AI OCR 
TaxTMI 
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2018 (8) TMI 857
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....electronically on 29.11.2012 and 30.11.2013 declaring total income at Rs. 6, 51, 35, 70, 910/- and book profit under section 115JB of the Act of Rs. 7, 01, 62, 08, 886/- in the assessment year 2012-13. The return was revised on 31.3.2013 whereby the assessee has disclosed total income under the regular provision at Rs. 6, 13, 41, 16, 740/-. In the assessment year 2013-2014, it has declared income at Rs. 5, 08, 02, 43, 451/- under normal provisions and book profit under section 115JB at Rs. 5, 92, 25, 89, 084/-. In this year also the assessee has revised its return of income on 31.3.2014 and declared total income under the normal provision at Rs. 5, 02, 43, 93, 321/-. The case of the assessee in both the assessment years were selected for scrutiny assessment and notice under section 143(2) were served upon the assessee. It is pertinent to note that the assessee-company at the relevant time was engaged primarily in manufacturing of chemicals and gases. After hearing, the ld.AO has passed draft assessment orders in both the years under section 143(3) r.w.s. 144C(1) on 29.3.2016 and 29.12.2016 respectively. The assessee filed objections before the ld.DRP who has disposed of the objecti....
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....asonably but can be applied only if the assessee's method of identifying expenditure and adding back the same is not to the satisfaction of the AO. In support of its contentions, it put reliance upon the decision of Hon'ble Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd. Vs. DCIT, (2010) 328 ITR 81. Assessee further contended that it has more interest free funds than the investment. It filed details of funds available with it and how the investments have been made. In support of its contentions, he relied upon the decision of the Hon'ble Gujarat High Court in the case of CIT Vs. UTI Bank Ltd., 215 Taxman 8. It also relied upon the decision of Hon'ble Bombay High Court in the case of CIT Vs. Reliance Utilities & Power Ltd. 313 ITR 340. The ld.AO was not satisfied with the contentions of the assessee and he proceeded to disallow the expenditure incurred in accordance with Rule 8D of Income Tax Rules 1962. The working made by the AO in both these years read as under: Assessment Year : 2012-13 Interest Expenses for computation u/s 14A r.w. Rule 8D Rs. 40, 09, 78, 000/- A Investment as on 31.3.2012 (1) Rs. 3, 48, 15, 42, 000/- Investmen....
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....the assessee of other expenses on estimation basis (Without following Rule 8D of Income Tax Rules-1962) 75, 00, 000 TOTAL DISALLOWANCE 8, 62, 75, 494 7. Dissatisfied with the proposed disallowance in the draft assessment order the assessee filed objection before ld.DRP. It reiterated its contentions as were raised before the AO. It contended that major investments are strategic investments i.e. in subsidiary companies and joint ventures. It has also pointed out that in the assessment years 2012-13, investment has been reduced in comparison to the investment stood as on 31.3.2011. Investment in March, 2011 was at Rs. 584.53 whereas it has been gone done to 351.76 crores as on 31.3.2012, though again in the assessment year 2013-14 investment has been increased. Basically, the assessee has raised two fold of contentions. It has submitted that its capital and reserves are much higher than the amount of investments therefore, no disallowance out of interest expenditure ought to be made. For buttressing this contention, it has filed a chart showing reserve and capital as much higher than the investment. It has also demonstrated that no borrowing has bee....
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....t expenditure cannot be calculated on notional basis for making disallowance. He further contended that the ld.DRP has not made any reference to this plea, rather devoted its energy in explaining the outcome of section 14A read with Rule 8D of the Income Tax Rules. According to the ld.counsel, there is no dispute about applicability of section 14A on the case of the assessee. Dispute relates to quantification of the expenditure required to be made. In this connection, the ld.DRP ought to have taken into consideration the interest free funds available with the assessee, and thereafter ought to have decided, whether any expenditure could be allocated for earning exempt income. 9. In his next fold of contention, he submitted that in the assessment year 2012-13 exact tax free dividend income was Rs. 1.55 crores out of total Rs. 233 lakhs considered by the AO. In the assessment year 2013-14 such dividend income was Rs. 43.35 lakhs. The Revenue authorities have made disallowance of expenditure at Rs. 7.43 cores in the assessment year 2012-13 and Rs. 4.93 crores in the assessment year 2013-14. He contended that in the case of Correctch Energy P.Ltd., 223 taxmann 130, the Hon'ble Gujara....
