TaxTMI 
TaxTMI 
2015 (7) TMI 1333
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....s and are eligible to tax as income from Business and Profession. 3. The Learned CIT(A) erred in law in not following the decision of Hon'ble ITAT, Hyderabad Bench which is the only decision on the subject and therefore binding on him following principle of judicial hierarchy as upheld by Hon'ble Jurisdictional High Court. 4. The Learned CIT(A) erred in confirming disallowance u/s 14A read with Rule 8D without considering the fact that during the year under consideration the appellant had not earned any income which is not chargeable to tax; and, In the appeal of the Revenue the following Grounds of appeal have been raised. "1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in disallowance of expenses made by the AO on account of interest u/s. 14A read with Rule 8D(ii) of Rs. 15,32,12,850/- without appreciating the fact that the interest expenses are attributable to the investments made by the assessee in the shares of its subsidiary company and without giving any justification that the investment made by the assessee are not out of borrowed funds." 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erre....
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....s not chargeable to tax was also rejected on the ground that the same was earned in the course of carrying on business activity. In this background, assessee is in appeal before us. 5. Before us, the Ld. Representative for the assessee pointed out that the stand of the assessee that the CERs receipts are not revenue receipts but they are capital receipts not chargeable to tax has since been upheld by the Hon'ble Andhra Pradesh High Court in the case of CIT Vs. My Home Power Ltd. [2014] 365 ITR 82 (AP). 6. The Ld. DR appearing for the Revenue did not contest the position that the Judgment of Hon'ble Andhra Pradesh High Court in the case of My Home Power Ltd. (supra) fully covers the controversy. So however, he has referred to a decision of Cochin Bench of the Tribunal in the case of Apollo Tyres Ltd. Vs. ACIT [2014] 31 ITR (Trib.) 477 (Cochin) to say that the income on sale of CERs is a benefit resulting out of the business activity and is thus liable to be considered as a revenue receipt. 7. We have carefully considered the rival submissions. Factually speaking, the Certified Emission Reductions (CERs) which under common parlance is known as Carbon Credits, is one of the outc....
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.... to the machinery and processes employed in the production process by the assessee?" 9. The Hon'ble High Court held as under:- "We have considered the aforesaid submission and we are unable to accept the same, as the learned Tribunal has factually found that "Carbon Credit is not an offshoot of business but an offshoot of environmental concerns. No asset is generated in the course of business but it is generated due to environmental concerns." We agree with this factual analysis as the assessee is carrying on the business of power generation. The Carbon Credit is not even directly linked with power generation. On the sale of excess Carbon Credits the income was received and hence as correctly held by the Tribunal it is capital receipt and it cannot be business receipt or income. In the circumstances, we do not find any element of law in this appeal." 10. As per the Hon'ble High Court, the income on sale of excess Carbon Credits was a capital receipt and not a business receipt/income. Notably, even in the case of assessee before the Hon'ble Andhra Pradesh High Court, assessee had earned income on sale of Carbon Credits in the course of carrying on the business of power genera....
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....850/- which represented a part of the total disallowance of Rs. 29,66,81,836/- made by the Assessing Officer. Since the two cross-Grounds relate to the same issue, they are being taken-up together. 14. In brief, the relevant facts are that in the course of assessment proceedings, assessee was asked to explain the amount of expenditure disallowable u/s 14A of the Act on account of investments made. The first plea of the assessee was that the investments were made only in its subsidiary and as such they should be treated as strategic investments made for business purposes and, therefore, no disallowance u/s 14A was called for. Secondly, it was canvassed that strategic investments are in the nature of business assets and interest on borrowings used for such investments is deductible u/s 36 (1)(iii) of the Act and accordingly no disallowance is merited u/s 14A of the Act in respect of such interest expenditure. Thirdly, assessee asserted that there was no direct interest expenditure attributable to investments in shares. Fourthly, assessee pointed out that administrative expenses in respect of strategic investments are deductible as business expenditure, and no disallowance is called....
