Explanation Inserted to S. 14A of Income Tax Act vide Finance Act, 2022 Applicable Prospectively: Gauhati HC

The Gauhati High Court ruled that the explanation inserted in Section 14A of the Income Tax Act by the Finance Act 2022 should apply prospectively, not retrospectively. Section 14A disallows expenses related to tax-exempt income. The explanation, which sought to clarify certain ambiguities, was debated in this case as the taxpayer contended that it should not apply to previous years' assessments. The court agreed, stating that applying the amendment retrospectively would be unfair and legally unsound. This judgment has significant implications for businesses and individuals facing scrutiny under Section 14A.