TaxTMI 
TaxTMI 
2023 (1) TMI 65
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..... CIT(Appeals) erred in law and on facts in deleting the addition made on account of disallowance of deduction u/s. 80-IA of the Income Tax Act, 1961 amounting to Rs.3,21,68,86,818/-." 2. "that the Ld. ClT(Appeals) erred in law and on facts in not appreciating the facts that the assessee had not shown the outstanding number of Certified Emission Reductions in its balance sheet as on 31.03.2012 neither it had shown the name as capital asset but had shown the same as business receipts. " 3. "that the Id. CIT(Appeals) erred in law and on fads in not appreciating the fact.1; that the Certified Emission Reductions/ Carbon Credit is an entitlement or privilege accrued to the assessee in the course of carrying on power generation activity, it cannot be said that such Carbon Credit is an accretion of capital asset. " 4. "that the Id. CIT(Appeals) erred in law and on facts in deleting the addition made on account of disallowance of delayed payment charges from customers u/s. 80-IA of the Income Tax Act, 1961 amounting to Rs.2,73,55,535/-," 5. "that the Id. CIT(Appeals) erred in law and on facts in deleting the addition made on account of disallowance of i....
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....be turned as "Commercial Expediency"." 15. "that the Id. CIT (Appeals) erred in law and on facts in ignoring the fact pointed out by the A.O. during the assessment proceedings that the assessee company failed to discharge the onus to prove that interest free fund were available with the assessee while advancing interest free loan. 16. "that the Id CIT (Appeals) erred in law and on facts in deleting the addition made to book profit u/s. 14A r, w. rule 8D of the Income Tax Act, 1961 totaling to Rs.6,78,94,834/-" 17. "that the Id. CIT (Appeals) erred in law and on facts in deleting the addition made on account of not granting of credit for dividend distribution tax(DDT) amounting to Rs.42,15,37,467/-" 18. "that the Id. CIT (Appeals) erred in law and on facts in not appreciating the fact that no credit is allowable in respect of dividend distribution tax against income tax payable by the assessee." 4. The interconnected issue raised by the Revenue vide ground Nos. 1 to 3 of its appeal is that the learned CIT-(A) erred in deleting the disallowances of deduction under section 80-IA of the Act for Rs. 321,68,86,818/- on account of income on sale of c....
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....le of CERs as 'other operating income' of SUGEN. The Appellant has claimed deduction under Section 80-lA on such income which is denied by AO on the ground that it is not linked with industrial undertaking. The Appellant has taken alternate ground that sale of CERs is capital receipt which is denied by AO on the ground that it is business receipt under Section 28(4) of the Act and Appellant itself has shown such income as revenue receipt in profit & loss account. This issue has been discussed by Hon'ble Hyderabad ITAT in the case of My Home Power Limited 151 TTJ 616 as under; 24. We have heard both the parties and perused the material on record. Carton credit is in the nature of "an entitlement" received to improve world atmosphere and environment reducing carbon, heat and gas emissions. The entitlement earned for carbon credits can, at best, be regarded as a capital receipt and cannot be taxed as a revenue receipt. It is not generated or created due to carrying on business but it is accrued due to "world concern". It has been made available assuming character of transferable right or entitlement only due to world concern. The source of carbon credit is world c....
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....on received on account of carbon credits cannot be considered as income as taxable in the assessment year under consideration. 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. Credit for reducing carbon emission or greenhouse effect can be transferred to another party in need of reduction of carbon emission. It does not increase profit in any, manner and does not need any expenses. It is a nature of entitlement to reduce carbon emission, however, there is no cost of acquisition or cost of production to get this entitlement. Carbon credit is not in the nature of profit or in the nature of income. 25. Further, as per guidance note on accounting for Self-generated Certified Emission Reductions (CERs) issued by the Institute of Chartered Accountants of India (ICAI) in June, 2009 states that CERs should be recognised in books when those are created by UNFCCC and/or unconditionally available to the generating entity. CERs are inventories of the generating entities as they are generated and held for the purpose of sale in ordinary course. Eve....
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....94 (Karnataka) dealt with the issue at length and relied on various judicial pronouncements, holding income received from realizationof carbon credits as capital in nature. The Hon'ble Karnataka High Court in paragraph 6 of its order (supra) has dealt with the issue at length and squarely held that the carbon credits are generated out of environmental concerns which does not have any character of trading activity; therefore, any receipt from an activity which is not a trading activity is capital in nature by following observation:- 19.1 The Hon'ble High Court further relied on the judgment of Hon'ble Andhra Pradesh High Court in the case of CIT vs. My Home Power Ltd [2014] 46 taxmsnn.com 314/365ITR 82 and the judgment of Hon'ble Karnataka High Court in the case of CIT vs. D.G. Gopala Gowda, [2013] 354 ITR 501, which have taken the same view on realization of carbon credits as capital receipt There is no contrary judgment and the two Hon'ble High Courts, i.e. Andhra Pradesh High Court and Karnataka High Court, having taken a concurrent view on this matter, are to be followed in judicial discipline. 19.2 The Id. Departmental Representative, on th....
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....ns made hereinabove, and relying upon decisions referred supra, income from sale of CERs is held as capital receipt hence issue as to whether Appellant is entitled for deduction under Section 80-IA or not has become infructuous and academic hence not adjudicated while deciding present appeal. This ground of appeal is thus allowed. 8. Being aggrieved by the order of the learned CIT-A, the assessee is in appeal before us. 9. Both the learned DR and the AR before us vehemently supported the order of the authorities below. 10. We have heard the rival contentions of both the parties and perused the materials available on record. At the outset, we note that there are several orders/ judgments wherein it has been held that the carbon credit received by the assessee represents the capital receipt which is not chargeable to tax. Some of the judgments are illustrated below: 10.1 The Hon'ble Andhra Pradesh High Court in case of CIT vs. My Home Power Ltd reported in 46 taxmann.com 314 in identical fact and circumstances has held as under: 3. We have considered the aforesaid submission and we are unable to accept the same, as the learned Tribunal has factually found that "C....
