The officer says the 2022 Explanation to s.14A is clarificatory and applies to my old years. Is there High Court authority against that?
Yes, and from a Court joining a settled line. The Gauhati High Court held that the Explanation inserted in s.14A by the Finance Act 2022 is prospective, set aside the Guwahati Tribunal's view that it was clarificatory and therefore retrospective, and affirmed the Commissioner (Appeals), whose orders had capped the disallowance under s.14A read with Rule 8D at the income claimed as exempt. It reached that result by following six earlier decisions of the Delhi, Calcutta and Madhya Pradesh High Courts, and the revenue's counsel conceded the point before it.
Decided by the High Court (Gauhati High Court — Vijay Bishnoi, C.J. and N. Unni Krishnan Nair, J.) on 2024-09-24, reported as (2024) 301 Taxman 102 (Gauhati)(HC); [2024] 166 taxmann.com 607 (Gauhati); 341 CTR 359 / 242 DTR 537 / (2025) 482 ITR 628 (uncorroborated); I.T.A. Nos. 2, 4, 6 and 7 of 2024. It bears on section 14A, section Rule 8D, section 260A of the Income Tax Act 1961, in Deductions & Disallowances, Assessment & Scrutiny and How Tax Law Is Read matters.
The corpus already holds Era Infrastructure from the Delhi High Court, and this judgment expressly follows it along with five other High Court decisions, so it is best cited as confirmation that the position is settled rather than as an independent development. What it adds is specific: it is the appeal in which a Tribunal had gone the other way in a reported decision - (2022) 196 ITD 422 - which assessing officers still cite, and it reverses that decision at High Court level. It also ties the prospectivity point to the practical consequence, because the relief actually given came from affirming the Commissioner (Appeals), whose orders had confined the disallowance to the exempt income.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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The assessee was engaged in lease financing, financial advisory work and capital market operations and returned a loss. In scrutiny the Assessing Officer computed a disallowance under s.14A by applying Rule 8D rather than accepting the assessee's own estimate. The Commissioner (Appeals), by orders all dated 31 January 2019, upheld the invocation of s.14A read with Rule 8D but directed that the disallowance be restricted to the income claimed as exempt. On the revenue's appeals the Guwahati Tribunal, by a common order dated 6 July 2022, held that the Explanation inserted in s.14A by the Finance Act 2022 was clarificatory and therefore applied to the earlier years. The assessee appealed under s.260A, and the appeals were admitted on 9 February 2024 on two substantial questions of law. Four assessment years were in issue: 2009-10, 2012-13, 2013-14 and 2014-15, the facts of 2013-14 being taken as representative.
The insertion of the Explanation to s.14A by the Finance Act 2022 is prospective. The Tribunal's order was reversed and the CIT(A)'s order restored, so that the disallowance under s.14A read with Rule 8D could not exceed the income claimed as exempt for those years.
Counsel for the revenue admitted at the outset that, in view of the Memorandum explaining the provisions in the Finance Bill 2022, it is settled that the Explanation inserted in s.14A is prospective, which is one reason the judgment is short on independent analysis. The Court set the Memorandum out in full: it records the Board's circular of 11 February 2014 and the divergent judicial view, states the intention to clarify that s.14A applies and shall be deemed always to have applied where no exempt income accrued, and then states that the amendment takes effect from 1 April 2022 and applies in relation to assessment year 2022-23 and subsequent years. The engine of the reasoning is adopted from the Delhi High Court in Era Infrastructure, quoted at length, and through it from the Supreme Court in Sedco Forex International Drill and M.M. Aqua Technologies: a provision in a taxing statute which is expressed to be for the removal of doubts cannot be presumed to be retrospective if it alters or changes the law as it stood, because a clarificatory Explanation is read back into the main provision while one that changes the law is not. The Court then walked through the concurring authority of the Delhi, Calcutta and Madhya Pradesh High Courts and held the Explanation applicable prospectively, answering both substantial questions against the Tribunal. The relief followed from the disposal rather than from the prospectivity holding alone: the Tribunal's order was set aside and the orders of the Commissioner (Appeals) affirmed, and those orders had capped the disallowance at the exempt income on the authority of the Delhi decisions in Joint Investment and Moderate Leasing, in the second of which the revenue's leave petition was dismissed.
In view of the Memorandum Explaining the Provisions in the Finance Bill, 2022 and various decisions rendered by the different High Courts, we also hold that the Explanation inserted to Section 14A vide Finance Act, 2022 is applicable prospectively.
