TaxTMI 
TaxTMI 
TaxTMI 
2018 (8) TMI 857
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....aring 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 objection of the assessee and issued necessary directio....
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....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/- Investment as on 31.3.2011 (2) Rs. 5, 83, 92, 10, 000/- Avg. Investment[(1)+(2)/2] Rs. 4, 66, 03, 76, 000/- B Assets as on 31.3.....
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.... 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 been made when investments were made by it. For buttressing, it has produced fund-flow statement showing interest on loans. The ld.DRP has gone through all these details, but did not find merit in the contentions of the assessee. According to the ld.DRP borrowings and internal accruals are being credited in the same account and mixed funds have been created. It considered it as inte....
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....ates 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 Gujarat High Court has held that if there is no dividend then there could not be any disallowance under section 14A. In the light of this decision, if facts of the present case are examined, then at the most, disallowance if any required to be made then it should not be made more than the dividend income. According to the ld.counsel for the assessee, how an assessee would incur a sum of Rs. 4.93....
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....t 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 disallowance. It is also pertinent to note that in order to remove subjectivity involved in calculating the expenditure, Rule 8D has been provided on the statute book providing a uniform formula for such calculations. The ld.DRP has made a lucid analysis of section 14A in its order passed in the assessment year 2013-14. It has observed that sub-section (3) of section 14A further provides that even if an assessee claims t....
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....e 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 not out of the overdraft account for the running of the business. It noted that to raise the presumption, there was sufficient material and the assessee had urged the contention before the High Court. The principle therefore would be that if there are funds available both interest-free and overdraft and/or loans taken, then a presumption would arise that investments would be out of the interest-free fund generated or available with t....
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....terpreted 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 assessment year 2013-14 the assessee itself disallowed a sum of Rs. 75 lakhs which can take care of administrative expenditure of earning dividend income at Rs. 43.35 lakhs. Accordingly, both these grounds are partly allowed. We confirm disallowance at Rs. 1.55 crores (Rupees One Crore and Fifty Five Lakhs) in the assessment year 2012- 13 and Rs. 75 lakhs (Rupees Seventy Five Lakhs in the assessment year 2013-14. Rest of the disallowances ma....
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....ind 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/115JB. The relevant Paras of the judgement are reproduced below:- "36. By order dated 16th May, 2012, the following substantial questions of law were framed in the present appeals:- "(i) Whether the Income Tax Appellate Tribunal was right in holding that while computing book profit under Section 115JA (sic. Section 115JB) of the Income Tax Act, 1961, no disallowance under Section 14A was required to be made? ----- 37. Learned counsel for the respondents-....
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.... 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. versus BHUSHAN STEEL LTD Respondent Through: Ms. Kavita Jha, Advocate with Ms. Roopali Gupta, Advocate. ORDER 29.09.2015 ** ** &....
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....TR 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 'Profit and Loss Account'. 6.2 When the matter travelled to the CIT (Appeals), since it deleted the addition of Rs. 1, 14, 43, 040/- while deciding the question No.1, it consequently deleted such addition under Section 115JB of the Act on the ground that this would not serve any purpose. 6.3 The Tribunal decided the said issue as follows : "94. We have considered the rival submissions and we find that similar issue was raised by Revenue as per ground No.3 above in respect of regular assessment of income and while deciding that ground, we have already upheld that disallowance of Rs. ....
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....r 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 the above, question (b) does not raise any substantial question of law. 24. Respectfully following the above decision, we hold that no addition in the book profit would be made on the basis of calculations worked out under section 14A of the Act. We allow this ground of appeal in both the years and delete the additions. 25. Ground No.3 in the assessment years 2012-13 and 2013-14 is as under: Assessment Year 2012-13 Ground no.3: The ld.DRP has erred in making addition of Rs. 2, 58, 962 to the total income, comprising of addition of Rs. 1, 17, 024/- on account of purchase of AHF from the associated enterprises and Rs. 1, 41, 938 on account of sale ....
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....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 has not attained finality therefore, the deduction under section 80IA cannot be granted on the enhanced amount claimed by the assessee during the assessment proceedings. With regard to the assessment year 2013-14, the ld.DRP has observed that there is a little change in the statutory provision by virtue of section 80IA(8). The arm's length price of the goods sold by the assessee in the alleged captive power plant has to be determined. The ld.DRP thereafter observed that the TPO has determined value of the goods and services sold by its eligible units. According to the TPO captive power plant and electricity distributing companies are to be pitted at different pedestal. According to the DRP,....