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....,55,535/- 2. Interest from customer Rs. 7,65,09,335/- 3. Shifting services Rs. 3,28,035/- 4. Liquidated damages/rebate Rs. 2,12,47,267/- 5. Sale of scrap Rs. 10,45,41,099 12.1 Nevertheless, the assessee has claimed deduction under section 80IA of the Act by treating them as profit derived from the business of distribution of power. However, the AO disputed the deduction with respect to such items of income. However, in appellate proceeding the learned CIT(A) held the above items of income as eligible for deduction under section 80IA of the Act. Thus the Revenue is in appeal before us. For the sake of convenience, we proceed to adjudicate each item of income shown by the assessee and claimed deduction under section 80IA of the Act in the manner as detailed below: Delayed payment charges from customers 13. At the outset, we note that identical issue came before this tribunal in the own case of the assessee for AY 2008-09 in ITA No. 776 & 738/Ahd/2012 where the issue has been decided in favour of the assessee and against the Revenue vide order dated 09-12-2021. The relevant finding of the Bench is extracted as under: 80. We have he....
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....tion is required to be excluded from the profits of the industrial undertaking as the same cannot be stated to have been derived from the business of the industrial undertaking. 31. In the result, both the questions stand answered as hereinbefore. The appeal is accordingly allowed and stands disposed of. 80.1 From the preceding discussion we note that the judgment was rendered in connection with the interest income which is eligible for deduction under section 80-I of the Act but the principles laid down therein can also be adopted to the provisions of section 80-IA of the Act in the given facts and circumstances. In view of the above we do not find any infirmity in the order of learned CIT (A). Hence the issue raised by the revenue is dismissed. 13.1 Before us, no material has been placed on record by the Revenue to demonstrate that the decision of Tribunal as discussed above has been set aside / stayed or overruled by the Higher Judicial Authorities. Before us, Revenue has not placed any material on record to point out any distinguishing feature in the facts of the case for the year under consideration and that of earlier year nor has placed any contrary bind....
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....above, such payment would not be profits derived from industrial undertaking, but in case of illustration (b) above, if the payment is described as sale price it would be profits derived from the industrial undertaking. This can never be, because in sum and substance these are only two modes of realising sale consideration, the object being to realise sale proceeds at the earliest and without delay. Purchaser pays higher sale price if it delays payment of sale proceeds. In other words, this is a converse situation to offering of cash discount. Thus, in principle, in reality, the transaction remains the same and there is no distinction as to the source. It is incorrect to state that the source for interest is the out-standing sale proceeds. It is not the assessee's business to lend funds and earn interest. The distinction drawn by Revenue is artificial in nature and is neither in consonance with law nor commercial practice. 30. The Tribunal was, therefore, not justified in holding that while computing deduction under section 80-I of the Act, interest received from trade debtors towards late payment of sales consideration is required to be excluded from the profits of the in....
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....as not placed any material on record to point out any distinguishing feature in the facts of the case for the year under consideration and that of earlier year nor has placed any contrary binding decision in its support. Thus, respectfully following the order this tribunal in the own case of assessee, we uphold the finding of the learned CIT(A). Thus, we hold that the assessee is eligible for deduction under section 80-IA of the Act with respect to Shifting Services. Liquidation damage/ Rebate 16. The assessee during the year has shown receipt of Rs. 2,12,47,267/- being liquidation damages/rebate in Ahmedabad Distribution unit, Surat Distribution unit and Surat generation unit. The assessee submitted that the liquidation damages were received from suppliers in case of short or late supply of materials or deficiency in materials supplied/ services rendered etc. Likewise, the assessee has received rebate under CERC regulation for prompt payment of transmission charges to PGCIL. Accordingly, the assessee contended that the above amount was received in the ordinary course of business and having direct nexus with the activity of distribution of power. Hence, the same is eligible f....
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....gly allowed appellant's claim for deduction under section 80-IA - Whether Tribunal was justified In its view - Held, yes [Paras 6 and 14] [In favour of appellant] Similar view is taken by Hon'ble MP High Court in case of CIT v Prakash Oils Ltd dated 08.03.2011 [58 DTR 279] in case of liquidated damages income. Hon'ble Gujarat High Court in the case of CIT vs Metrochem Industries Ltd. [[2017] 79 taxmann.com 440 has also allowed deduction u/s 80IA on Kasar and discount which is similar in nature of rebate as discussed herein above. Relying upon decisions referred supra, the AO is directed to allow deduction u/s SOIA on liquidated damages/rebate. 18. Being aggrieved by the order of the learned CIT(A), the Revenue is in appeal before us. 19. The learned DR before us contended that income to the assessee under the head liquidation damages and rebate does not arise from the activity of power generation and distribution and therefore the same is not eligible for deduction under section 80 IA of the Act. 20. On the contrary, the learned AR contended that the income to the assessee as discussed above directly relates to the activity of power generation and dist....
