TaxTMI 
TaxTMI 
TaxTMI 
2023 (1) TMI 65
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....he 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 interest from customers on late receipt u/s. 80-IA of the Income Tax Act, 1961 amou....
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....uring 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 certified emission Reduction by treating the same as capital asset. 5. The facts in brief are that the assessee is a public company and engaged in the business of generation a....
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....th 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 concern and environment. Due to that the assessee gets a privilege in the nature of transfer of carbon credits. Thus, the amount received for carbon credits has no element of profit or gain and it....
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....ronmental 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. Even though CERs are intangible assets those should be accounted as per AS-2 (Valuation of inventories) at a cost or market price, whichever is lower. Since CERs are recognized as inventories, the generati....
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.... (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 the other hand, contends that the realization from carbon credits has been treated by the appellant itself as revenue income and offered to tax and in fact in actualities they are revenue receipt, However, no adverse judgment on this has been cited. 2....
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....resent 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 "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 Ca....
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....iness 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 heard the rival contentions of both the parties and perused the materials available on record. The late fees charged by the assessee from the customers on account of delayed payment within the time has direct nexuses with the activity of the business of the assessee i.e. distribution of electricity. Thus to our understanding such amount of delayed paym....
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....ment 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 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 delayed payment charges from customers. Interest from customer 14. At the outset, we note that identical issue came bef....
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....y. 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 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." 59.1 From the preceding discussion we note that the judgment was rendered in connection with the provisions of section 80I of the Act but the principles l....
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.... 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 for deduction under section 80-IA of the Act. 16.1 However, the AO disagreed with the submission of the assessee and held that amount of compensation received from supplier and rebate availed on account of prompt payment to PGCIL does not have any nexus with the activity of the power distribution or generation. The above receipt is in the nature of income being compensation and incentive and therefore, the same is outside the preview of....
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.... 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 distribution. Therefore, the same is eligible for deduction under section 80 IA of the Act. 21. 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 damages were received by the assessee in connection with the purchases made by the eligible unit. The amount of liquidated damages represents the receipt of the assessee from the supplier who failed to supply or caused delay in ....
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....t 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 in view of orders passed in cases of Dy, CIT v. Harjivanda$JuthabhaiZaveri[2002j 258 ITR 785/[2003] 132 Taxman 923 (Guj.)and CIT v. Sadhu Forging Ltd. [2011] 336 ITR 444/200 Taxman 1/11 taxmann.com 322 (Delhi), Tribunal was justified in holding that assesses, engaged in manufacturing card boxes, was entitled to deduction under section 80-iB in respect of income arising from sale of scrap - Held, yes [Para 6][ln favour of assessee" Relying upon the binding decision of the Hon'ble Court....
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.... 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 of the consumables sold by it there will not be any income in the books of accounts of the assessee and accordingly the question of disallowances of deduction under the section 80IA of the Act will not arise. Thus, merely the assessee has presented the sale of consumable stores in a particular manner, the assessee cannot be debarred from claiming the deduction under the provisions of section 80IA of the Act. It is also pertinent to note that the income from the sale of consumable stores used in the eligible....
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....r 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 the Act eligible for 50% deduction. 29. Aggrieved assessee preferred an appeal to the learned CIT (A) who deleted the addition made by the AO by following the order of his predecessor CIT (A) in the own case of the assessee for AY 2008-09 to 2010-11. 30. Being aggrieved by the order of the learned CIT (A), the Revenue is in appeal before us. 31. Both the learned DR and the AR before us vehemently supported the order of the authorities below as favourable to them. 32. We have heard the rival contentions of both the parties and perused the materials available ....
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.... 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 under section 80-IA of the Act which is eligible for deduction. But the same can be claimed as deduction by virtue of the provisions of section 80G/80GGB of the Act separately subject to the conditions specified therein. Hence, we do not find any infirmity in the order of learned CIT (A). Thus, the ground of appeal of the Revenue is dismissed. 32.1 Before us, no material has been placed on record by the Revenue to demonstrate that the decision of the Tribunal as discussed above has been set aside / stayed or overruled by the Higher Judicial Authorities. Before us, Revenue has not placed a....