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.... the correctness of the claim of the assessee in respect of such expenditure in relation to income which does not form part of the total income under this Act. (3) The provisions of sub-section (2) shall also apply in relation to a case where an assessee claims that no expenditure has been incurred by him in relation to income which does not form part of the total income under this Act : Provided that nothing contained in this section shall empower the Assessing Officer either to reassess under section 147 or pass an order enhancing the assessment or reducing a refund already made or otherwise increasing the liability of the assessee under section 154, for any assessment year beginning on or before the 1st day of April, 2001. 12. A perusal of this section would indicate that sub-section-1 contemplates that deduction of expenditure incurred by an assessee in relation to income which does not form part of taxable income shall not be allowed. Sub-section (2) casts an obligation on the AO to first examine the claim made by the assessee in its books of accounts and if he is not satisfied with the correctness of the claim, then he would work out the expenditure for d....
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....essee had raised a loan it can be presumed that the investments were from the interest-free funds available. In our opinion the Supreme Court in East India Pharmaceutical Works Ltd.'scase (supra) had the occasion to consider the decision of the Calcutta High Court in Woolcombers of India Ltd.'s case (supra) where a similar issue had arisen. Before the Supreme Court it was argued that it should have been presumed that in essence and true character the taxes were paid out of the profits of the relevant year and not out of the overdraft account for the running of the business and in these circumstances the appellant was entitled to claim the deductions. The Supreme Court noted that the argument had considerable force, but considering the fact that the contention had not been advanced earlier it did not require to be answered. It then noted that in Woolcombers of India Ltd.'s case (supra) the Calcutta High Court had come to the conclusion that the profits were sufficient to meet the advance tax liability and the profits were deposited in the overdraft account of the assessee and in such a case it should be presumed that the taxes were paid out of the profits of the year and....
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....tax free income in a year then no disallowance u/s.14A can be made. This explication was amplified and employed subsequently by ITAT to construe that working of expenditure for disallowance u/s.14A should not exceed more than dividend income itself. In the case of Joint Investment Pvt. Ltd. Vs. CIT (ITA No.117/2015 decided on 25.2.2015) Hon'ble Delhi High Court has observed that by no stretch of imagination can section 14A or Rule 8D be interpreted so as to mean that entire tax exempt income is to be disallowed. The ITAT, Ahmedabad has restricted the disallowance equivalent to exempt income (ITA No.3266/Ahd/2015, ITA No.261/Ahd/2012, ITA No.1281/Ahd/2012 decided on 7.12.2016. The ld.counsel for the assessee agreed for disallowance to the extent of dividend income earned by it in both the years. However, that would give an excessive relief to the assessee in the assessment year 2013-14 because assessee itself has disallowed a sum of Rs. 75 lakhs whereas dividend income is only Rs. 43.35 lakhs. Thus, we confirm disallowance to the extent of Rs. 1.55 crores (Rupees One Crore Fifty Five Lakhs) in the assessment year 2012-13, which is equivalent to the dividend income, whereas in the as....
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....his issue in the assessment year 2013-14 reads as under: "10.3 In the case of Viraj Profiles Ltd. [2015] 64 taxmann.com 52 (Mum Trib), the Hon'ble Bench has elaborately discussed the issue and held that the disallowance is liable to be calculated as per Rule 8D of the Rules. After discussing the decisions which have also been relied on by the appellant, the Hon'ble Bench has concluded that; "In view of our foregoing discussion, we find no infirmity with the orders of the AO and we hold that the AO has rightly disallowed the expenditure of Rs. 73, 07, 018/- by invoking the provisions of Section 14a of the Act read with the Rule 8D of Income Tax Rules. 1962 for computing book profit u/s. 115JB(2) of the Act read with clause (f) to Explanation 1 to clause 115JB(2) of the Act. We, therefore, set aside the orders of the CIT(A) and restore the orders of the AO. We order accordingly. 10.4 In the case of CIT(Central-II) Vs Goetze (India) Limited, the Hon'ble Delhi High Court has in ITA No. 1179/2010 vide order dated 09.12.2013, held that the disallowance u/s 14A is to be taken into consideration for the purposes of calculating book profits u/s 115JA/1....
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.... Delhi High Court diagonally opposite to each other. One referred by the ld.DRP also in the present case, rendered in the case of CIT Vs. Geotze India Ltd. (supra) and other in the case of Pr.CIT Vs. Bhushan Steel. ITAT, Special Bench has reproduced both these orders in Vireet Investment P.Ltd. (supra) and thereafter it considered as to which decision ought to be followed by a subordinate authority. The department advanced an argument that in the case Bhushan Steel, Hon'ble Delhi High Court failed to consider subsequent decision of CIT Vs. Geotze India Ltd. (supra). However, the Tribunal after placing reliance upon the decision of Hon'ble Supreme Court in the case of CIT Vs. Vegetable Products Ltd., 88 ITR 192 (SC) and other decisions has held that it is incumbent upon it follow the decision of Hon'ble Delhi High Court in the case of Bhushan Steel. In this case, Hon'ble Delhi High Court has held as under: "However. Ld. Senior Counsel has relied on the decision in the case of Bhushan Steel Ltd. (supra) wherein it has been held as under:- "ITA 593/2015 PR. CIT ..........Appellant Through: Mr. N.P. Sahni, Senior Standing counsel with Mr. Nitin Gulati, Advocate.....