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.... from the activity of power generation but incidental to the business of the assessee. Accordingly, the same cannot be made subject to deduction under section 80 IA of the Act. 23. On appeal, the learned CIT-A was pleased to allow the deduction to the assessee under the provisions of section 80 IA of the Act with respect to the sales of scrap by observing as under: 5.8.3 The submission is considered. So far as deduction under Section 80-IA on sale of scrap is concerned, it is observed that same has been shown by Appellant as business income and the same is accepted by AO as such. The AO has not brought any evidences to suggest that same relates to capital assets. The income has been credited in distribution units and AO has not proved that such sale of scrap does not relate to business of power distribution undertaken by various units.*. Hon'ble Gujarat High Court in the case of CIT V/s Jikar A. Saiyed 42 taxman.com 403 has held as under: 'Section 80-/B of the Income-tax Act, 1961 - Deductions - Profits and gains from industrial undertakings other than infrastructure development undertakings [Computation of deduction] - Assessment year 2001-02 -Whether ....
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....does not arise. The learned DR at the time of hearing has not controverted the finding of the learned CIT-A. 26.1 When the consumable stores are purchased by the assessee, they are directly debited in the profit and loss account and the balance if remaining at the end of the year is shown as closing stock in the profit and loss account after making the adjustment of the consumption which is debited in the profit and loss account. Thus in effect only the amount of material consumed is claimed as deduction against the income of the assessee. If obsolete stores have been sold out in the year under consideration the same will be shown as income in the profit and loss account at the sale price and simultaneously the corresponding material cost of the consumables will be debited in the profit and loss account. Thus in effect the losses that the assessee has incurred on account of obsolescence of consumable materials is reduced by the amount of sale's realization. It is a matter manner of presentation in the books of accounts about the sale of consumable materials. If the assessee instead of showing the sale of the consumable materials as income and adjusting the same against the cost ....
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....section 80G/GGB of the Act. 28.3 The assessee in response thereto submitted that the deduction under section 80G/80GGB of the Act is eligible/allowed from the Gross Total Income when the payment is made to certain organizations specified therein. On the contrary the deduction under section 80-IA of the Act is provided for the specified business activity carried on by the assessee. Thus, the deductions under section 80G/80GGB of the Act and 80-IA of the Act are mutually exclusive and independent to each other. The assessee while claiming the deduction under section 80-IA of the Act against the profit of the specified business can also claimed the deduction under section 80G/80GGB of the Act separately. 28.4 However, the AO disregarded the contention of the assessee by observing that there remained no taxable profit after claiming the deduction under section 80-IA of the Act in the specified undertaking. Accordingly, the AO disallowed the deduction of Rs. 1,45,00,000/- being political donation u/s 80GGB of the Act, and Rs. 25,00,000/- being other donation under section 80G of the Act eligible for 100% deduction and Rs. 6,38,77,500/- being other deduction under section 80G of th....
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.... same cannot be considered as an expense/payment against the specific business/undertaking eligible for deduction under section 80-IA of the Act. It is for the reason that the donation under section 80G/80GGB of the Act does not relate to the activity of eligible undertaking. In other words, the payment under section 80G/80GGB of the Act is eligible for deduction on account of the payment made to the specific institution irrespective of the business whether it is eligible or non-eligible carried on by the assessee. 114.2 There is no dispute to the fact that the amount of donation was claimed by the assessee in the profit and loss account of the eligible undertaking which has been disallowed while computing the eligible profit. Certainly, the profit of the eligible undertaking will increase by the amount of disallowance made by the assessee on account of the donations paid to the institutions which is entitled for deduction under section 80G/80GGB of the Act. It has to be disallowed/added back while computing the eligible profit of the business referred therein under section 80-IA of the Act. It is for the reason that this donation does not relate to the business referred u....
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.... 7.2 The submission is considered. The AO has made disallowance under Section 14A applying Rule 8D, the Appellant has not earned any exempt income during the year which is not disputed by AO. The Hon'ble Gujarat High Court in the case of Corrtech Energy Pvt. Limited 45 taxman.com 116 on identical disallowance under Section 14A when no exempt income is earned, the Court has held as under: 4. Counsel for the Revenue submitted that the Assessing Officer as well as ClT(Appeals) had applied formula of rule B'J of the Income Tax Rules, since this case arose after the assessment year 20C,;-2Q10. Since in the present case, we are concerned with the assessment year 2009-2010, such formula was correctly applied by the Revenue. We however, notice that sub-section(l) of section 14A provides that for the purpose of computing total income under chapter IV of the Act, no deduction shall be allowed in respect of expenditure incurred by the assesses in relation to income which does not form part of the total income under the Act. In the present case, the tribunal has recorded the finding of fact that the assessee did not make any claim for exemption of any income from payment....
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....ourt. It is for the Court to declare what the particular provision of statute says and it is not for the Executive looked al from another angle, a circular which is contrary to the statutory has realty no existence in taw," The conclusion of the matter is that the law declared by Supreme Court is binding in terms of Article 141 of the Constitution. The Assessing Officer cannot simply brush aside the interpretation by Courts, in view of the aforesaid discussion, the disallowance made by the Assessing Officer invoking the provisions of Section 14A of the Act is not correct and hence, same is deleted. Accordingly, ground No. 6, 7 and 8 of the appeal are allowed. 37. Being aggrieved by the order of the learned CIT(A), the Revenue is in appeal before us. 38. Both the learned DR and the AR before us vehemently supported the order of the authorities below as favourable to them. 39. We have heard the rival contentions of both the parties and perused the materials available on record. At the outset we note that identical issue came up for hearing before this tribunal in the own case of the assessee for AY 2011-12 in ITA No. 3178/Ahd/2016 where the issue has been decided in....
