January 2023
Income — Computation of income — Disallowance of expenditure incurred on exempt income — Amendment providing for disallowance even if assessee has not earned exempt income — Amendment not retrospective — Not applicable for A.Y.: 2013-14 — Tribunal deleting disallowance on ground assessee had not earned exempt income — Proper.
By K. B. Bhujle, Advocate
66. Principal CIT vs. Era Infrastructure (India) Ltd.
[2022] 448 ITR 674 (Del.)
A.Y.: 2013-14
Date of order: 20th July, 2022
Section: 14A of ITA,1961
Income — Computation of income — Disallowance of expenditure incurred on exempt income — Amendment providing for disallowance even if assessee has not earned exempt income — Amendment not retrospective — Not applicable for A.Y.: 2013-14 — Tribunal deleting disallowance on ground assessee had not earned exempt income — Proper.The Tribunal deleted the disallowance made by the AO under rule 8D of the Income-tax Rules, 1962 r.w.s. 14A of the Income-tax Act, 1961 holding that no disallowance u/s 14A could be made if the assessee had not earned any exempt income.
On appeal by the Revenue, the Delhi High Court upheld the decision of the Tribunal and held as under:
“i) The Memorandum Explaining the Provisions of the Finance Bill, 2022 ([2022] 440 ITR (St.) 226) explicitly stipulates that the amendment made to section 14A of the Income-tax Act, 1961 will take effect from April 1, 2022 and will apply in relation to the A Y. 2022-23 and subsequent assessment years. The amendment of section 14A which is “for removal of doubts” cannot be presumed to be retrospective even where such language is used, if it alters or changes the law as it earlier stood.
ii) The Tribunal had not erred in deleting the disallowance made by the Assessing Officer under r