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....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 of tax. It was on this basis that the tribunal held that disallowance under section 14A of the Act could not be made, In the process tribunal relied on the decision of Division Bench of Punjab and Haryana High Court in case of CIT v. Winsome Textile Industries Ltd. [2009] 319 ITR 204 in which also the Court had observed as under: "7. We do not find any merit in this submission. The judgement of this court in Abhishek Industries Ltd {2006} 286 ITR 1 was on the issue of allowability of interest paid on loans given to sister concerns, without interest. It was held that deduction for interest was permissible when....
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....al 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 favour of the assessee and against the Revenue vide order dated 09-12-2021. The relevant finding of the Bench is extracted as under: 210. We have heard the rival contentions of both the parties and perused the materials available on record. There is no ambiguity to the fact that there was no dividend/exempted income earned by the assessee in the year under consideration. Accordingly, there cannot be any disallowance under the provisions of section 14A read with rule 8D of Income Tax Rule in view of the judgment of Hon'ble Gujarat High Court in the case of Corrtech Energy Ltd reported in 372 ITR 97 wherein it was held as under: Section 14A(1) provides tha....
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....rovisions 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 discussion. 39.1 Before us, no material has been placed on record by the Revenue to demonstrate that the decision of the 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. 40. The next issue raised by the Revenue vide groun....
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....f 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 books profit u/s 115JB of the Act by the amount of Rs. 6,78,94,834/- being disallowances under section 14A read with rule 8D of the Income Tax Rules. 47. The AO while computing the income under the normal provisions of the Act has made the disallowance under the provisions of section 14A read with rule 8D of Income Tax Rule. As per the AO, the same has to be added while computing the book profit under section 115JB of the Act. Accordingly, the AO has done so by adding the sum of Rs. 6,78,94,834/- to the book profit of the assessee under section 115JB of the Act. 48. Aggrieved assessee preferred an appeal to the learned CIT (A) who deleted the addition made by the AO by observing that once the disallowance under section 14A of the....
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....t 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 regarding the exempted income needs to be made as per the clause (f) to Explanation-1 of Sec. 115JB of the Act independently. The relevant extract of the judgment is reproduced below:- "We find computation of the amount of expenditure relatable to exempted income of the assessee must be made since the assessee has not claimed such expenditure to be Nil. Such computation must be made by applying clause (f) of Explanation 1 under section 115JB of the Act. We remand the matter for such computation to be made by the learned Tribunal. We accept the submission of Mr. Khaitan, learned Senior Advocate that the provision of section 115JB in the matter of computation is a complete code in itself and resort need not and cannot be made to section 14A of the Act." 124.4 Given....
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.... 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 Rs. 42,15,37,467/- made on account credit of dividend distribution tax. 53. The assessee has raised the ground of appeal before the learned CIT-A as detailed below: In law and in the facts and circumstances of the appellant's case, the learned Assessing Officer has grossly erred in not at all considering the Credit for Dividend Distribution Tax paid amounting to Rs.42,15,37,467/- available to the appellant up to the year under consideration while determining the demand of tax payable for the year under consideration. 53.2 Based on the above ground of appeal, the learned CIT-A has held as under: The eleventh and twelfth ground of appeal relate to not granting of credit for dividend distribution tax (DDT) for Rs.44,15,37,467 and short grant of TDS for Rs.2,83,716. The AO is directed to verify th....
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....ssing 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 miscellaneous receipts of Rs.62,95,181 in respect of Bhiwandi Distribution unit are not eligible for deduction u/s.80-IA of the IT. Act. 7. 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 Store Billing Charges of Rs.1,18,67,206 received from Ahmedabad Municipal Corporation for supply of material like bulbs and tube-lights for street lighting, are not eligible for deduction u/s.80-IA of the IT. Act. 8. 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 Sales-tax refund of Rs. 1,41,575, rent recovery charges of Rs.60,473, miscellaneous income of Rs. 1,47,270 and excess provision in respect of depreciation written back amounting to Rs.1,11,198 are not eligible for deduction u/s.80-IA of ....