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....ction 14A read with rule 8D. At that point of time, there was no clarity on the issue whether there will not be any disallowance under the provisions of section 14A read with rule 8D of Income Tax Rule if there was no exempted income. However this clarity was brought on a later date by the Hon'ble Gujarat High Court in the case of Corrtech Energy Ltd (Supra) vide order dated 24-3-2014. The contents of the order has already been reproduced in the preceding paragraph. Thus, there remains no ambiguity that the assessee was not aware of the provisions of law at the time of filing the return of income. 210.4 Be that as may be, the assessee cannot be deprived from the benefits provided under the provisions of law more particularly in a situation where the proceedings of the assessee for the year under consideration were pending before the higher authorities on same issues. 210.5 In view of the above and after considering the facts in totality, we hold that the disallowance under section 14A read with rule 8D of Income Tax Rule was not warranted. Hence the ground of appeal of the assessee is allowed whereas ground of appeal of the Revenue is dismissed in view of above di....
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....nly whereas the amount of loans and advances to subsidiary stands at Rs. 49.79 crore only which can be verified form the financial statement available on record. Thus, a presumption can be drawn that such amount of loan advances have been provided by the assessee out of its own fund. Therefore, there cannot be any disallowance of interest expenses. Hence the ground of appeal of the Revenue is hereby dismissed. 45.1 Before us, no material has been placed on record by the Revenue to demonstrate that the decision of Tribunal as discussed above has been set aside / stayed or overruled by the Higher Judicial Authorities. Before us, Revenue has not placed any material on record to point out any distinguishing feature in the facts of the case for the year under consideration and that of earlier year nor has placed any contrary binding decision in its support. Thus, respectfully following the order this tribunal in the own case of assessee, we uphold the finding of the learned CIT(A). Thus, the ground of appeal raised by the Revenue is hereby dismissed. 46. The next issue raised by the Revenue vide ground no. 16 is that the learned CIT (A) erred in deleting the addition made to the b....
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....s made u/s 14A r.w.r. 8D cannot be the subject matter of addition while determining the net profit u/s 115JB of the Act. The relevant portion of the said order is reproduced below: "In view of above discussion, the computation under clause (f) of Explanation 1 to section 115JB(2), is to be made without resorting to the computation as contemplated under section 14A, read with rule 8D of the Income-tax Rules, 1962." 124.2 The ratio laid down by the Hon'ble Tribunal is squarely applicable to the facts of the case on hand. Thus it can be concluded that the disallowance made under section 14A r.w.r. 8D cannot be resorted while determining the expenses as mentioned under clause (f) to explanation 1 to section 115JB of the Act. 124.3 However, it is pertinent to note that the disallowance needs to be made with respect to the exempted income in terms of the provisions of clause (f) to section 115JB of the Act while determining the book profit. In holding so, we draw support from the judgment of Hon'ble Calcutta High Court in the case of CIT Vs. Jayshree Tea Industries Ltd. in GO No.1501 of 2014 (ITAT No.47 of 2014) dated 19.11.14 wherein it was held that the disallowance r....
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....n-1 of Sec. 115JB of the Act. Thus the ground of appeal of the Revenue is partly allowed. 51.1 Before us, no material has been placed on record by the learned AR or DR to demonstrate that the decision of Tribunal as discussed above has been set aside / stayed or overruled by the Higher Judicial Authorities. Before us, learned AR or DR has not placed any material on record to point out any distinguishing feature in the facts of the case for the year under consideration and that of earlier year nor has placed any contrary binding decision in its support. Thus, respectfully following the order this tribunal in the own case of assessee, we set-aside the finding of the learned CIT(A) and direct the AO make adhoc disallowances @ 1% of exempted income. However, in the given facts and circumstances, we find that there was no exempt income in the year under consideration, therefore there cannot be any disallowance while computing the book profit under section 115JB of the Act. Thus, the ground of appeal raised by the Revenue is hereby dismissed. 52. The next issue raised by the Revenue vide ground Nos. 17 & 18 of its appeal is that the learned CIT(A) erred in deleting the addition of ....
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....idence and thereby restricting the deduction in respect of such expenditure to the extent of Rs. 4,12,12,6657- only.55.1 3. On the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the learned Assessing Officer's finding that bad debt recovery of Rs.93,15,306 in respect of Ahmedabad unit and Rs.38,97,867 in respect of the Surat unit are not eligible for deduction u/s.80-IA of the IT. Act. 4. On the facts and in the circumstances of the case, the learned CIT(A) erred in upholding the finding of the learned Assessing Officer that interest deposits amounting to Rs.1,37,41,456/- and Rs.61,45,411 being other interest income are not eligible for deduction u/s.80-IA of the IT. Act. 5. On the facts and in the circumstances of the case, the learned CIT(A) erred in upholding the finding of the learned Assessing Officer that rental income of Rs.5,36,138 in respect of Ahmedabad unit and Rs.83,293 in respect of Surat unit are not eligible for deduction u/s.80-IA of the IT Act. 6. On the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the finding of the learned Assessing Officer that other....
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.... respect of Education Cess and the Secondary and Higher Education Cess on income tax, on the ground that such expenditure is allowable business expenditure u/s 37(1) of the Act as per settled legal precedents. 2. Without prejudice to all the grounds raised, in law and in the facts and circumstances of the appellant's case, the appellant requests for admission of its additional claim and for allowing deduction of Rs.1,89,74,745/- in respect of Education Cess and the Secondary and Higher Education Cess on Dividend Distribution Tax, on the ground that such expenditure is allowable business expenditure u/s.37(1) of the Act as per settled legal precedent. 3. Without prejudice to all the grounds raised, in law and in the facts and circumstances of the appellant's case, the appellant requests for admission of its additional claim and for not including the proceeds of Rs. 3,21,68,86,818/- received on sale of carbon credits, while computing the Book Profit u/s. 115JB of the Act on the ground that it is income in the nature of "capital receipts" as per the settled legal precedents. 56. The first objection raised by the assessee vide ground nos. 1 & 2 is that the ....
