'ble High Courts. 5. The Hon'ble High Court of Delhi in the case of PCIT vs. McDonald's India (P) Ltd. reported in [2019] 101 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. We have considered the said judgments, but do not think that there is any ground or reason to not follow the clear and categorical ratio of the decisions of the Delhi High Court in Cheminvest Ltd. (Supra) and Holcim India (P.) Ltd. (Supra)." 6. The Hon'ble High Court of Madras in the case of Commisioner of Income-tax, Central 1, Chennai v. Chettinad Logistics (P.) Ltd., reported in [2017] 80 taxmann.com 221 (Madras), considering the similar issue held as follows:- "10. In the instant case, there is no dispute that no income i.e., dividend, which did not form part of total income of the Assessee was earned in the relevant assessment year. 10.1 Therefore, to our minds, the addition made by the Assessing Officer by relying upon Section 14 A of the Act, was completely contrary to the provisions of the said Section. 10.2 Mr.Senthil Kumar, who appears for the Revenue, submitted that the Revenue could disallow the expenditure even in such a circumstance by taking recourse to Rule 8D. 10.3 According to us, Rule 8D, only provides for a method to determine the amount of expenditure incurred in relation to income, which does not form part of the total income of the Assessee. 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue 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 were inserted as a response to the judgments of the Supreme Court in Commissioner of Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue, in that matter and who is present in this Court, informs us that he had in fact argued that the Rule was clarifactory in nature and would apply retrospectively, and that, the Division Bench, therefore, discussed the impact of Rule 8D of the Rules. 15. However, it is, our view, as indicated above, independent of the reasoning given in Redington (India) Ltd. case (supra) that Rule 8D cannot be read in a manner, which takes it beyond the scope and content of the main provision, which is, Section 14 A of the Act. 15.1 Therefore, as adverted to above, Rule 8D, cannot come to the rescue of the Revenue. 15.2 In any event, the Tribunal, via, the impugned judgment has remitted the matter to the Assessing Officer. 15.3 Therefore, for the foregoing reasons, we are of the view, that no interference is called for qua the impugned judgment." 6.1. The SLP of the revenue was dismissed by the Hon'ble Supreme Court in [2018] 95 taxmann.com 250 (SC). 7. The Hon'ble High Court of Bombay in the case of PCIT vs. Kohinoor Project (P.) Ltd. 425 ITR 700 (Bombay), was seized with the following substantial question of law:- "(i) Whether on the facts and in circumstances of the case and in law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e under section 14A of the Act and, therefore, no disallowance could have been made by the Assessing Officer by invoking section 14A together with Rule 8D(2)(ii) of the Income-tax Rules, 1962. Tribunal relied upon the decision of the Delhi High Court in the case of Cheminvest Ltd. v. CIT [2015] 61 taxmann.com 118/234 Taxman 761/378 ITR 33 (Delhi); the decision of the Punjab and Haryana High Court in CIT v. Lakhani Marketing Inc. [2014] 49 taxmann.com 257/226 Taxman 45 (Mag.); and decision of the Allahabad High Court in the case of CIT v. Shivam Motors (P.) Ltd. [2015] 55 taxmann.com 262/230 Taxman 63 (All.) and observed that there is uniformity in the view that in case there is no exempt income claimed by the assessee in the return of income, no disallowance can be made by the revenue. Consequently, vide order dated 18-10-2016 Tribunal dismissed the appeal of the revenue. 7. Submissions made by learned counsel for the parties have been considered. 8. Section 14A of the Act deals with expenditure incurred in relation to income not includible in total income. As per sub-section (1) of section 14A, for the purpose of computing the total income, no deduction shall be allowed in res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sake of our convenience and at the concession of the rival representatives, we are taking the issue with respect to the facts of AY 2014-15. 10. On going through the notes on financial statements submitted by the assessee, the AO noticed that the assessee has paid Rs. 9,05,18,445/- to M/s. KKR Holding on account of Employees Stock Option. The assessee was asked to explain the allowability of ESOP expenses. The assessee explained as under:- "The said plan which is called as equity incentive plan is launched by KKR Holding LP (KKRH) a group entity of KCM. Under the said plan awards in the form of shares/ units of Kohlberg Kravis Roberts & Co. LP (KKRCo.LP), the ultimate holding company of the KKR group, is granted to employees of KKRCOLP & its group entities (which includes KCM). The said plan is offered to employees by the KKR group in order to employ, retain & motivate its employees. Hence, for the same reason even KCM offers Shares/ Units of KKRCo.LP to its employees under the said plan. For this purpose, every year KCM provides details of the relevant employee to KKRH for the allotment of the shares / units." 10.1. Strong reliance was placed on the following judicial pronou ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