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....book profit u/s 115JB of the Act is not as per law without appreciating that the amount disallowable under section 14A is covered under clause (f) of Explanation to section 115JB(2) and, thus, said amount has to be added back while computing amount of book profits? 22. The Hon'ble Gujarat High Court has replied this question as under: "7. So far as issue Nos. (iii) and (iv) are concerned, the learned counsel for the assessee has relied on the decision of this court in the case of Commissioner of Income-tax-I v. Gujarat State Fertilizers & Chemicals Ltd., reported in (2013) 358 ITR 323 (Gujarat) where this court has held in paragraph Nos. 6 to 6.5 this court has observed as under: "6. So far as the fourth question is concerned, it pertains to addition of Rs. 1, 14, 43, 040/- under Section 115JB of the Act being the expenditure estimated on earning of dividend income under Section 14A of the Act. 6.1 The Assessing Officer on referring to the said provision of Section 115JB(2) of the Act added the said amount considering that any amount of expenditure relatable to the income exempted under Section 10 of the Act shall need to be added in the profit shown in the ....
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....on in the case of Bengal Finance & Investments P.Ltd. (supra) and replied as under: (b) Whether on the facts and in the circumstances of the case, and in law, the ITAT is justified in deleting the addition of Rs. 78, 84, 387/ under clause (f) of Explanation 1 to Section 115JB relying upon the decision in the case of Goetze (India) Ltd. v/s. CIT (2009) 32 SOT 101 (Del.), which has been followed by ITAT, Mumbai in the cases referred to in para 5 of the impugned order without appreciating that the above decision in the case of Goetze (India) Ltd. was rendered by the ITAT, Delhi Bench on completely distinguishable set of facts, peculiar to the said case?" ....... 4 So far as Question (b) is concerned, the impugned order of the Tribunal followed its decision in M/s. Essar Teleholdings Ltd. v/s. DCIT in ITA No. 3850/Mum/2010 to held that an amount disallowed under Section 14A of the Act cannot be added to arrive at book profit for purposes of Section 115JB of the Act. The Revenue's Appeal against the order of the Tribunal in M/s. Essar Teleholdings (supra) was dismissed by this Court in Income Tax Appeal No.438 of 2012 rendered on 7th August, 2014. In view of t....
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....purpose of allowing deduction, the rate should be adopted equivalent to the rate at which Madhya Gujarat Vij Company Ltd. ("MGVCL" for short) and Dakshin Gujarat Vij Company Ltd. ("DGVCL" for short) etc. are supplied the electricity to the assessee's manufacturing unit. The ld.AO did not adjudicate the issue in the assessment year 2012-13 for the enhancement of deduction in the draft assessment order. Before the ld, DRP, the assessee raised specific objection about the nonadjudication of the issue by the AO. Also it raised that enhanced rate should be adopted for determining the value of electricity at which deduction under section 80IA has to be granted. The ld.DRP rejected the contentions of the simply for the reason that the AO cannot entertain any claim for allowing deduction resulting in reduction in the total income returned by the assessee. The ld.DRP placed reliance upon the decision of the Hon'ble Supreme Court in the case of Goetze (India) Ltd. (supra). It further rejected the contentions of the assessee that the identical issue was decided by the ld.CIT(A) in the assessment year 2011-12 and the matter is pending before the Tribunal. Thus, according to the DRP, the issue ....
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....y ought to be applied. Before us, the ld.counsel for the assessee contended that this controversy has been silenced by the Hon'ble Gujarat High Court in the case of CIT, Gujarat Alkalis and Chemicals Ltd. He placed on record copy of the Hon'ble High Court's decision and contended that for the purpose of computation of deduction admissible under section 80IA market price of the electricity supplied by a CPP is to be determined by adopting rate at which manufacturing unit has been purchasing the electricity from the open market. The ld.DR, on the other hand relied upon the order of the DRP, but unable to controvert the contentions raised by the assessee. 30. We have duly considered rival submissions and gone through the record carefully. Before us the dispute has two dimensions. In the first fold of dispute the issue is, whether the claim of the assessee for enhanced deduction can be entertained during the assessment proceedings by way of a letter. The ld.DRP after putting reliance on the judgment of Hon'ble Supreme Court in the case of Geotze India Ltd (supra) did not accept the claim of the assessee in the assessment year 2012-13. It has been brought to our notice that such c....