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....1,40,67,489/- cannot be accepted for the reason that the same is not supported by the evidences. There was also no explanation furnished by the assessee that how it worked the amount of Rs. 71,31,629/- being the expenditure over income. Nevertheless, the AO held that expenses incurred by the assessee in relation to maintenance services cannot be denied. Therefore, the AO estimated the profit from the activity of streetlight maintenance services at Rs. 1,08,66,911/- being 0.00065% of total revenue and excluded the same from the computation of income under section 80-IA of the Act. 58. Aggrieved assessee preferred an appeal to the learned CIT (A), who confirmed the finding of the AO by following the order of his predecessor CIT(A) in own case of the assessee for AY 2010-11. 59. Being aggrieved by the order of the learned CIT (A), the assessee is in appeal before us by this cross objection. 60. The learned AR before us contended that the provisions of section 80-IA of the Act are beneficial provisions and therefore the same has to be read liberally. Likewise, the activity of streetlight maintenance is closely connected with the activity of distribution of power. Thus, the sam....
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.... CIT [1978] 113 ITR 84 (SC) which have interpreted the term 'derived from'. The relevant decisions of the Supreme Court: "The Legislature has deliberately used the expression 'attributable to', having a wider import than the expression 'derived from', thereby intending to cover receipts from sources other than the actual conduct of the business of the specified industry." (p.85) 38.3 From the ratio of the aforesaid decision of the Apex Court, it is clear that the phrase 'derived from' covers receipts from the actual conduct of business of the specified industry as provided under section 80-IA of the Act. 38.4 Likewise, as per the Bombay High Court in the case of Hindustan Lever Ltd. v. CIT [1980] 121 ITR 951/3 Taxman 390, the word 'derived' as far as income tax law is concerned, has been given a narrow meaning - a strict meaning, by the courts and has been understood in the restricted sense of a direct derivation and not understood in the broad sense as equivalent to be derived directly or indirectly. In other words, only the proximate source has to be considered and not the source to which it may ultimately be referable. 38.5 In the light of the....
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....r. It is because, the AO has considered all the income of the assessee for working out the profit from the activity of streetlight maintenance instead of making the estimate directly on the income shown by the assessee under the head streetlight maintenance. In simple words, the AO could have estimated the profit on some reasonable basis in relation to the gross income shown by the assessee from the activity of streetlight maintenance. As such, we are of the view that the justice shall be served to the assessee and the revenue, if the income of the assessee from the streetlight maintenance is estimated at the rate of 8% of Rs. 5,48,55,284/- being gross income from the streetlight maintenance activity. Hence the ground of appeal of the assessee is partly allowed. 63. The next objection raised by the assessee vide ground no. 3 is that the learned CIT(A) erred in sustaining the disallowance of deduction claimed under section 80-IA of the Act for Rs. 93,15,306/- and Rs. 38,97,867/- on account of recovery of bad debts in Ahmedabad unit and Surat unit. 64. The assessee during the year has shown income on account of recovery of bad debts amounting to Rs. 2,88,72,977/- and Rs. 59,68,....
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....ct. The finding of the AO has not been controverted by the assessee. The learned CIT(A) also found that identical disallowance was also made in earlier year being AY 2008-09 to 2010-11 which has been confirmed by the ld. predecessor CIT(A). Thus, the learned CIT(A) confirmed the disallowance made by the AO. 66. Being aggrieved by the order of learned CIT (A) the assessee is in appeal before us. 67. The learned AR before us contended that the bad debts were recovered with respect to the eligible undertaking. Therefore, the same should be eligible for deduction under section 80 IA of the Act. 68. On the other hand, the ld. DR vehemently supported the order of the authorities below. 69. We have heard the rival contentions of both the parties and perused the materials available on record. At the outset, we note that identical issue with respect to the eligibility of deduction of income from the activity of streetlight maintenance services came before this Tribunal in the own case of the assessee for AY 2008-09 in ITA No. 776 &738/Ahd/2012 where the issue has been decided in favour of the assessee vide order dated 09-12-2021. The relevant finding of the Bench is extracted as....
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....ring the course of business the transactions have a direct nexus with the business and one cannot view these transactions away from the business. Such transactions include receipts and payment of money in cash or in kind immediately or on credit and are part of business activities. If the assessee has to make the payment to the above four parties, which were standing in the balance sheet as creditors and which have been claimed as business deduction in an earlier year then only course left to the assessee is either to make the payment or if no payment is legally required, to show as profit under section 41(1) which has been so done by the assessee. There is a clear and direct business connection of such cessation or remission and such profits taxable under section 41(1) can be held as derived from industrial undertaking. The arguments of the ld. DR that they are not current year's profit from manufacturing activity is devoid of any merit because deduction under section 80-IA is available only on profits derived from industrial undertaking which is carrying on manufacturing activities and it is not confined to only current year's profit as per P&L account. The deduction unde....
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....ection 80-IA is denied to it, then, the expenditure incurred by way of interest on such deposits should be netted off. 71.1 However, the AO found that the amount of interest income from the fixed deposits and IT refund are not arising from the activity of distribution of power. Therefore, the same is not eligible for deduction under section 80-IA of the Act. Likewise, the alternate contention for netting of the interest income is not maintainable for the reason that there was no nexus brought on record by the assessee suggesting that there was the expenditure incurred by the assessee against such fixed deposit in the form of interest. Thus, the AO was pleased to exclude the gross amount of interest income being from FD and IT refund from the amount eligible for deduction under section 80-IA of the Act. 72. Aggrieved assessee preferred an appeal to the learned CIT (A) who confirmed the order of the AO. 73. Being aggrieved by the order of the learned CIT (A), the assessee in appeal before us. 74. The learned AR before us contended that the interest was recovered with respect to the eligible undertaking. Therefore, the same should be eligible for deduction under section 80....
