NDTV NETWORKS LTD.,NEW DELHI vs. DCIT, CIRCLE- 18(1), NEW DELHI

4. That the CIT(A) erred on facts and in law in confirming disallowance of Rs.2,78,000 made by the AO under Section 14A of the Act read with Rule-8D of the Income Tax Rules, 1962 without appreciating that the Appellant did not earn any exempt income during the relevant year. 2 | P a g e

4.1 Without prejudice, that CIT (A) erred in confirming the action of the AO in invoking the provisions of Section 14A of the Act without appreciating that no satisfaction was recorded having regard to the books of accounts of the Appellant, that certain expenditure was actually incurred for earning any exempt income. That the appellant seeks leave to add, alter, amend or withdraw any ground of appeal before or at the time of hearing of this appeal.”

Association, the main object of the assessee company has been stated to be to carry on the business of development, establishment and running of networks and distribution of non-news and current affairs television channels. arranging band placements, seeding of set-top boxes etc. within India and abroad across different mediums etc. Another of the main objects is to produce, buy, sell, import, export or otherwise deal in television programs etc. and to carry on the business of consultancy and management of projects in News and broadcasting sectors. As noted by the AO it is seen that no income from these activities is apparent from the financial statements of the assessee even though the said company was incorporated on 10/06/2010.From the balance sheet it is also noted that the assessee has no fixed assets, both tangible as well as intangible. Hence it cannot be said that the assessee was pursuing its main objects as per the Memorandum of Association. The view of the AO that the assessee has no income which is chargeable under the head 'Profits and gains of business or profession' is upheld. Further, as has also been pointed out by the AO, once there is no income which is chargeable under the head 'Profits and gains of business or profession', deductions which are specific to the said head of income are not admissible. Hence, the disallowance made is upheld. Since expenditure claimed under the head 'Profits and gains of business or profession' has been disallowed, there is no question of set-off of the loss against interest income. Grounds of appeal

Nos. 1 and 2 are dismissed.”

5. Suffice to say, there would be hardly any dispute between the parties that both the learned lower authorities have rejected the assessee’s impugned business expenditure claim on the ground that it was neither carrying on any business within the meaning of section 2(13) of the Act, nor there was any income declared under the head “profits and gains from business or profession”. The Revenue’s case accordingly is that once the assessee was only a company, holding investments in subsidiaries, it could not be held as entitled for the expenditure claim in question. This is what leaves the assessee aggrieved. 4 | P a g e

6. We have given our thoughtful consideration to the assessee’s and Revenue’s vehement rival submissions. We find no reason to sustain the impugned disallowance. Learned counsel first of all takes us to the Assessing Officer’s section 143(3) assessment for AY 2012-13 accepting this very expenditure claim. He next quotes various judicial precedents i.e Mazagaon Dock Ltd. Vs. CIT (1958) 34 ITR 368 (SC); CIT Vs. Upasana Hospital, (1997) 225 ITR 845 (Ker); CIT Vs. Distributors (Baroda) (P.) Ltd. (1972) 83 ITR 377 (SC); CIT Vs. Amalgamations (P.) Ltd. (1977) 108 ITR 895 (Madras) and ESSAR Investments Ltd. Vs. DCIT (2006) 7 SOT 378 (Mum) that a business expenditure could not be disallowed even in an instant of a holding company having made investments in subsidiary as such an activity could indeed be treated as business itself. We find merit in the assessee’s instant first and foremost substantive ground to delete the impugned disallowance, in very terms.

7. Next comes the second substantive issue between the parties regarding correctness of both the lower authorities’ action disallowing the assessee’s directors’ remuneration on the ground that the same was over and above that held allowable under the companies law. Learned counsel, inter alia, invites our attention to 5 | P a g e the assessee’s alternate plea that it had already reversed the alleged excess expenses in financial year 2014-15 and got assessed for the same. That being the case, we are of the considered view that the instant issue deserves to be restored back to the learned Assessing Officer for his afresh appropriate verification/computation. Ordered accordingly.

8. Lastly comes the assessee’s third substantive ground that both the learned lower authorities have erred in law and on facts in making section 14A read with Rule 8D disallowance of Rs.2,78,000/- despite the fact that it had not derived any exempt income in the relevant previous year.

9. The Revenue vehemently quotes section 14A Explanation inserted by the Finance Act, 2022 w.e.f. 01.04.2022 that the actual except income being derived is no more the condition precedent for the purpose of making the disallowance herein. We find no merit in the Revenue’s foregoing arguments as not only the jurisdictional high court in Chemnivest Ltd. vs. CIT; (2015) 61 taxmann.com 118 (Del.) has settled the issue prior to the above amendment that the impugned disallowance does not get attracted in absence of any exempt income but also in PCIT v. Era Infrastructure (India) Ltd.

6 | P a g e (2022) 448 ITR 674 (Del), their lordships have held that the above statutory amendment carries only prospective effect. We thus accept the assessee’s instant last ground, in very terms.