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.... of Rs. 5.40 ps. charged by Gujarat Electricity Board (" GEB" for short) was inclusive of 8 paise per unit of electricity duty. This component of electricity duty the Assessing Officer discarded for the purposes of ascertaining market value of the electricity generated by the CPP Unit and supplied to its general unit. 4. CIT (Appeals) confirmed the view of the Assessing Officer on the same line of reasoning. The Tribunal, however, on further appeal by the assessee, reversed the orders passed by the Revenue authorities referring to and relying upon the decisions of other Tribunals. The Tribunal was of the opinion that the market value of the electricity supplied by the CPP Unit to the general unit would be the same being charged by GEB from the consumers. 5. Counsel for the Revenue contended that the component of 8 paise per unit was the electricity duty which GEB was not authorized to retain but had to pass on to the Government. In essence, GEB was only collecting 8 paise per unit as electricity duty for and on behalf of the Government. He submitted that the market value of the electricity should be reckoned on Rs. 5.32 ps. per unit as was done by the Revenue auth....
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....ked out cost of such electricity generation. In fact CIT(Appeals) in terms recorded that Rs. 4.51 was computed as the reasonable value of the electricity generated by eligible unit of assessee. This amount included Rs. 4.17 per unit which was the cost of electricity generation and Rs. 0.34 per unit which was duty paid by the assessee to GEB for such power generation. Thus the sum of Rs. 4.51 per unit only represented the cost of electricity generation to the assessee. In Section 80IA(8) of the Act what is required to be ascertained is the market value of the goods transferred by the eligible business, when such transfer is by eligible business to another non eligible business of the same assessee and the consideration recorded in the accounts of the eligible business does not correspond to market value of such goods. Term "Market Value" is further explained in explanation to said sub-section to mean in relation to any goods or services, price that such goods or services will ordinarily fetch in the open market. To our mind sum of Rs. 4.51 per unit of electricity only represented cost of electricity generation to the assessee and not the market value thereof. It is not in dispute th....
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....to its manufacturing units by adopting the average rate of electricity supplied to the assessee by MGVCL, DGVCL. 34. We now take ground no.5 in the assessment year 2012-13 and ground no.8 in the assessment year 2013-14: 35. In the assessment year 2012-13, the assessee has pleaded that the ld.DRP has erred in not adjudicating the claim made by the assessee company to consider revenue earned on sale of carbon credits, net of expenses as a capital receipts and not subject to tax. Similarly, in the assessment year 2013-14, the assessee has pleaded that the DRP has erred in rejecting claim made by the assessee that revenue earned from sale of carbon credits is to be held as capital receipts. In other words, common issue in both the years is, whether receipts received by the assessee on sale of carbon credits is to be assessed as a capital receipt or to be treated as revenue receipts. 36. Facts in both the years are common. The assessee has filed a note explaining the alleged carbon credits and how it has received the receipts. The note has been reproduced by the DRP in both the assessment years in its order. The note and the discussion made by the DRP on this issue are as under....
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.... at the normal rate of tax like any other sources of income. All the expenses incurred as stated above are claimed as deduction (including tax depreciation on TO plant). In this note, we have given the background of the carbon credits and how the carbon credits are received in the case of our Company. We had also explained the procedure of generation of carbon credits and steps taken and involved in receipt of such carbon credits. Thus, the carbon credits are issued by the CDM Executive Board, which operates under the UNFCCC and those are sold to international buyers for cash. We have also explained that the CERs are not received or allocated by Government. It will also be observed that in our case carbon credits are not received for using alternative fuel like non-fossil fuel which may be specific to wind energy business or other fuel switch or energy efficiency projects. The claim is made that the said revenue from Carbon Credit is not taxable as income but a capital receipt not liable to tax. Hence, while computing total income, the said receipt, net of expenses, may please be excluded as capital receipt. This claim is based on the ITAT order in the case of My ....
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....ain any claim for allowing deduction resulting in a reduction in the total income returned, which is not claimed in the original return or a revised return. 24.3 On merits, the DRP has noted the CIT (A)'s order of earlier 2 years and concurs with the findings of the CIT (A), that such carbon credit receipts GFL are taxable. The relevant excerpts of the order of the CIT(A) for A.Y. 2011.12 A.Y. 2010-11 are reproduced hereunder:- From CIT (A) order for AY 2011-12; / "9. 1 This issue has .been decided in appellant 's own case for the A Y 2010-1 1 vide order dated 30-10.2015 in Appeal No. CAB- 11321201415. In this order the revenue earned from the sale of carbon credits, net of expenses has been held to be taxable in the hands of the appellant. Moreover, it is seen that in the current year such revenue also includes profit earned on account of trading of such carbon credits which are revenue in nature under all circumstances. Hence, following the decision of the earlier order and considering the fact that the appellant is also engaged in the trading of carbon credits, it is held that such revenue in the current year is also taxable in the hands of the appellan....