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....set aside / stayed or overruled by the Higher Judicial Authorities. Before us, learned AR or DR has not placed any material on record to point out any distinguishing feature in the facts of the case for the year under consideration and that of earlier year nor has placed any contrary binding decision in its support. Thus, respectfully following the order this tribunal in the own case of assessee, we hereby confirm the finding of the learned CIT(A). Thus, the ground of objection raised by the Assessee is hereby dismissed. 77. The next objection raised by the assessee vide ground no. 5 is that the learned CIT(A) erred in sustaining the disallowance of deduction claimed under section 80-IA of the Act for Rs. 5,36,138/- and Rs. 83,293/- representing Rental income with respect to Ahmedabad unit and Surat Unit. 78. The assessee has provided staff quarters to the employees against the rent who were engaged in the activity of power distribution. Accordingly, the assessee was of the view that such the receipt of rent cannot be segregated from the activity of power distribution. Thus, the assessee claimed that the impugned rental income of T 6,19,431/- (Rs. 5,36,138 + Rs. 83,293/-) is ....
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.... is for the reason that there is no immediate nexuses between the activity of power distribution and the rental income from the staff working for the eligible undertaking. The provisions of Section 80-IA of the Act provides for deduction of the profits derived from the business by an undertaking or enterprise, engaged inter alia, in generation or generation and distribution of power. But the rental income was not arising to the assessee from the activity of distribution of power. Thus, on the same reasoning given in the relation to streetlight maintenance activity in para no. 38 of this order, the impugned income is not eligible for deduction under section 80-IA of the Act. Thus in view of the above discussion we are of the opinion that the rental income received from employee should not be included in the computation of deduction under section 80IA of the Act as the same is not the profit or gain derived from the eligible business activity. 73.1 Before parting a question arises what about the depreciation claimed by the assessee with respect to such building being the staff quarters. If the income is not eligible for deduction under section 80-IA of the Act then in our co....
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....stablished such claim with evidences hence it is held that such income is not eligible under section 80-IA of the Act. 87. Being aggrieved by the order of the learned CIT-A, the assessee is in cross objection before us. 88. The learned AR before us contended that the other misc. income being incentive, invoice TCD income, test report charges, excess amount recovered from GETCO are inextricably connected to the business of power generation. Hence,thesame should be allowed as deduction under section 80IA of the Act. 89. On the other hand, the learned DR vehemently supported the finding of the lower authorities. 90. We have heard the rival contentions of both the parties and perused the materials available on record. From the preceding discussion, we note that the assessee has shown miscellaneous receipts as income amounting to T 62,95,181/- only. The breakup of the same stands as under: Particulars Amount(Rs.) Incentive Income 1688995 Invoice TCD Income 1453059 Other Revenue 3153127 Total 6295181 90.1 The sum of T 16,88,995/- represents incentive to the assessee on account of collection made of the arrears of Maharashtra State Electricity ....
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....e same from the computation of eligible profit under section 80-IA of the Act. 93. On appeal by the assessee, the learned CIT-A confirmed the finding of the AO by observing as under: The Appellant has carried out street light maintenance activity for AMC for which various material charges in form of bulbs, tube lights are separately recovered from AMC. The AO has treated such income of Rs.1,18,67,2067- as income not eligible for deduction under Section 80-IA on the ground that as street light maintenance income is not held as eligible for deduction, such income also cannot be subject matter of deduction. On the other hand, Appellant has argued that such income is part of distribution services as contended while dealing with income relating to street light maintenance hence such income is eligible for deduction. However, this contention of Appellant cannot be accepted for the reasons given by undersigned while adjudicating issue of allowability of deduction under Section 80-IA on street light maintenance, supra. The Appellant has also contended that expenditure incurred for Rs. 99,24,9057-need to be allowed from above receipt. This claim was denied by AO on the ground th....
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.... has shown other income of Rs. 23,81,508 with respect to its different units. The details of the same stands as under: Particulars Amount (Rs.) A Surat Distribution 1 Income from shifting of services 328035 2. Refund against sales tax 141575 3. Capacitor Rent Recovery Charges 60473 4. Other Misc. Income 147270 677353 B Bhiwandi Distribution 1 Excess provision of depreciation w/o 111198 111198 C SUGEN 1. Net Gain/(Loss) On Foreign Currency Transactions 1592957 1592957 TOTAL 2381508 99.1 However, the AO was of the view that such other income is not eligible for deduction under section 80IA of the Act as it has no nexus with the activity of power generation and power distribution carried out by the assessee. Thus, the AO disallowed the same and added to the total income of the assessee. 100. Aggrieved assessee preferred an appeal to the learned CIT-A who partly confirmed the order of the AO by observing as under: ....
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....y dismissed. Now coming to the additional ground of objection raised by the assessee. 105. At the outset, we note that the learned AR for the assessee at the time of hearing submitted that he has been instructed not to press the issue raised by the assessee in additional ground nos. 1 and 2 of its objection. Hence, the same are dismissed accordingly as not pressed. 106. The assessee in the additional ground of objection bearing No. 3 has requested that the carbon credit of Rs. 321,68,86,818/-being capital receipt should not be taken into consideration while computing the book profit under the provisions of section 115JB of the Act. 107. At the outset, we note that the assessee vide letter dated 22-10-2021 has filed the additional ground of objection. It was pleaded by the assessee in the application filed for the admission of the additional ground of appeal that the issue raised in the additional ground of appeal goes to the root of the matter and the necessary facts are available on record. Accordingly, it was prayed by the learned AR for the assessee that the same should be admitted for adjudication. 108. On the other hand, the learned DR opposed to admit the addit....