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....ssions 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 claim can be made even before the ld.DRP in the form of objection. A reference to the decisions of ITAT, Mumbai and Bangalore Benches have been made; Asian Paints Vs. DCIT, Mumbai 88 taxmann.com 677, and Himalaya Drug Co. Vs. DCIT, Bangalore, 48 taxmann.com 65 (2017). The ld.counsel for the assessee also put reliance upon the decision of the Hon'ble Gujarat High Court in the cases of Mitesh Impex, 270 CTR 66. This decision propounds that when the taxability of the assessee is going to be effected, then it can raise a fresh plea before the appellate authorities. Taking a leaf from this reasoning, ITAT, Mumbai and Bangalore have propounded that fresh claim can be made even before the DRP. Thus, respe....
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....ing 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 authority. 6. Under sub-Section(8) of Section 80IA of the Act, if it is found that where any goods or services held for the purposes of the eligible business are transferred to any other business carried on by the assessee or where any goods or services held for the purposes of any other business carried on by the assessee are transferred to the eligible business and in either case the consideration for such transfer does not correspond to the market value of such goods as on the date of the transfer, then for the purposes of deduction under Section 80IA in case of the eligible business as if the transfer had been made at the market value of such goods or services. It is in this context that the question of substituting the actual c....
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....ble 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 that the GEB charged Rs. 5 per unit for supplying electricity to other industries including non eligible unit of the assessee itself. Tribunal therefore, while adopting the said base figure and excluding excise duty therefrom to work out Rs. 4.90 as the market value of the electricity generated by the assessee, to our mind, committed no error. It can be easily seen that if the assessee were to supply such electricity or was allowed to do so in the open market, surely it would not fetch Rs. 4.51 per unit but Rs. 5 per unit as was being charged by GEB. Since the excise duty component thereof would not be retained by the assessee, Tribunal reduced the said figure by the nature of excise duty and came to the figure of Rs. 4.90 to ascertain the market value of e....
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....ssee 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: "Claim of deduction in respect of income from Carbon Credit being Capital receipt - During the year, the Company has received income from Carbon Credit of Rs. 441.69 crores. The said revenue is credited to Profit & Loss account and is included in Revenue from Operations. Please refer to Schedule 23 of the Annual accounts. We are enclosing herewith a detail note on this Carbon Credit. In the said note we have explained as under: GFL's Carbon Credit: * GFL operates a HCFC-22 plant at Village Ranjitnagar, District Panchmahals, Gujarat, India. During the production of HCFC-22, waste gas called HFC-23 is generated. * For each ton of HCFC-22 produced, approximately 2.9% of HFC-23 is generated. HFC-23 is a greenhouse gas (GHG) which has Global Warming Potential of 1....
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....gy 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 Home Power Limited, Hyderabad Bench, which is now confirmed by the Hon'ble Andhra Pradesh High Court. We may state that such claim, that Carbon Credit revenue is Capital receipt not liable to tax, and hence should be excluded from total income, was made during the course of assessment proceedings for A.Y. 2010-11 and 2011-12 also. In the Assessment order, the AO has not accepted the said claim. The Company, has filed appeals for both the years before CIT(A). One of the grounds of appeal is regarding such claim. During the course of appellate proceedings for A.Y. 2010-11, the CIT(A) has called for the remand report from Assessing officer on the issue. A copy of the said remand report was provided to us and we were asked to make our submissions on the said remand report. We have made our detailed submission dated 02-01-2015 to the CIT(A). The copy of the said ....
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....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 appellant as income from business. Alternatively, this is also taxable as short term capital gain as has been held in the appellate order of AY 2010-11. Hence, this ground of appeal is dismissed" From CIT(A)order for AY2010-11 "11.1 In the present case too, the appellant had profit motive in the establishment of the CDM project. Hence it is held that it is carrying on the business of generation of CERS through this CDM project and accordingly, the revenue on account of sale of such CER. is taxable as profits and gains of business being carried on by the appellant. 11.2 Without prejudice to the finding given above that revenue earned from sale of carbon credits is taxable as income from the business Hi the hands of the appellant, even if it is treated as a capital receipt then also it will be taxable in the hands of the appellant as income from capital gain on account of transfer ofCERs. This is due to the fact that in the case of t....