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....the Revenue authorities below contended that the issue in dispute is squarely covered by decision of Hon'ble Gujarat High Court in the case of Alembic Ltd. (supra). He placed on record copy of the Hon'ble Gujarat High Court decision in Tax Appeal Nos.553 and 554 of 2017 decided on 28.8.2017. He also pointed out that this issue has been considered by the Hon'ble Karnataka High Court in the case of CIT Vs. Subhash Kabil Power Corporation Ltd., (2016) 287 CTR(Kar) 147; (2016) 69 taxmann.com 394 (Kar). The Hon'ble Karnataka High Court has also relied upon the decision of Hon'ble Andhra Pradesh High Court in the case of CIT Vs. My Home Power Ltd., (2014) 46 taxmann.com 314 (AP). Apart from the above, he further contended that w.e.f. 1-4- 2018, a special provision has been enacted in the shape of section 115BBG which prescribe levy of tax at the rate of 10% on income from transfer of carbon credit. He took us through explanatory statement of Finance Act, 2017. 38. We have duly considered rival contentions and gone through the record carefully. Issue before us is, whether receipts received by the assessee on sale of alleged carbon credit is revenue in nature or capital in nature. An id....
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....e posted at Bangalore). Apart from the above, we would like to make reference to the explanatory statement of Finance Act, 2017. It reads as under: "Carbon credits is an incentive given to an industrial undertaking for reduction of the emission of GHGs (Green House gases), including carbon dioxide which is done through several ways such as by switching over to wind and solar energy, forest regeneration, installation of energy-efficient machinery, landfill methane capture, etc. The Kyoto Protocol commits certain developed countries to reduce their GHG emissions and for this, they will be given carbon credits. A reduction in emissions entitles the entity to a credit in the form of a Certified Emission Reduction (CER) certificate. The CER is tradable and its holder can transfer it to an entity which needs Carbon Credits to overcome an unfavorable position on carbon credits. Income-tax Department has been treating the income on transfer of carbon credits as business income which is subject to tax at the rate of 30%. However, divergent decisions have been given by the courts on the issue as to whether the income received or receivable on transfer of carbon credit is a ....
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....rred in making addition of Rs. 38, 84, 898/- on account of late payment of employees contribution to provident fund. 43. As the facts emerge from the record, the AO noticed that assessee has deducted an amount of Rs. 38, 84, 898/- towards P.F. contribution from its employees' but did not deposit in the Government account within the time prescribed in the respective Act. The AO has noticed such details payments made by the assessee in his order. It reads as under: Month Employee's contribution to Amount Due date Payment date April- 11 Provident Fund & Family Pension Fund 1722105 20.05.2011 24.05.2011 Sept- 11 Provident Fund & Family Pension Fund 2147672 20.10.2011 31.10.2011 Feb-12 Provident Fund & Family Pension Fund 11271 20.03.2012 02.05.2012 June- 11 Labour Welfare Fund 3276 15.07.2011 26.07.2011 Dec.- 11 Labour Welfare Fund 574 (203 + 574) 15.01.2012 Not paid till 31.03.2013 Total 38, 84, 898/- Assessee has given the following reasons for the delay as under: 1 Employees Contribution to PF of Rs. 17, 22, 105/- In the payment of....
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....he due date, but on account of certain technical objection, cheques deposited have been returned, which ultimately after removal of objection was cleared. Thus, it could be construed that payment was within the due date and therefore, deduction ought to be granted to the assessee. We allow the claim of the assessee qua Rs. 21, 47, 672/-. 46. So far as payment of Rs. 17, 22, 105/- and Rs. 15, 121/- are concerned, we find that the Revenue authorities have not verified the details furnished by the assessee. The reasons explained by the assessee cannot be bruised aside. Therefore, we send back the issue of addition qua these two payments to the file of AO for verification of the details of payments. If on verification the reasons assigned by the assessee are found to be correct, then, the AO is directed to give benefit of section 43B of the Act to the assessee. 47. Ground no.4 in the assessment year 2012-13 and ground no.6 in the Asstt.Year 2013-14. Both these grounds are inter-connected with each other. Therefore, they are taken up together. Grievance of the assessee is that the ld.DRP has erred in making an addition of Rs. 436, 80, 00, 000/- on protective basis in the assessmen....