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....ct resulted in increased profits, which qualified for the benefits of section 80IA of the Act. The aforesaid decision of the CIT(A) is challenged by the Revenue by way of Ground of appeal No.2. 17. Pertinently, with respect to the disallowance u/s 14A of the Act made by application of clauses (i) and (ii) of Rule 8D of the Rules amounting to Rs. 24,37,66,836/- the Assessing Officer himself allowed deduction u/s 80IA of the Act on the income so enhanced. So however, in respect of the profits enhanced as a result of a disallowance under the third limb of rule 8D(2)(iii) of the Rules i.e. Rs. 5,29,15,000/- on account of administrative expenses, the Assessing Officer bifurcated the disallowance between 80IA unit and non 80IA unit on the basis of turnover and accordingly exemption u/s 80IA of the Act was denied on the amount of Rs. 3,11,29,566/-. In appeal, the CIT(A) has noted that the expenses debited to non-80-IA units were direct expenses pertaining to those units and insofar as the indirect expenditure was concerned, the same was debited to 80IA units, which are engaged in the business of generation of power. Thus, as per the CIT(A), the disallowance of administrative expenses u/....
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....its U/s 115JB of the Income Tax Act, 1961. 2. In the facts and circumstances of the case and in law, the learned. Assessing Officer ought to have allowed as a reduction the sum of Rs. 3,258,313,098/- arising on account of the demerger of the investment division of the Appellant in computing the book profits u/s. 115JB of the Income Tax Act' 1961." 21. At the time of hearing, the Ld. Representative for the assessee submitted that the aforesaid Grounds were not raised earlier before the lower authorities but the same are purely legal in nature and since all the relevant facts are already on record, the same be admitted for adjudication following the ratio of the Judgment of Hon'ble Supreme Court in the case of CIT Vs. National Thermal Power Corporation 229 ITR 383 (SC). 22. On the other hand, the Ld. DR appearing for the Revenue has not seriously opposed the plea of assessee for admission of aforesaid additional Grounds but pointed out that the assessee has not explained the circumstances in which the said Grounds were hitherto not raised before the lower authorities. 23. Both the Additional Grounds of Appeal raised by the assessee relate to the manner of computation of 'Boo....
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....he Hon'ble Bombay High Court vide order dated 1.11.2007. In terms of the Scheme of arrangement, the assets and liabilities of the investment division were transferred JSWEIPL at their book values. As a consequence, a sum of Rs. 3,25,83,13,098/-, being the excess of book value of assets over the liabilities transferred, was a loss suffered on demerger of the investment division. Notably, in lieu of such transfer of investment division, shares of JSWEIPL were issued to shareholders of assessee company in the ratio specified in the Scheme of arrangement. The loss of Rs. 3,25,83,13,098/- was adjusted against the balance/ surplus of the Profit & Loss Account appearing in the Balance-sheet, but was not routed through the Profit & Loss Account. 25. The claim of the appellant is that the above loss of Rs. 3,25,83,13,098/- suffered on demerger of the investment division during the previous year relevant to the assessment year under consideration was not routed through Profit & Loss Account but it was an amount deductible while computing 'Books Profits' u/s 115JB of the Act. It is pointed out that under the Act transfer of assets/liabilities in the case of merger or demerger is a transacti....
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....High Court, the appellate authorities have jurisdiction to deal not merely with Additional Grounds, which become available on account of change of circumstances or law, but also with Additional Grounds which were available when the return of income was filed, though assessee did not claim it in the return of income. As per the Hon'ble High Court, the appellate authorities have the discretion to permit raising of such Additional claims and that each case must be considered on its own facts. In the background of the aforesaid legal position, the claim of the assessee for admission of the Additional Ground of appeal no. 2 relating to adjustment of loss arising on demerger for computing Book Profits u/s 115JB of the Act, is liable to admitted, though such a claim was available when the return of income was filed; and, the non-claiming of such an adjustment in the return of income cannot be a ground to deny its admission at this stage. There is no material lead by the Revenue which would suggest that the omission to make such a claim in the return of income was either deliberate or malafide. At this point, it is also appropriate to note the Judgment of Hon'ble Supreme Court in the case ....