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Handle my notice → Ask a CA on WhatsAppYes, and from a Court joining a settled line. The Gauhati High Court held that the Explanation inserted in s.14A by the Finance Act 2022 is prospective, set aside the Guwahati Tribunal's view that it was clarificatory and therefore retrospective, and affirmed the Commissioner (Appeals), whose orders had capped the disallowance under s.14A read with Rule 8D at the income claimed as exempt. It reached that result by following six earlier decisions of the Delhi, Calcutta and Madhya Pradesh High Courts, and the revenue's counsel conceded the point before it. This was decided by the High Court (Gauhati High Court — Vijay Bishnoi, C.J. and N. Unni Krishnan Nair, J.) and bears on section 14A, section Rule 8D, section 260A of the Income Tax Act 1961. It is reported as (2024) 301 Taxman 102 (Gauhati)(HC); [2024] 166 taxmann.com 607 (Gauhati); 341 CTR 359 / 242 DTR 537 / (2025) 482 ITR 628 (uncorroborated); I.T.A. Nos. 2, 4, 6 and 7 of 2024. The corpus already holds Era Infrastructure from the Delhi High Court, and this judgment expressly follows it along with five other High Court decisions, so it is best cited as confirmation that the position is settled rather than as an independent development. What it adds is specific: it is the appeal in which a Tribunal had gone the other way in a reported decision - (2022) 196 ITD 422 - which assessing officers still cite, and it reverses that decision at High Court level. It also ties the prospectivity point to the practical consequence, because the relief actually given came from affirming the Commissioner (Appeals), whose orders had confined the disallowance to the exempt income. If it applies to you, the first step is this: For any year before AY 2022-23, take the prospectivity point first and the quantum point second, and cite both this decision and Era Infrastructure.
The assessee was engaged in lease financing, financial advisory work and capital market operations and returned a loss. In scrutiny the Assessing Officer computed a disallowance under s.14A by applying Rule 8D rather than accepting the assessee's own estimate. The Commissioner (Appeals), by orders all dated 31 January 2019, upheld the invocation of s.14A read with Rule 8D but directed that the disallowance be restricted to the income claimed as exempt. On the revenue's appeals the Guwahati Tribunal, by a common order dated 6 July 2022, held that the Explanation inserted in s.14A by the Finance Act 2022 was clarificatory and therefore applied to the earlier years. The assessee appealed under s.260A, and the appeals were admitted on 9 February 2024 on two substantial questions of law. Four assessment years were in issue: 2009-10, 2012-13, 2013-14 and 2014-15, the facts of 2013-14 being taken as representative. The matter was decided on 2024-09-24 by the High Court (Gauhati High Court — Vijay Bishnoi, C.J. and N. Unni Krishnan Nair, J.). On those facts the High Court held as follows. The insertion of the Explanation to s.14A by the Finance Act 2022 is prospective. The Tribunal's order was reversed and the CIT(A)'s order restored, so that the disallowance under s.14A read with Rule 8D could not exceed the income claimed as exempt for those years.
Counsel for the revenue admitted at the outset that, in view of the Memorandum explaining the provisions in the Finance Bill 2022, it is settled that the Explanation inserted in s.14A is prospective, which is one reason the judgment is short on independent analysis. The Court set the Memorandum out in full: it records the Board's circular of 11 February 2014 and the divergent judicial view, states the intention to clarify that s.14A applies and shall be deemed always to have applied where no exempt income accrued, and then states that the amendment takes effect from 1 April 2022 and applies in relation to assessment year 2022-23 and subsequent years. The engine of the reasoning is adopted from the Delhi High Court in Era Infrastructure, quoted at length, and through it from the Supreme Court in Sedco Forex International Drill and M.M. Aqua Technologies: a provision in a taxing statute which is expressed to be for the removal of doubts cannot be presumed to be retrospective if it alters or changes the law as it stood, because a clarificatory Explanation is read back into the main provision while one that changes the law is not. The Court then walked through the concurring authority of the Delhi, Calcutta and Madhya Pradesh High Courts and held the Explanation applicable prospectively, answering both substantial questions against the Tribunal. The relief followed from the disposal rather than from the prospectivity holding alone: the Tribunal's order was set aside and the orders of the Commissioner (Appeals) affirmed, and those orders had capped the disallowance at the exempt income on the authority of the Delhi decisions in Joint Investment and Moderate Leasing, in the second of which the revenue's leave petition was dismissed. In the words reproduced by the source cited on this page: "In view of the Memorandum Explaining the Provisions in the Finance Bill, 2022 and various decisions rendered by the different High Courts, we also hold that the Explanation inserted to Section 14A vide Finance Act, 2022 is applicable prospectively."