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....4, then according to the understanding of the AO, applicability of section 50D and 92BA is to be examined, which is according to his understanding applicable on the facts of the present case. Therefore, the first we would like to determine the correct amount of capital gain/loss arising to the assessee, even after application of sections 50D and 92BA of the Act. 50. Thus, before we embark upon an inquiry as to find out amount of capital gains arisen to the assessee on slump sales of its wind energy division to IRL and in which assessment year capital gain is to be taxed, we deem it appropriate to take note of relevant provisions. Section 2(42C) provides definition of expression "slump sale". According to this definition, "slump sale" means the transfer of one or more undertakings as a result of the sale for a lump sum consideration without values being assigned to the individual assets and liabilities in such sales. Explanation 1 added to this section further provide; for purpose of this claim; "undertaking" shall have the meaning assigned to it in Explanation 1 to clause (19AA). For the removal of doubts, it is hereby declared that determination of the value of an asset or liab....
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....rtaking or division transferred by way of such sale, the "net worth" of the undertaking or the division, as the case may be, shall be deemed to be the cost of acquisition and the cost of improvement for the purposes of sections 48 and 49 and no regard shall be given to the provisions contained in the second proviso to section 48. (3) Every assessee, in the case of slump sale, shall furnish in the prescribed form along with the return of income, a report of an accountant as defined in the Explanation below sub-section (2) of section 288 indicating the computation of the net worth of the undertaking or division, as the case may be, and certifying that the net worth of the undertaking or division, as the case may be, has been correctly arrived at in accordance with the provisions of this section. Explanation.-For the purposes of this section, "net worth" means the net worth as defined in clause (ga) of sub-section (1) of section 3 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986).'. 52. A plain reading of section would show that capital gains on slump sale are to be computed by deducting net worth of the undertaking/division from the slum....
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....n the strength of the following decisions submitted that there is no provision for replacing the full value of consideration shown by the assessee with fair market value: "1. High Court decision CIT Vs. Gaurangibiben S. Shodhan, 367 ITR 238 (Guj) 2. Jurisdictional Ahmedabad ITAT order in the case of ACIT Vs. M/s.Aakash Association; 3. Supreme Court, CIT Vs. George Henderson and Co. Ltd., 66 ITR 622 SC; 4. CIT Vs. Shivakami Co.P.Ltd., SC 159 ITR 0071; 5. Rupees Finance & Management Ltd. Vs. ACIT, Mumbai, ITAT (2008) 27 CCH 0111 Mum Trib. (2008) 119 TTJ 0643; 6. CIT Vs. Smt. Nandini Nopany, Calcutta High Court (1998) 230 ITR 679 (Cal); 7. Bombay high Court, CIT Vs. M/s.Morarjee Textiles Ltd." 55. He further contended that the ld.AO has tried his best to shift the date of transfer from the assessment year 2012-13 to 2013-14 in order to take benefit of section 50D for adopting fair market value of the assets as sale consideration. He pointed out that applicability of section 50D has been explained by the Hon'ble Bombay High Court in the case of CIT Vs. Morarjee Textiles Ltd. rendered in tax appeal no.738 of 2014. He plac....
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....f such transfer provided in section 48 would be deemed equivalent to the amount on which stamp duty was paid. Thus, this full value of consideration could be replaced by way of deeming provision provided in section 50C which is relatable to transfer of capital assets in the shape of land or building or both. No such provision has been provided with regard to slump sales of an undertaking or division as a going concern. Other decisions are also to this effect. 58. Let us take note of section 50D of the Income Tax Act. It reads as under: "50D. Fair market value deemed to be full value of consideration in certain cases.-Where the consideration received or accruing as a result of the transfer of a capital asset by an assessee is not ascertainable or cannot be determined, then, for the purpose of computing income chargeable to tax as capital gains, the fair market value of the said asset on the date of transfer shall be deemed to be the full value of the consideration received or accruing as a result of such transfer.". This section has been inserted w.e.f. assessment year 2013-14 to provide that where the consideration received or accruing as a result of transfer of a ca....
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....ore, the issue is whether such substitution of full consideration received by fair market value of the asset is permissible. As held by the Tribunal at the relevant time there was no authorities under the Act to substitute a full value received for sale of shares by fair market value in respect of stocks and shares. The power to substitute full consideration with of shares came into the statute only on introduction of section 50D with effect from 1st April, 2013. Moreover, such a power under Section 50D of the Act is only to be exercised if the Assessing Officer comes to a finding that the consideration received is not ascertainable or cannot be determined. Moreover the decision of the Co-ordinate bench of the Tribunal in the case of MGM Shareholders Benefit Trust (supra) on identical facts situation has been accepted by the Revenue, as no appeal from the same has been filed by the Revenue. (d) In the above view, the question as formulated does not give rise to any substantial question of law. Thus not entertained." 59. Hon'ble Court has specifically held that section 50D would be applicable after the AO comes to a finding that consideration received is not ascertainabl....
