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Facts
The Revenue appealed against the CIT(A)'s deletion of disallowance made under section 14A read with Rule 8D for AY 2014-15 & 2015-16. The core contention was whether disallowance under section 14A could be made even in the absence of exempt income, considering the Explanation added to section 14A. The Revenue conceded that the assessee did not derive any exempt income in these assessment years.
Held
The Tribunal dismissed the Revenue's appeals, holding that disallowance under section 14A does not apply when there is no exempt income, relying on the Bombay High Court decision. It further clarified that the Explanation to section 14A, inserted by the Finance Act, 2022, is prospective and not retrospective, thus not applicable to the assessment years 2014-15 & 2015-16.
Key Issues
Whether disallowance under Section 14A read with Rule 8D can be made in the absence of exempt income, and whether the Explanation to Section 14A applies retrospectively to AY 2014-15 and 2015-16.
Sections Cited
Section 14A, Rule 8D, Section 143(3), Finance Act, 2022
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Income Tax Appellate Tribunal, MUMBAI BENCH “G”, MUMBAI
Before: SHRI SATBEER SINGH GODARA & SHRI OMKARESHWAR CHIDARA
Income Tax Officer 14(3)(1), M/s. Supreme Realty Room No.554, Pvt. Ltd., Aayakar Bhawan, Gr Floor, HDIL Tower, Vs. New Marine Lines, Anant Kanekar Marg, Mumbai – 400 020 Mumbai Maharashtra-400051 PAN: AALCS0761J (Appellant) (Respondent) Present for: Assessee by : None Revenue by : Dr. Kishor Dhule, CIT DR & Shri Manish Ajudiya, Sr. AR. Date of Hearing : 18 . 07 . 2024 Date of Pronouncement : 24 . 07 . 2024 O R D E R Per : Satbeer Singh Godara, Judicial Member: These Revenue’s twin appeals & 2068/M/2024, for assessment years 2014-15 & 2015-16 arise against the National Faceless Appeal Centre(NFAC) Delhi’s as many DIN & order No.ITBA/ NFAC/S/250/2023- 24/1061253799(1) & No.ITBA/NFAC/S/250/2023-24/ 1061253141(1) both dated 21.02.2024, in proceedings under section 143(3) of the Income Tax Act, 1961 (in short ‘the Act’).
Case called twice. None appears at assessee’s behest. It is accordingly proceeded ex-parte.
The Revenue’s former lead appeal for A.Y. 2015-16 raises the following sole substantive ground:
“Whether on the facts & circumstances of case and in law the CIT(A) erred in deleting the disallowance made u/s.14A ignoring the fact that the disallowance has to be made even if there is no exempt income during the year considering the Explanation added to section 14A which makes it mandatory even when there is no exempt income and language of Explanation makes it clear that it is applicable retrospectively.”
The Revenue’s latter appeal also appears to be raising the very substantive grievance since the only exception herein is that of the quantum of section 14A r.w.Rule 8D disallowance of Rs.1,84,27,407/-.
We proceed further and put the Revenue to the clinching question of the quantum of assessee’s exempt income derived in both these assessment years. The Revenue is indeed more than fair; that the assessee has not derived any such exempt income in these twin assessment years. That being the case, we find no merit in the Revenue’s instant identical sole Ltd. (2017) 85 taxmann.com 13 (Bom.) that the impugned disallowance does not apply in absence of any exempt income.
The Revenue at this stage quotes the statutory Explanation to section 14A inserted by the Finance Act, 2022 w.e.f. 01.04.2022. This Revenue’s last argument is found to be devoid of any merit in light of Principal Commissioner of Income-tax v. Keti Construction Ltd. (2024) 162 taxmann.com 278 (MP) and PCIT vs. Era Infrastructure (India) Ltd. (2022)
144 taxmann.com 289 (Delhi) that the same carries only prospective than retrospective effect. We reiterate that our instant adjudication is confined to 2014-15 and 2015-16 only.
We accordingly reject the Revenue’s instant identical sole substantive grievance in very terms.
These Revenue’s twin appeals i.e. & 2070/M/2024 are dismissed in above terms. A cop of this common order be placed in the respective case files.
Order pronounced in the open court on 24.07.2024.