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.... 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 identical question was formulated by the Hon'ble Gujarat High Court in the case of CIT Vs. Alembic Ltd. (supra). The question framed is as under: (4) Whether on facts and in the circumstances of the case and in law, the ITAT erred in treating the income from realisation of carbon credits as capital in nature, despite the fact that the realization from carbon credits has been treated by the assessee itself as revenue income and offered to tax?" 39. The question has been replied by the Hon'ble High Court is as under: "6. The last surviving question pertains to the treatment that the assessee's income from trading of carbon credits should be given. The Tribunal held that receipts should in the nature of capital receipts and therefore would not invite tax. This issue has been examined by two High Courts. The Karnataka High Court in the case of CIT Vs. Subhas Kabini Corporation Ltd., reported in (2016) 385 ITR 592 (Karn) and Andhra Pradesh High Court in the....
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.... 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 revenue receipt or capital receipt. In order to bring clarity on the issue of taxation of income from transfer of carbon credits and to encourage measures to protect the environment, it is proposed to insert a new section 115BBG to provide that where the total income of the assessee includes any income from transfer of carbon credit, such income shall be taxable at the concessional rate often per cent (plus applicable surcharge and cess) on the gross amount of such income. No expenditure or allowance in respect of such income shall be allowed under the Act. This amendment will take effect from 1st April, 2018 and will, accordingly, apply in relation to the assessment year 2018-19 and subsequent years." 41. Thus, taking into consideration resolution of litigation on this issue by the Legislature itself, which had made provision for taxation of such receipts at the rate of 10% from the assessment year 2018-19 as well as authoritative pronouncements of Hon'ble jurisdictional High Court, we ....
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....ons for the delay as under: 1 Employees Contribution to PF of Rs. 17, 22, 105/- In the payment of April 2011, the clearing Stamp endorsed by the bank on the challan was visible as 27.05.2011, but actual date of clearing was 21.05.2011 (Copy of Challan is attached at page no. 182. The cheque of PF payment for the month of April 2011 was tendered to bank on 18.05.2011 and was cleared on 20.05.2011(Copy of Bank statement is attached at page no. 183). Since, Cheque was tendered and cleared before due date there was no delay in depositing PF for the month of April, 2011. 2 Employees Contribution to PF of Rs. 21, 47, 672/- /n respect of delay in payment of PF for the month of September 2011, the first cheque of Rs. 44, 47, 781 (Rs. 21, 47, 672 Employees contribution + Rs. 23, 00, 109 Employer's contribution) was cleared by bank on 14.10.2011 and refunded on 19.10.2011 vide Bankers cheque no 964025 dated 15.10.2011 (Copy of Bankers cheque is attached).We made application to PF office for address change on 24.10.2011(Copy of application is attached). Thereafter, the technical issue of address change was resolved by PF office and a fresh cheque was required to be issued which....
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....ddition of Rs. 436, 80, 00, 000/- on protective basis in the assessment year 2012-13 and substantive basis in the assessment year 2013-14. Along with these grounds, the assessee has taken sub-grounds, which are multiple arguments taken by it. Therefore, we do not deem it necessary to make reference of these pleas taken in the grounds of appeal at this stage. 48. Brief facts of the case are M/s.Inox Renewable Ltd. ("IRL" for short) is 99.98% subsidiary of assess-company. The assessee company has sold its entire wind energy business to IRL for a sum of Rs. 1 crore on 30.3.2012. According to the assessee it has completed documentation and handed over possession to the vendee. In Asstt.Yar 2012-13, the assessee has shown long term capital loss of Rs. 1, 23, 78, 585/- on account of slump sale, but it did not claim this loss as deduction while computing total income being long term capital loss and carried forward in the computation. On scrutiny of this transaction, the ld.AO has observed that two days after the alleged transaction, IRL got revalued and considered fair market value of the assets at Rs. 437.80 crores as on 1.4.2012. The AO thereafter observed that by way of a Finance Act....
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....eby declared that determination of the value of an asset or liability for the sole purpose of payment of stamp duty, registration fees or other similar taxes or fees shall not be regarded as assignment of values to individual assets or liabilities. 51. Section 48 of the Act provide mode of computation of capital gain. It contemplates that income chargeable under the head of "Capital Gains" shall be computed by deducting from the value of consideration received or accruing as a result of transfer of capital assets following amounts viz. (i) expenditure incurred wholly and exclusively in connection with such transfer, and (ii) the cost of acquisition of the asset and the cost of any improvement thereto. It is important to note that gain on slump sales used to generate lots of litigations because the assessee would exclude such gain from charge of tax under capital gain on the plea that there is no machinery provision for computing the cost of acquisition of the undertaking/division as in the slump sale, only lump sum consideration is to be fixed without assigning any value to separate assets constituting the undertaking or division, then mechanism provided in section 48 would fail. ....