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....ording to the assessee, it has transferred its wind energy business in the assessment year 2012-13. Sub-section (10) of Section 80IA used an expression "course of business between them is so arranged" it contemplates that there should be some material on record exhibiting arrangement by which profit by one company has been siphoned off to other one. No such arrangement has been demonstrated by the AO. Section 80IA(10) is applicable to the business transacted between two associate concerns which produce to the assessee more than ordinary profit which might be expected to arise in such eligible business. Here the assessee has not claimed deduction under section 80IA in the assessment year 2013-14. The AO has not pointed out any arrangement showing unusual profit to the assessee by way of transfer of an undertaking under section 50B. Had the AO demonstrated that arrangement between the assessee and IRL showed unusual profit to the assessee, which would grant higher deduction under section 80IA, he could re-compute that, but no such circumstances are available. In brief, the profit or loss on sale of fixed assets of eligible undertaking are not entitled to deduction under section 80IA,....
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....rved that the transaction is between Holding company and its 99.98% Subsidiary company and is not between two unknown parties. Therefore, the condition of the business, assets, employees etc. was known to both the parities at any given point of time. Therefore, there was no specific need to do physical verification on any given date as contemplated in the show cause notice/Order as wind energy business including assets and liabilities of the undertaking was transferred on as is where is basis, on a slump sale basis. These documents are not just the paper work. It will be observed that BTA dated 30/03/2012 is the legally enforceable document executed by both the parties. The possession letter was executed in terms and BTA agreement as a part of closing activities. By signing the possession letter on 30/03/2012, GFL had given and IRL has taken over the actual possession of the transferred business and undertakings including employees. The constructive delivery and receiving possession of various assets and liabilities are sufficient and legally accepted mode to give complete effect to the transfer. was transferred to IRL and hence the income belongs to IRL. This being a broken period....
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....l date of transfer of wind energy business and undertakings, being part of post closure activities and not a pre-condition for the transfer of the capital asset i.e. Wind energy business. It will be observed that even for the same project, various permissions, approvals, registrations etc. have happened on different dates and not on the same date. In view of this, they were made as a part of postclosing activities and not preconditions of transfers. It will also be appreciated that in such a case of slump sale, it is always a running business and hence position of various assets and liabilities continue to change on day-to-day basis and in such case, unless single date is agreed as per contract for the transfer of the undertaking, it will not be possible to transfer business undertaking under slump sale basis. Secondly, if it is presumed that transfer takes place only when all the permissions are received, there will never be a single date of transfer since different permissions will be received on different dates, and it will be impossible to determine a date of transferfor the purpose of computing capital gains. Para 6 (e) and (f) of submission dated 19.10.2016 Para 11 of t....
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....ank, GFL &, IRL transferring the bank loan was entered oil 17.10.2012. (iv) The RBI approval to transfer foreign currency loan was obtained on 18.03.2013. Transfer of bank loans - No document or Bank communication suggests/requires prior permission for this transaction. RBI and ICICI bank have not objected at all for the transfer of loan and also have not raised any queries regarding prior approval because it was not required at all. The observations of the AO in case of loan transfer are based on the part of the document. The AO is not giving due weightage to all the documents submitted. There are three separate loans from ICICI Bank which are related to the transaction under consideration. The sanction letter in respect of first loan (dated December 29, 2006) has a negative covenant "4. No consolidation, demerger, corporate restructuring without the approval of Lender in the event of default." (Emphasis provided). Thus, this clause makes it clear that the approval of ICICI Bank is required only in the case of default. In the instant case, there was no default and hence no approval was required. Further, in the sanction letters in respect of other two loans (both dated De....
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.... information and clarification regarding this transaction. ICICI bank has replied to RBI as per letter dated 08-10- 2012. On the basis of the information submitted RBI has given no objection to ICICI bank as per letter dated 19-12-2012. In this letter RBI has advice ICICI bank. We advice that we have no objection from FEMA 1999 angle, to your constituent for transfer of External Commercial Borrowing (ECB) up to USD 60 million availed from ICIC Bank Singapore vide LRN 201203132 and USD 12.8 million availed from ICIC bank, Hong kong vide LRN 2007151 from Gujarat Fluorochemicals Limited (GFL) to Inox Renewables Limited (IRL) subject to AD to ensure that the ECB continues to adhere the extent ECB guidelines. We further advise you to file a revised form 83 indicating the said changes with the Director, Balance of Payment statistic Division, Department of statistics and information management, Reserve bank of India, Bandra-kurla Complex, and Mumbai-400051. In respect of LRN 201202101, your constituent may submit a revised form 83 for reduction in the amount of ECB from USD 40 million to USD 16.5 million and Inox Renewables Limited (IRL) may submit a new form 83 for availing ECB of ....
