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Facts
The assessee filed a return declaring nil income for AY 2017-18. The AO made an addition of Rs. 4,75,14,520/- under Section 14A read with Rule 8D. The CIT(A) confirmed this addition. The assessee appealed to the Tribunal.
Held
The Tribunal noted that the issue is covered by a coordinate bench's decision, which followed the Delhi High Court's ruling that amendments to Section 14A are prospective. Since no exempt income was earned, the addition was deleted.
Key Issues
Whether the disallowance under Section 14A read with Rule 8D is sustainable when no exempt income has been earned by the assessee. Applicability of amendments to Section 14A.
Sections Cited
14A, Rule 8D
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Before: SMT. BEENA PILLAI & SMT. RENU JAUHRI
सुिवधई की िधरीख / Date of Hearing 14.05.2025 घोर्णध की िधरीख/Date of Pronouncement 22.05.2025 आदेश / O R D E R PER RENU JAUHRI [A.M.] :- This appeal is filed by the assessee against the order of the Learned Commissioner of Income-tax (Appeals), Mumbai/National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”] dated 13.02.2025 passed u/s. 250 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for Assessment Year [A.Y.] 2017-18.
A.Y. 2017-18 JSW Infrastructure Ltd. 2. The assessee has raised the following grounds of appeal:
1. On the facts and circumstances of the case as well as in law, the Learned CIT(A) has erred in passing the ex-parte order without granting sufficient opportunity of being heard to the appellant.
2. On the facts and circumstances of the case as well as in law, the Learned CIT(A) has erred in confirming the action of the Learned Assessing Officer in disallowing a sum of Rs.4,75, 14,520/-u/s.14A of the Income Tax Act, 1961 by invoking the Rule 8D of the Income Tax Rules, 1962, without considering the facts and circumstances of the case.
3. On the facts and circumstances of the case as well as in law, the Learned CIT(A) has erred in confirming the action of the Learned Assessing Officer in making disallowance u/s.14A of the Act despite the fact that no exempt income was earned by the Appellant during the year under consideration, without considering the facts and circumstances of the case.”
3. Brief facts of the case are that the assessee filed return declaring nil income on 29.11.2017 for AY 2017-18. The case was selected for complete scrutiny, and the assessment was completed after making an addition of Rs. 4,75,14,520/- u/s 14A r.w. Rule 8D for expenses incurred towards earning exempt income.
4. Aggrieved with the order of Ld. AO, the assessee preferred an appeal before Ld. CIT(A). Vide order dated 13.02.2025, the addition made by Ld. AO u/s 14A r.w Rule 8D was confirmed.
5. Aggrieved with the order of Ld. CIT(A), the assessee preferred an appeal before the Tribunal.
6. At the outset, Ld. AR pointed out that the issue is squarely covered by the order of the coordinate bench in assessee’s own case for AY 2018-19 in ITA No. 6015/Mum/2024. On identical facts, the coordinate bench has held as under:
A.Y. 2017-18 JSW Infrastructure Ltd. “4.5 As far as issue in dispute in the matter is concerned, we note that the Co-ordinate Benches of the Tribunal have followed the decisions of the Hon'ble Delhi High Court in the case of Era Infrastructure Ltd. (supra) and held the applicability of the amendment to section 14A of the Act as prospective. The relevant finding of the Tribunal in the case of M/s Welspun Steel Ltd. in for assessment year 2015-16 is reproduced as under: 6. We have considered the rival submissions and perused the material on record. It is admitted position that the Hon'ble Bombay High Court and the Hon'ble Supreme Court have clearly held that disallowance under Section 14A of the Act cannot exceed the amount of exempt income earned by the Assessee during the relevant previous year. The stand of the Revenue is that amendments to Section 14A introduced by the Finance Act 2022 apply retrospectively and therefore, the aforesaid judgments no longer hold good. Whereas the contention of the Assessee is that the said amendments to Section 14A of the Act are prospective in nature and therefore, the order of CIT(A), passed by following the binding judgments of the Hon'ble Jurisdictional High Court, cannot be set aside by the applying the amended provisions of Section 14A of the Act.
We note that the Mumbai Bench of the Tribunal has, in the case of Assistant Commissioner of Income Tax- Circle 3(1)(1) Vs Bajaj Capital Ventures (P.) Ltd.: [2022] 140 taxmann.com 1 (Mumbai -Trib.)[29-06-2022) and also in the case of Assistant Commissioner Of Income Tax Vs. K Raheja Corporate Services Private Limited (ITA No. 2521 to 25271, held that the amendments to Section 14A introduced by the Finance Act 2022 shall apply from Assessment Year 2022-23 and onwards. Further, Hon'ble Delhi High Court in the case of Principal Commissioner of Income-Tax (Central) 2 Vs. M/s Era Infrastructure India Ltd: [ITA No. 204 of 2022, decided on 20.07.2022) has rejected the contention of the Revenue that amendments to Section 14A introduced by the Finance Act 2022 shall have retrospective effect. Accordingly, Ground No.1 raised by the Revenue is dismissed." 4.6 Respectfully, following the finding of the Tribunal (supra), we set aside the finding of the Ld. CIT(A) on the issue in dispute and delete the addition made by the Assessing Officer. The ground No. 1 and 2 of the appeal of the assessee are accordingly allowed.
7. Since there is no exempt income in this year also, and respectfully following the decision of the coordinate bench, we hold that the addition of Rs. A.Y. 2017-18 JSW Infrastructure Ltd. 4,75,14,520/- u/s 14A r.w. Rule 8D is not justified, and the same is hereby deleted.
In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 22.05.2025.