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....rtaking/division from the slump sale consideration received on sale of such undertaking/division. Originally, expression "net worth" was defined by way of Explanation that for the purpose of this section, net worth as defined in clause (ga) of sub-section (1) of section 3 of Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986). 53. By way of Finance Act, 2000, this Explanation was substituted by way of Explanation 1 and 2 extracted (supra). Object of this explanation was to provide a method for computing net worth of an undertaking/division sold on slump sale basis. Explanation 1 contemplates that net worth to be the aggregate value of assets of the undertaking or division as reduced by the value of liabilities of such undertaking. Explanation 2 was inserted with an object to compute the aggregate value of total assets. A bare reading of this Explanation would show that it has basically three compartments; clause (a) is concerned with computation of depreciable assets; clause (b) value of capital assets in respect of which whole expenditure has been allowed as a deduction under section 35AD of the Act, and clause(c) is a residuary clause in respect of assets which ....
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....of the decision dated 24.1.2017. 56. On the other hand, the ld.DR relied upon orders of the Revenue authorities. In the assessment year 2012-13, ld.DRP has considered this issue elaborately, but ultimately recorded the following finding: "16.9 Further, it is noted by the DRP that the assessee company has calculated the Capital Gains by taking a sale consideration of just Rs. 1 Crore only for the entire Wind Energy Buisness. The DRP has noted that Fair Market Valuation of the Wind Energy Business was done by M/s Inox Renewable Limited on 01/04/2012 at Rs. 437.83 Crore. For this valuation of Rs. 437.83 Crore as on 31.03.2012 the DRP has relied heavily on the Valuation of the assets of the wind farm prepared by R.K. Patel & Co. Thus, for the calculation of the Capital Gain, the sale consideration is taken as Rs. 437.8352 Crore instead of just Rs. 1 Crore. Accordingly, the Capital Gain is worked out at Rs. 43 5, 59, 73, 415/-as against the returned Capital loss of Rs. 1, 23, 78, 585/-. In view of the above detailed discussion, the AO is directed to tax on protective basis Capital Gains worth Rs. 435, 59, 73, 415/-. "Needless to mention here that during the DRP proceedings, the asses....
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....rtainable or cannot be determined, then for the purpose of computing the income chargeable to tax as a capital gain, 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. While introducing this section, memorandum explaining the provisions of the Finance Bill 2012 provides as under: "Capital gains are calculated on transfer of a capital asset, as sale consideration minus cost of acquisition. In some recent rulings, it has been held that where the consideration in respect of transfer of an asset is not determinate under the existing provisions of the Income-tax Act, then, as the machinery provision fails, the gains arising from the transfer of such assets is not taxable. It is, therefore, proposed that where in the case of a transfer, consideration for the transfer of a capital asset(s) is not attributable or determinate then for the purpose of computing income chargeable to tax as gains, the fair market value of the asset shall be taken to be the full market value of consideration." According to the assessee, section 50D confers powers to the AO to substitute fa....
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.....DRP. Nowhere such aspect is discernible. The ld.AO as matter of fact accepted the sale consideration at Rs. 1 crore. He only replaced with fair market value on the basis of the fact that IRL has revalued the assets after such transfer. It is also pertinent to note that section 50B itself provides that such revaluation has to be ignored. Thus, even if it is to be construed for the sake of arguments that transaction has taken place in the assessment year 2013-14, then also the AO cannot replace the sale consideration disclosed by the assessee as per section 50D with fair market value. Since, we have held that fair market value considered by the AO to charge the assessee with capital gain cannot be adopted either with help of section 50D or in assessment year 2012-13. 60. As far as applicability of section 92BA is concerne, d let us take note of this section, which reads as under: Section 92BA: After section 92B of the Income-tax Act, the following section shall be inserted with effect from the 1st day of April, 2013, namely:- '92BA. Meaning of specified domestic transaction.-For the purposes of this section and sections 92, 92C, 92D and 92E, "specified domestic transact....