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....ind energy business as a core business so as to enable it to grow, GFL had transferred the wind energy business under a 'Business Transfer Agreement' ("BTA") executed on 30th March, 2012 by way of 'slump sale' to its 99.985% subsidiary, Inox Renewables Limited ("IRL") for a lump sum consideration of Rs. 1 crore. In this connection, E & Y was appointed as consultants for raising capital for the wind energy business. Even though, it is mentioned in the letter "it is intended that the entire 230MW shall be transferred from GFL to IRL as slump sale in FY 2012-13" it is mentioned in appendix A as a part of their understanding of our requirement. But this appendix A is attached to the letter dated August, 2011, i.e. the date before the actual BTA was entered on 30/03/2012. It is generally a business practice to take consultations on various issues and start discussions before the transaction actually happens. But the said discussions or consultations are not indicative of the dates of legally enforceable contract date and agreements. It will be observed that the process for transfer of wind energy business was even started much before earlier in 2011, and got comple....
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....red sale deed is executed in January, 2013. In case of Sadiya, request letter to the Collector was submitted on 14/09/2013 i.e. during financial year 2013-14 and the permission is received on 08/01/2014 and sub-lease is transferred on 14/03/2014. In the case of Ossiya, request letter to the Collector was submitted on 11/02/2013 i.e. during financial year 2012-13 and the permission is received on 28/07/2014 and sub-lease is transferred on 04/08/2014 i.e. during the financial year 2014-15. In case of Tamil Nadu, being a private land, no permissions were required and registered sale deed is executed in October, 2012. In case of Barmer, letter dated 20/09/2012 was submitted to REC and after the receipt of the permission dated 14/03/2013, lease deed is executed on 1st April, 2013 i.e. in financial year 2013-14. In any case, all these are post-closing activities as per BTA. Page no 57-58 from DRP Order. 11 The regulatory permission to transfer the registration of wind energy projects in Rajasthan was obtained from Rajasthan Renewable Energy Corporation on 12.09.2012 Permission to transfer wind energy projects - From the chart, it will be observed that there was no such requir....
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....t transfer of business and has no bearing on the transaction or the date of transferred. In any case, these are post-closing activities as per BTA. Page no 59-60 from DRP Order. From the above, it will be clearly observed that the applications and permissions of transfer of project registration, lands, PPA and insurance policies are on various different dates spreading over a period of financial years 2012-13, 2013-14 and even 2014-2015 and even -in some cases they were not required at all. This clearly proves that these dates are not of relevance in determining the actual date of transfer of wind energy business and undertakings being part of post closure activities and not a pre-condition for the transfer of the capital asset and they are procedural aspects. It will be observed that even for the same project, various permissions, approvals, registrations etc. have happened on different dates and not on the same date. In view of this, they were made as a part of post-closing activities and not preconditions of transfers. It will also be appreciated that in such a case of slump sale, it is always a running business and hence position of various assets and liabilities continue....
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....not dispute the consideration of Rs. 1 crore. Thus the question is, whether exhaustive mode of transfer provided in section 2(47) of the Act would not be assumed as taken place by virtue of execution of agreement dated 30.3.2012. The AO was of the view that cumulative settings of certain circumstances would indicate that this transfer is not taken place on 30.3.2012. Though he failed to identify a specific date on which he could construe the transfer, in very sweeping manner he made reference that this transfer would constitute in a financial year 2012-13 relevant to the assessment year 2013-14. We have analysised the circumstances pointed by the AO and the explanation given by the assessee extracted (supra). There is no dispute that IRL is a 99.98% subsidiary. Thus, both the parties at any given point of time were having complete knowledge of the conditions of business and business, assets, employees etc. There was no requirement as such physical verification of these assets. The representatives of both the assessee have put signatures and executed agreement. Therefore, there could not be any justification for doubting the genuineness of the agreement at the end of the AO by makin....
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....ded. For example, section 50C where a deeming provision has been provided. It is worth to note of Hon'ble High Court finding in this decision on this aspect as under: "1. Taking the question of ascertaining the fair market value on the date of sale, we notice that section 48, which is also contained in chapter IV of the Act pertains to method of computation of capital gain. A detailed mechanism has been provided for such computation of the income chargeable under the head "Capital Gains". It provides, inter alia, that the income chargeable under the Head "Capital Gains", shall be computed by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset, the amounts mentioned therein that is the expenditure incurred wholly and exclusively in connection with such transfer and the cost of acquisition of the asset and the cost of any improvement thereto. Main thrust of section 48 of the Act, therefore, is the full value of consideration received or accruing as a result of the transfer of the capital asset as reduced by expenditure mentioned therein and the cost of acquisition of the asset. Section 55 A, as we have noti....