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....the additional ground of objection raised by the assessee is hereby admitted. 109.3 At the time of hearing, the learned AR on behalf of the assessee contended that the carbon credit being capital receipt should not be considered for the purpose of calculating the book profit under the provisions of section 115JB of the Act. The learned AR in support of his contention has relied on various orders submitted in the written submission filed by the assessee, which is available on record. 110. On the other hand, the learned DR could not controvert the argument advanced by the learned AR for the assessee. 111. We have heard the rival contentions of both the parties and perused the materials available on record. There is no dispute to the fact that the amount received by the assessee on the sale of carbon credit of Rs. 321,68,86,818/- is capital receipt not chargeable to tax under the normal computation of income. There are series of judgments wherein it has been held that once a receipt, which is not chargeable to tax, by its nature then the same cannot be subject to tax under the provisions of book profit as specified under section 115JB of the Act. In holding so, we draw suppor....
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.... has erred in law and on the facts in deleting the addition made on account of late delivery payment of Rs.11,30,229,/- and supplier's discount and penalty of Rs.1,06,07,952/-. (c) that the Ld. CIT (A) has erred in law and on the facts in deleting, the addition made on account of miscellenaneous receipts of Scrap Sales of Rs. 2,42,03,238;- (d) that the Ld. CIT (A) has erred in law and on the facts in deleting the addition made on account of UI(Unscnednted Interchange) Income of Rs.3,66,81,586/- (e) that the Ld. CIT (A) has erred in law and on the facts in deleting the addition made on account of Meter fixing fees of Rs.41,5l,680/- (f) that the Ld. CIT (A) has erred in law and on the facts In deleting the addition of Income -from Shifting of services of Us. 33,81 329/- (g) that the Ld. CIT (A) has erred in law and on the facts in deleting the addition made on account of Liquidated, damage of Rs.4,32,144/- (h) that the Ld. CIT (A) has erred in law and on the facts in deleting addition made on discount of (Jain on foreign currency transaction of Rs.56, 56,459/- 3) that the Ld. CIT (A) has erred in law and on the facts ....
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....- 5. Misc. Income on sale of scrap Rs. 2,42,03,238/- 6. Supplier discount and penalty Rs. 1,06,07,470/- 7. Late delivery payment Rs. 11,30,229/- 8. Unscheduled interchange income Rs. 3,66,81,586/- 9. Meter fixing fee Rs. 41,51,680/- 10. Gain on foreign currency exchange Rs. 56,56,459/- 118. The items of income in serial No. 1 to5 were also there in the appeal of the revenue pertaining to the assessment year 2012-13 in ITA No. 14/AHD/2018. Therefore, the findings given in ITA No. 14/AHD/2018 shall also be applicable for the year under consideration i.e. AY 2013-14. The appeal of the Revenue for the assessment 2012-13 has been decided by us vide paragraph No. 13 to 26 of this order against the Revenue. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2012-13 shall also be applied for the year under consideration i.e. AY 2013-14. Hence, the grounds of appeal filed by the Revenue to the extent above stated item nos. 1 to 5 are hereby dismissed. 118.1 However, we note that the items of income mentionedat serial numbers 6 to 10were raised by the revenue 1st time and therefore they ....
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.... waster paper, etc. - Assessing Officer held that in terms of provisions of sub-section (2A) of section 80-IA profits and gains derived from above six items could not be said to be derived from eligible business of assessee and accordingly disallowed claim for deduction - Tribunal held that first degree nexus implicit in words 'derived from' used in section 80-IA(1) was not required for computation of deduction in case of undertaking engaged in providing telecommunication services, since words 'derived from' did not occur in sub-section (2A) of section 80-IA - It accordingly allowed assessee's claim for deduction under section 80-IA - Whether Tribunal was justified in its view - Held, yes [Paras 6 and 14] [In favour of appellant] Similar view is taken by Hon'ble MP High Court in the case of CIT vs Prakash Oils Ltd dated 08.03.2011 [58 DTR 279] in case of Late delivery payment charges. Hon'ble Gujarat High Court in the case of CIT vs Metrochem Industries Ltd. [[2017] 79 taxmann.com 440 has also allowed deduction u/s 80IA on Kasar and discount which is similar in nature of Supplier's Discount and Penalty as discussed herein above. I find the deduction on ....
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....ribution of power. Similarly, the amount of discount received by the assessee has presented in the financial statement in a different format. As such, the assessee instead of showing such discount income as a separate items income, it could have adjusted such receipt against the payment made to GETCO. In such an event, there would not have been any question of showing the impugned income and consequently for disallowing the deduction claimed by the assessee under the provisions of section 80 IA of the Act. Accordingly, we hold that the assessee is eligible for deduction on such discount. Unscheduled interchange income Rs. 3,66,81,586/- 125. The AO during the assessment proceedings found that the assessee claimed deduction under section 80IA of the Act on the amount of Rs. 3,66,81,586/- being unscheduled interchange income. The AO further found that such receipt was in the nature of penalty levied on the buyer on account of over drawing of the power. Therefore, the AO was of view that such receipt was not having direct link with activity of power distribution. As such, the same is mere incidental to the activity of the assessee and such incidental receipt cannot be allowed as ....