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.... section, and he just made passing reference about the section. 62. The issue regarding year of taxability is just an academic issue. It will not going to affect materially. Nevertheless, we consider this aspect also, because kind of revenue involved in this issue would certainly goad the litigation upto the higher appellate forum. 63. With regard to year of taxability, the AO has narrated various circumstances and on cumulative settings of those circumstances, he harboured a belief that transaction has taken in the assessment year 2013-14 and not in assessment year 2012-13. During the course of hearing, we have confronted the assessee with regard to those circumstances as summarised by the ld.DRP, and on our direction, the assessee has compiled the details in tabular form showing reasons considered by the AO as well as DRP for treating the transactions taken place in the accounting year relevant to the assessment year 2013-14 vis-à-vis explanation given by the assessee as to why this transaction should be taken in the assessment year 2013-14. Such details have been filed in tabular form. It reads as under: DRP 'Order extract Assesse's submission and Argument Re....
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.... account income and expenditure correctly. This cannot be a basis for not acceptance of the date of transfer contractually agreed, which is 30/03/2012. On the contrary, this actually confirms that the transfer took place on 30/03/2012 since income and expenditure after that date belonged to IRL and was transferred by GFL to IRL, accordingly. The transferred employees continued to run the business. Page no 56 -57 from DRP Order 4 The payment of Rs. 1 crore towards sale has been credited in the bank account of GFL on 03.04.2012. As stated above the consideration of Rs. 1 crore was received by cheque dated 30.03.2012 and was also deposited in bank on the same date as per the pay-in-slip duly acknowledge by bank and cheque was cleared on 03.04.2012. Thus the consideration was received by cheque and deposited on 30th March itself. Page no 48-49 from DRP Order 5 The effective date of the completion of the transfer has to be ascertained from the date of grant of statutory/ mandatory/ regulatory approvals for transfer or at least from the date of transfer. Permissions for transfer of projects, lands, power purchase agreement, loans, insurance policies etc. was not a precondition of....
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....l Stock Exchange Ltd. Mumbai on 02.04.2012. It will be observe that this letter and intimation are very important documents and intimation to stock exchanges under SEBI act and rule and are statutory intimations. Giving wrong information can lead to serious repercussion involving penalty and even delisting on the stock exchange. The letters are dated 30-03-2012 and submitted by email and fax on 30 March, 2012, and in hard copy on 2nd April, 2012 itself and not on 12th April, 2012 as observed by AO and clearly state that the wind energy business is transferred on 30-03-2012. Further, the stock exchanges have displayed on their website on 30 March itself about the transfer having taken place, and a copy of the said web-page is on record. We have given information to BSE & NSE stock exchanges regarding transfer of Wind Energy Business by GFL to IRL on 30th March, 2012 as per the letter dated 30th March, 2012. The intimations were also given by Fax. We are enclosing herewith a copy of the report downloaded from the site ofBSE and NSE. It is mentioned on BSE website on 30th March, 2012 at 19.30 P.M by BSE that "Transfer of Wind Energy Business of the Company to Inox Renewables Ltd. Va....
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.... two loans, there is a specific and clear permission to transfer the assets to Inox Renewables Limited as a part of restructuring process. From the above, it is clear that at the time of sanction of these two loans itself, ICICI Bank had permitted the said transfer of assets. Hence, there was no need for seeking a separate and prior approval. In accordance with the obligations assumed by GFL (as the Seller) under the BTA, after Closing, GFL made an application to ICICI Bank on 21st April, 2012 requesting the bank to transfer of above Transferred Facilities to IRL. GFL's letter to ICICI Bank stated that that pursuant to Board and shareholder resolutions, GFL has transferred its wind energy business on 30th March, 2012 through a slump sale to IRL hence all assets and liabilities of such wind energy business stand transferred to IRL with effect from 30thMarch, 2012. Pursuant to the GFL Letter, ICICI Bank Limited as lender to GFL, made an application to the Reserve Bank of India on 1stAugust, 2012 seeking the RBI's permission to allow them to transfer the transferred Facilities to IRL in the manner provided therein. GFL, IRL and ICICI Bank Limited entered into 3 (three) Novation agr....
