AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2021 (3) TMI 1004
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....and in circumstances of the case, the Ld. CIT(A) is legally justified in not upholding the disallowance u/s 14A of the Act amounting to Rs. 2,46,47,780/- even when section 14A of the Act stipulates mandatory computation of direct and indirect expenses relating to the income not forming part of total income under all the clauses (i), (ii) and (iii) of Rule 8D(2) of the Rule? 3. Whether on facts and in circumstances of the case, the Ld. CIT(A) is legally justified in not upholding the disallowance u/s 14 A of the Act r.w R 8 D of the Rule amounting to Rs. 2,46,47,780/- without considering legal principles that allowability /disallowability of expenditure under the Act is not conditional upon the earning of the income as upheld by Hon'ble Supreme Court in case of CIT Vs Rajendra Prasad Moody (1978) 115 ITR 519? 4. Whether on facts and in circumstances of the case, the Ld. CIT (A) is legally justified in not upholding the disallowance u/s 14 A of the Act r.w. R 8D of the Rule of Rs. 2,46,47,780/- without considering ratio decidendi as upheld in cases of CIT Vs Walfort Share and Stock Brokers P Ltd. [2010] 326 ITR 1 (SC) and Maxopp Investment Vs CIT [2012] 347 ITR 272 ....
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....s investment is out of own funds. The ld. AO stated that even if the investment in shares did not yield any exempt income in the form of dividend during the year then also disallowance as per provisions of Section 14A is required to be made. In response to the submission of the assessee identical issue has been dealt with and decided in favour of the assessee for Assessment Years 2008-09 and 2009-10 by the CIT (Appeals), He rejected the explanation of the assessee. Thereafter he disallowed a sum of Rs. 2,46,47,780/- under Section 14A only on account of the provisions of Rule 8D(2)(ii) being 0.5% of the average value of investment. 5. The Assessing Officer further examined the claim of the assessee under Section 80IA of the Act. He raised a query that assessee has credited a. Rs. 1,29,16,998/- being net figure after considering the expenses of Rs. 41,49,880/- with respect to sale of voluntary Emission reduction claim, b. interest income received on bank deposits of Rs. 1,48,80,000/- and c. Miscellaneous income of Rs. 5,07,000/-. He held that the above three income are not derived from the industrial undertaking and, therefore, considering the decisio....
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....Rs. 1,29,16,998/- is a capital receipt and not of business income and, therefore, corresponding deduction under Section 80IA should be reduced. With respect to the adjustment of carbon credit received from the computation of book profit, he rejected the same holding that since Profit * Los account of the assessee prepared in accordance with the provisions of Schedule VI to the Companies Act, certified by the auditor includes profit on sale of carbon credit as per the prescribed accounting standard issued by ICAI. He thus rejected the claim of the assessee for reduction of the carbon credit income from the computation of book profit. Thus, the order of the ld. CIT (Appeals) is a matter of challenge before us by both the parties under respective grounds of appeal raised as above. 8. We first come to the IT Appeal No. 2464 (Del) of 2017 filed by the assessee. 9. The first ground of appeal is with respect to the computation of book profit under the provisions of Section 115JB of the Income Tax Act wherein assessee has claimed that net income realized from the sale of carbon credit of Rs. 1,29,16,998/- is a capital receipt and should be excluded from the book profit. The ld. AR su....
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....s Ltd. 95 taxman.com 313 against which the Special Leave Petition has been dismissed by the Hon'ble Supreme Court. He also referred to the decision of the Hon'ble Delhi High Court in 300 ITR 6 and ITA 1441/2006. He further submitted that such interest income cannot be assessed under the head 'Income from Other Sources'. 13. The ld. DR vehemently relied upon the order of the ld. Assessing Officer as well as the decision of the Hon'ble Supreme Court in Liberty India (supra). 14. We have carefully considered the rival contentions and perused the orders of the lower authorities. Assessee has earned interest income from the fixed deposit receipts. Assessee has submitted that the interest income from short term FDR is only a temporary arrangement for making timely re-payment of loan installments on respective due dates out of the proceeds of the FDR. Therefore, the interest income has direct link with the industrial undertaking. He further submitted that assessee has borrowed from banks and financial institutions a sum of Rs. 329 crores and, therefore, the assessee is required to keep funds in fixed deposit receipts for short term for honouring the installments of the loan. Therefo....
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....owance Under Section 14 A read with rule 8D of the income tax act he further noted that ITAT in the case of the assessee for assessment year 2008 - 09 has upheld the relief granted by the learned CIT - A wherein the disallowance u/s 14A was deleted. The learned assessing officer aggrieved with the above order has preferred this appeal before us. 17. On hearing the rival contentions, we found that assessee has not on any exempt income during the year from the above investment and therefore there cannot be any disallowance u/s 14 A of the income tax act. This is an accepted position in the case of the assessee as per the order of the coordinate bench in assessee's own case for assessment year 2008 - 09. Such is also the mandate of the honourable Delhi High Court in case of Cheminvest Ltd versus CIT [2015] 61 taxmann.com 118 (Delhi)/[2015] 234 Taxman 761 (Delhi)/[2015] 378 ITR 33 (Delhi)/[2015] 281 CTR 447 (Delhi) wherein it has been held that if there is no exempt income received or receivable during the year there cannot be any disallowance u/s 14 A of the income tax act. Therefore respectfully following the decision of the coordinate bench as well as the decision of the honourab....