2016 (3) TMI 367 - AT - Income Tax

Tribunal Upholds CIT(A)'s Decisions on Varied Grounds, Directs Fresh Consideration

The Tribunal consistently upheld the CIT(A)'s decisions across multiple assessment years, rejecting the Revenue's challenges on various grounds including ... Addition on account of sale of carbon credit - capital receipt or Revenue receipt - Held that:- As decided in case of CIT Vs. My Home Power Ltd. [2014 (6) TMI 82 - ANDHRA PRADESH HIGH COURT] carbon credit is not an offshoot of business but an offshoot of environmental concerns and no assets is generated in the course of business but it is generated due to environmental concerns and therefore, it was held that the Tribunal has correctly held that this is a capital receipt and it cannot be business receipt of income Addition on account of low value of bagasse claimed and sold the same in open market - Held that:- ince the assessee has shown some sales at ₹ 150 per qtl., some at ₹ 130 per qtl. and some at ₹ 120 per qtl. also, it cannot be said that lesser sales proceed of bagasse has been shown by the assessee without bringing some evidence on record, suggesting such reduction in sales proceeds accounted for by the assessee by showing lesser amount of sale proceeds as against actual realization of higher sales proceeds because if the assessee is doing so, then there is no need to show such high sale price of ₹ 120 to ₹ 150 per quintal for about 51,500 Quintals out of total sale of 615,631 Quintals. This has been deleted by the Ld. CIT(A) on this basis that there is no evidence in the possession of the Assessing Officer which goes to prove that the assessee had actually sold the declared bagasse at ₹ 80 per qtl. or at a higher rate then what has been declared by the assessee and in the absence of such information or evidence, no addition can be made in the hands of the assessee MAT computation - inclusion or exclusion of receipt of carbon credits - Held that:- The receipt on account of transfer of carbon credit which is held to be a capital receipt needs to be excluded from profit as per P&L account for the present year while computing the book profit u/s 115JB of the Act. Issues Involved:1. Nature of receipt on account of sale of carbon credit.2. Disallowance of miscellaneous expenses.3. Disallowance of building and machinery repairs.4. Addition on account of suppressed production and sale of bagasse.5. Addition on account of expenditure in the nature of capital expenditure made under the head molasses tank.6. Addition on account of low value of bagasse claimed and sold.7. Addition under the head provision of interest on extra levy price.8. Applicability of Section 115JB (Minimum Alternate Tax).Issue-wise Detailed Analysis:1. Nature of Receipt on Account of Sale of Carbon Credit:The Revenue challenged the deletion of the addition made by the AO on account of sale of carbon credit, treating it as income of the assessee. The Tribunal upheld the CIT(A)'s decision, referencing the Andhra Pradesh High Court judgment in CIT Vs. My Home Power Ltd., which held that carbon credit is a capital receipt and not a business receipt. Therefore, this ground of the Revenue was rejected for AYs 2008-09 and 2009-10.2. Disallowance of Miscellaneous Expenses:The AO made disallowances on miscellaneous expenses, which the CIT(A) restricted to Rs. 1,00,000/-. The Tribunal found that similar issues were raised in AY 2007-08, where the Tribunal upheld the CIT(A)'s decision due to lack of specific defects in the accounts. This precedent was followed for AYs 2008-09, 2009-10, 2010-11, and 2011-12, rejecting the Revenue's grounds and the assessee's cross objections seeking further relief.3. Disallowance of Building and Machinery Repairs:Similar to miscellaneous expenses, the AO's disallowance on building and machinery repairs was restricted by the CIT(A) to Rs. 1,00,000/-. The Tribunal upheld this decision based on the precedent set in AY 2007-08, where no specific defects were pointed out by the AO. This was applied consistently for AYs 2008-09, 2009-10, 2010-11, and 2011-12.4. Addition on Account of Suppressed Production and Sale of Bagasse:The AO estimated the yield of bagasse at 36%, higher than what the assessee disclosed. The Tribunal referenced its decision in AY 2007-08, where the yield was estimated at 34%, and since the disclosed yield in the present years was around 34%, no addition was justified. This ground was rejected for AYs 2008-09 and 2009-10, and the AO was directed to adopt a 34% yield for AY 2010-11.5. Addition on Account of Expenditure in the Nature of Capital Expenditure Made Under the Head Molasses Tank:The CIT(A) deleted the addition made by the AO, following the Madras High Court and Supreme Court judgments, which held that the fund for molasses tank was a statutory obligation and not includible in the assessee's total income. The Tribunal upheld this decision for AY 2008-09.6. Addition on Account of Low Value of Bagasse Claimed and Sold:The AO's addition based on the low value of bagasse sold was deleted by the CIT(A) due to lack of evidence proving higher sales proceeds. The Tribunal upheld this decision, finding no infirmity in the CIT(A)'s order for AY 2008-09.7. Addition Under the Head Provision of Interest on Extra Levy Price:The CIT(A)'s deletion of the addition was not a speaking order. The Tribunal set aside this issue and remanded it back to the CIT(A) for a fresh decision by way of a speaking and reasoned order for AY 2008-09.8. Applicability of Section 115JB (Minimum Alternate Tax):The assessee contended that Section 115JB was not applicable due to business loss. The Tribunal found that the provisions of Section 115JB apply regardless of the business loss, as the comparison is between the tax payable under normal provisions and the specified percentage of book profit. The Tribunal also held that the receipt on account of transfer of carbon credit, being a capital receipt, needs to be excluded from book profit for AY 2009-10. This ground was consistently rejected for AYs 2009-10, 2010-11, and 2011-12.Conclusion:The Tribunal's decisions were consistent across the assessment years, applying precedents and legal principles to uphold or reject the grounds raised by both the Revenue and the assessee. The appeals and cross objections were disposed of accordingly, with some issues remanded for fresh consideration.