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....FEMA and should not be construed to convey the approval by any other statutory authority of Government under any other laws / regulations." On 18thMarch, 2013, the RBI conveyed to ICICI Bank Limited that pursuant to the request made by ICICI Bank Limited for transfer of the Facilities to IRL, the RBI had made changes to its records and allotted new loan registration numbers ("LRN") in relation to the same. The aforesaid letter of the RBI ("RBI Letter") is enclosed herewith. Thus no document or Bank communication suggests that prior permission was required 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.In fact, they have processed the transfer of loan, recognizing that the slump sale had already taken place on 30 March, 2012. Thus, from the above, it is clear that the lenders were aware of the transfer of the undertaking under slump sale to IRL and procedures were required to be completed as a part of post-closing activity and it was not the prior condition as stated in the notice. From the above facts, it is quite clear that there was no n....
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....action on BTA for slump sale. The date of transfer has to be ascertained on the basis of BTA and actual conduct of both the parties and not on the basis of the intentions stated in any other documents. . The AO is drawing conclusion that this letter suggest that this transaction was intended to be done in FY 2012-13. The AO is also observing that except BTA the assessee has not furnished any documentary evidence. As stated above the assessee has submitted all the document pertaining to the transaction like BTA, possession letter, copy of cheque of consideration, pay in slip for deposited in the bank, letters dated 30-03-12 intimating the transaction to BSE and NSE etc. We have explained in detail the background of this letter. E & Y are not our statutory auditor but they are our consultant advising only, for raising capital for the wind energy business. Page no 54-55 from DRP Order. 9. The application for issue of REC w.r.t. power generated in March, 2012 was applied for by GFL on 20.052012. GFL sold 2800 REC i.e.1000 REC on 25.04.2012 and 1800 REC on 27.06.2012 for Rs. 65.24 lakhs. Accounting of income of Rs. 65.24 lakhs - The income of Rs. 65.24 lakh is accounted in the book....
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....egistration was filed on 9th February, 2011. As per the letter dated 12th September, 2012 from Rajasthan Renewable Energy Corporation Limited, they have confirmed the BTA and accepted the request for transfer of ownership from GFL to IRL and agreement referred is the same BTA agreement. In any case, these are post-closing activities as per BTA. Page no 58 from DRP Order. 12 Application to transfer the PPA was filed in F.Y. 2012-13 and the mandatory approval for the transfer of PPA from Rajasthan projects was obtained on 08.012013 from Jodhpur Discom, RDPPC and for Maharashtra project on 12.12.2012. From the chart at page no 59 of the DRP order, it will be observedthat applications are made and permissions are received on various dates. In some cases, even no further transfer documents are required to be executed and just intimation were required to be given of transfer such as Sadiya and Ossiya. In any case, these are post-closing activities as per BTA. Page no 58-59 from DRP Order. The New India Assurance Company Ltd granted approval to IRL for replacement of the name of GFL by IRL in respect of the following policies only on 01.06.2012. The copy of the letter dated....
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....ace and procedural aspects are taken care thereafter. But that does not affect the date of transfer. This is the exact position in our case. Contractually as per the BTA and possession letter dated 30/03/2012, the business got transferred on 30/03/2012 only and hence there cannot be any other date of transfer of the business dependent on the procedural permissions mentioned above and fair value of assets etc." 64. Expression "transfer" has been defined in section 2(47) of the Income Tax Act. For the purpose of controversy in hand, we would like to make reference to sub-clauses (i) to (v) along with explanation 2 of section 2(47) of the Act. These clauses provide for transfer in relation to a capital asset include (i) the sale, exchange or relinquishment of the asset; or .... (v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to section 53A of the Transfer of Property Act. Explanation 2 attached with this clause reads as under: Explanation 2.-For the removal of doubts, it is hereby clarified that "transfer" includes and shall be deemed to have always included dispo....
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.... at the end of DRP as well as the AO has been refuted by the assessee in its explanation. The assessee pointed out that intended transfer was intimated to the stock exchange well in advance according to the guidelines of the SEBI Act. BSE website had displayed this intended transfer on 30.3.2012 itself. 66. The next objection assigned by the AO against non-completion of transfer is that the prior approval from the banks from whom loans were taken by the vendor have not been taken. To this assessee has given a detailed explanation. We have extracted at serial no.7 of the objection. The assessee has pointed out that it never defaulted the loans, and therefore, there is no need for taking such an approval from the bank. It took approval subsequently and nowhere has raised objection. Section 2(47) r.w.s. 50B nowhere contemplates such approval while transferring the assets. An analysis of all these objections in the light of explanation given by the assessee, we are of the view that sale taken place on 30.3.2012. When the rights have been transferred by way of slump sales, possession on papers given, cheques for consideration handed over and it was deposited in the bank, the rights hav....