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....ort transmission of electricity to customer than the billed unit. On such excess transmission of electricity, the assessee charged consideration. Thus, it appears that such receipt has direct link from the activity generation and distribution of power as it is charged on the excess supply of power. In our considered view, such receipt is part parcel to the sales made by the assessee. Accordingly, we hold that the assessee is eligible for deduction on such discount. Meter fixing fee: Rs. 41,51,680/- 130. The assessee during the year has shown receipt of Rs. 41,51,680/- from meter fixing services provided to the customer and claimed the same as income eligible for deduction under section 80IA of the Act. However, the AO was of the view that such services provided to the customer are not interlinked with the power distribution activity. As such, the impugned receipt do not contain any element of generation or distribution of power. Thus, the AO excluded the same from the eligible profit. 131. On appeal by the assessee, the learned CIT-A deleted the disallowances of deduction made by the AO by observing as under: "On careful consideration of the facts stated above, it....
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....ligible for deduction under section 80IA of the Act on such receipt. Gain on foreign currency exchange: Rs. 56,56,459/- 135. The assessee claimed gain of Rs. 56,56,459/- on account of foreign currency fluctuation as income eligible for deduction under section 80IA of the Act for its Surat Generation unit. The assessee in support of its claim submitted that such currency fluctuation gain arises because of import of material, natural gas and equipment used for the purpose of generation of power in Surat Generation unit. Hence, the impugned gain of currency fluctuation has direct nexus with the activity of power generation. Therefore, the same is eligible for deduction under section 80IA of the Act. The assessee in support of its contention also referred to various case laws. 135.1 However, the AO disagreed with the claim of the assessee. The AO found that the loss/gain arising from the receipt or payment of foreign currency has nothing to do with business activity of the assessee. Such gain or loss is purely based on market condition of the particular currency, which is not in the control of the assessee. Further, such gain or loss recognized in the books separately from sal....
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....livered from Industrial Undertaking - Held, yes [Para 7] [Partly in favour of appellant]" (ii) CIT vs Metrochem Industries Ltd [[2017] 79 taxmann.com 440] dated 19.07.2016 "II Section 80-IA of the Income-tax Act, 1961 - Deductions - Profits and gains from infrastructure undertakings (Computation of deduction) - Assessment years 1994-95, 1996-97 and 1997-98 - Foreign exchange fluctuation and duty drawback is an income derived from industrial undertaking, eligible for deduction under sections 80-I and 80-IA [In favour of assessee]" In view of binding decision of Hon'ble Gujarat High Court referred supra, it is held that Appellant is entitled for deduction under Section 80-IA on gain on foreign currency transaction for Rs. 15,92,957." Facts on the case continue to be same and also respectfully relying upon the judgment of jurisdictional High Court as above and following the decisions of my predecessor CIT(A), deduction under Section 80-IA towards Gain on Foreign currency transaction for Rs. 56,56,469 is allowed. Related ground of appeal is allowed." 137. The learned DR before us contended that the said income does not have direct nexus with the e....
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....ciple laid down by the Hon'ble Court in the case cited above is squarely applicable in the case on hand. Thus, in view of the above, the ground of appeal of the Revenue is hereby dismissed. 140. The next issue raised by the Revenue in ground No. 3of its appeal is that the learned CIT (A) erred in deleting the addition made under section 14A r.w.r 8D of Income Tax Rule for Rs. 7,82,31,933/- only. 141. At the outset, we note that the issues raised by the revenue in its grounds of appeal for the AY 2013-14 are identical to the issues raised by the Revenue in ITA No. 14/AHD/2018 for the assessment year 2012-13. Therefore, the findings given in ITA No. 14/AHD/2018 shall also be applicable for the year under consideration i.e. AY 2013-14. The appeal of the Revenue for the assessment 2012-13 has been decided by us vide paragraph No. 39 of this order against the Revenue. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2012-13 shall also be applied in the year under consideration i.e. AY 2013-14. Hence, the grounds of appeal filed by the Revenue is hereby dismissed. 142. The next issue raised by the Revenue in ground No. 4of its appe....
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....n i.e. AY 2013-14. The appeal of the Revenue for the assessment 2012-13 has been decided by us vide paragraph No. 51 of this order against the Revenue. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2012-13 shall also be applied for the year under consideration i.e. AY 2013-14. Hence, the grounds of appeal filed by the Revenue is hereby dismissed. 148. In the Result the appeal file by the Revenue is dismissed. Coming to CO No. 120/Ahd/2019 by the assessee in ITA No. 2047/Ahd/2018 for A.Y. 2013-14. 149. The assessee has raised the following grounds of objection: 1. On the facts and in the circumstances of the case, the learned CIT(A) has erred in denying deduction u/s 80IA of the Act on interest income on deposits amounting to Rs. 56,07,267/- Act when no such denial is called for. 1.1 On the facts and in the circumstances of the case, the learned CIT(A) ought to have appreciated that as there is net interest expenditure in industrial undertaking eligible for deduction u/s 80IA, such deduction cannot be denied on gross interest income in view of binding decision of Hon'ble Gujarat High court in the case ....
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.... created during the year, as per the settled legal precedents. In view of the above, the additional ground raised may kindly be admitted in view of natural justice to the appellant. 150. The first objection raised by the assessee vide ground no. 1 is that the learned CIT(A) erred in sustaining the disallowances of deduction under section 80-IA of the Act for Rs. 56,07,267/- on account of FD interest income. 151. At the outset, we note that the issues raised by the assessee in its grounds of cross objection for the A.Y. 2013-14 are identical to the issues raised by the assessee in CO No. 41/AHD/2019 for the assessment year 2012-13. Therefore, the findings given in CO No. 41/AHD/2019 shall also be applicable for the year under consideration i.e. AY 2013-14. The objection of the assessee for the assessment 2012-13 has been decided by us vide paragraph No. 76 to 76.1 of this order against the assessee. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2012-13 shall also be applied for the year under consideration i.e. AY 2013-14. Hence, the ground of cross objection filed by the assessee is hereby dismissed. 152. The next....