It was decided by the High Court on 2024-09-24 and is reported as (2024) 301 Taxman 102 (Gauhati)(HC); [2024] 166 taxmann.com 607 (Gauhati); 341 CTR 359 / 242 DTR 537 / (2025) 482 ITR 628 (uncorroborated); I.T.A. Nos. 2, 4, 6 and 7 of 2024. Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 14A, section Rule 8D, section 260A, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The insertion of the Explanation to s.14A by the Finance Act 2022 is prospective. The Tribunal's order was reversed and the CIT(A)'s order restored, so that the disallowance under s.14A read with Rule 8D could not exceed the income claimed as exempt for those years. It arises in Deductions & Disallowances, Assessment & Scrutiny and How Tax Law Is Read matters, on section 14A, section Rule 8D, section 260A of the Income Tax Act 1961, and was decided by Gauhati High Court — Vijay Bishnoi, C.J. and N. Unni Krishnan Nair, J.. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. If the officer relies on the Guwahati Tribunal decision in this very assessee's case, point out that it has been reversed by the High Court. Put the exempt income figure for the year on the record, since the cap argument depends on it. Do not carry the argument into AY 2022-23 and later years — on this reasoning the Explanation does apply to them.
Still good law. Followed by name and citation in Indus Valley Properties (P.) Ltd. v. ITO [2025] 175 taxmann.com 412 (Bang.)(Trib.), 9 June 2025, whose case review records this judgment as followed at para 13; that Bench reproduced paras 13 to 20 of it and deleted the disallowance on its authority. The only other recorded treatment is the Gauhati High Court's own expunction of the last paragraph of this judgment, in Sanjay Garg v. Williamson Financial Services Ltd. [2025] 178 taxmann.com 220 / [2026] 484 ITR 400 (Gauhati), 1 September 2025, which is recorded as modifying it and which says in terms that the expunction is not to be construed as a comment on the merits. No reversal and no leave petition is disclosed. Two further Tribunal decisions of 2026 cite it and were not opened. Note for completeness that the leave-petition outcome once recorded here for the question deferred in Era Infrastructure - reported as CIT (E) v. Ghaziabad Development Authority - was not re-tested and should be treated as unverified rather than repeated as established. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The judgment was read in full and the facts, the reasoning and the quoted sentence now come from its numbered paragraphs. What was expunged, and why, can now be stated precisely. The application was made by the two Members of the Tribunal whose order had been set aside; their counsel told the Court in terms that he was not going into the merits. The Court applied the settled rule that harsh or disparaging remarks are not to be made against persons or authorities whose conduct comes before a court unless really necessary for the decision as an integral part of it, held that the remarks in the last paragraph could be harmful to the applicants given that they had decided as they deemed proper, and expunged that paragraph alone, adding that the expunction should not be construed as a comment on the merits. The s.14A reasoning is untouched. The judgment as reproduced on commercial databases has not been corrected and still carries the expunged paragraph. Of the citations carried above, the Taxman and taxmann.com references are corroborated; the CTR, DTR and ITR references are not contradicted but could not be corroborated. The date of the Delhi judgment in Era Infrastructure is printed inconsistently in the record - this judgment gives 20 July 2022 and the expunction decision 16 July 2022 - and 16 July 2024 belongs to a later Delhi order in that matter. It does not tell you how s.14A operates for AY 2022-23 onwards, where the Explanation does apply and the exempt-income cap is the very thing Parliament set out to remove. Nor does it decide whether the non obstante clause separately inserted in s.14A(1) by the same Finance Act is itself prospective: the Memorandum set out in the judgment records that insertion as a distinct amendment, and the holding is expressed about the Explanation alone. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The insertion of the Explanation to s.14A by the Finance Act 2022 is prospective. The Tribunal's order was reversed and the CIT(A)'s order restored, so that the disallowance under s.14A read with Rule 8D could not exceed the income claimed as exempt for those years.
Every entry in this library links to where it was found, so you can check it yourself rather than take our word for it.
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