THE DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-6(4), MUMBAI vs. INDIABULLS DISTRIBUTION SERVICES LIMITED, MUMBAI

ITA number 1552/M/2023 is filed by the Deputy Commissioner of income tax, Central Circle – 6 (4), Mumbai (the learned assessing officer) against the appellate order passed by The Commissioner Of Income Tax (Appeals) – 54, Mumbai (the learned CIT – A) for assessment year 2018 – 19 dated 16/2/2023 wherein the appeal filed by the assessee against the assessment order passed under section 143 (3) of The Income Tax Act, 1961( the act) dated 27/3/2021 By The Deputy Commissioner Of Income Tax was allowed.

Therefore the learned assessing officer is aggrieved with the order of the learned CIT – A stating that CBDT circular number 5/2014 and the explanation to section 14 A introduced with effect from 1/4/2022 has been ignored.

Fact shows that assessee is a company engaged in the business of underwriting/distribution of real estate projects. It filed its return of income on 10/10/2018 at a net loss of ₹ 240,635,477/– and book profit under section 115JB at ₹ 42,307,714/–. The return was revised on 28/3/2019 declaring loss of ₹ 198,816,077/–. The book profit remains the same. The return of income was picked up for scrutiny.

The learner assessing officer noted that assessee has a huge investment in equity shares and therefore the expenditure under section 14 A is disallowable. The assessee was questioned. The assessee submitted that

The learned AO is aggrieved with that and has preferred this appeal holding that there is a retrospective amendment to the income tax act and further there is a circular of central board of direct taxes to this effect that even if the assessee has not on any exempt income, the

Despite notice, none appeared on behalf of the assessee, therefore the issue is decided in absence of the assessee has per information available on record on merits of the case.

On careful consideration of the facts available on record as well as the argument of the learned departmental representative we find that the issue is squarely covered in favour of the assessee that there cannot be any disallowance under section 14 A of the act when assessee has not earned any exempt income. The honourable Delhi High Court in case of PCIT versus Era Infrastructure P Ltd [2022] 141 taxmann.com 289 (Delhi)/[2022] 288 Taxman 384 has held that Amendment made by Finance Act, 2022 to section 14A by inserting a non-obstante clause and Explanation will take effect from 1-4-2022 and cannot be presumed to have retrospective effects. Further the honourable Bombay High Court in Nirved traders private limited (ITA number 149 of 2017) dated 23/4/2019 that the disallowance under section 14 A was to be restricted to the tax-exempt income on during the year. Therefore, now it is an undisputed proposition for assessment year 2018 – 19 is that if the assessee has not earned any exempt income, no disallowance under section 14 A read with rule 8D can be made. In view of this we do not find any infirmity in the order of the learned CIT – A.

In the result, appeal of the learned AO is dismissed.