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....bon 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 learned CIT(A) erred in sustaining the disallowance of deduction under section 80-IA of the Act for Rs. 1,08,66,911/- representing street light maintenance income on the reasoning that it is not derived from the activity of power generation. 57. The assessee during the year under consideration earned gross of income of Rs. 5,20,79,576/- from streetlights maintenance in pursuance to the agreement entered into with Ahmedabad Municipal Corporation which was claimed as deduction under section 80- IA of the Act. As per the assessee, the activity of maintaining the streetlights directly relates to its business of distribution of power. It is for the reason that the assessee cannot distribute the power in the streetlights until and unless it maintains them. Accordingly, the assessee contended that the income derived by it from the maintenance of the streetlights maintenance should also be eligible for deduction under section 80IA of the ....
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....rovisions 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 same is eligible for deduction under section 80 IA of the Act. 61. On the other hand, the learned DR before us vehemently supported the order of the authorities below. 62. 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 up 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 against the assessee. The relevant finding of the Bench is extracted as under: 38. We have heard the rival contentions of both the parties and perused the materials available on record. The provisions of section 80IA of the Act, inter-alia, provides the deduction to the undertaking which is engaged in generation or generation and distribution of power. The essential ingredients for claiming....
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....ndirectly. 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 aforesaid discussion, it may be safely concluded that the expression "Profit and gain derived from an Industrial undertaking" used in sections 80-IA of the Act, will include all the profits and gains earned by the Industrial undertaking by the actual conduct of its business. It would mean that all the income which has a direct nexus with the business of the Industrial Undertaking, will be includible in such profits and gains. Thus, we are of the view that profit and gain earned by the assessee from the services of maintenance of street light are not the profit and gain from the activity or undertaking of generation and distribution of power. As there is no nexus between the business of power distribution and maintenance /service of street light. Thus, we hold that profit and gains derived from street light maintenance services should not be included in amount of deduction under section 80IA of the Act. Hence we do not find any infirmity in the finding of the authority below. Accordingly the assessee's ground of appeal is di....
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....nit 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. 59,68,563/- with respect to Ahmedabad and Surat units respectively and same was included in the deduction claimed under section 80IA of the Act. The assessee submitted that bad debt and their recovery arise from business of distribution of power, therefore,the same is eligible for deduction under section 80-IA of the Act. The assessee alternatively submitted that during the year it has written off bad debts to the tune of Rs. 1,95,57,671/-, Rs. 8,34,21,345/- and 20,70,696/- in respect of Ahmedabad unit, Bhiwandi unit and Surat unit respectively. Therefore, in case, the income on account bad debt recovery is not considered for deduction under section 80- IA of the Act then the amount of bad debt should also be excluded while computing the deduction under section 80-IA of the Act. 64.1 However, the AO was of the view that no benefit of bad debts recovery can be granted by allowing deduction under section 80IA of the Act for the reason that the amount of bad debt was recognized by the assessee when its unit was not eligible for deduction un....
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.... 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 under: 45. We have heard the rival contentions of both the parties and perused the materials available on record. Admittedly, there is no dispute to the fact that the bad debs recovery shown by the assessee as income in the year under consideration pertains to the undertaking eligible for deduction under section 80IA of the Act. The allegation of the AO was that the bad debts recovery represents the amount which was claimed as deduction by the assessee in the earlier year when the undertakings were not eligible for deduction under section 80IA of the Act. Thus, the assessee has claimed double benefit firstly by claiming the deduction of bad debts when the undertakings were not eligible for deduction under section 80IA of the Act and secondly by showing the income of Bad debt recovery when the undertakings were eligible for deduction under section 80IA of the Act. On this reasoning, the AO did not allow the benefit of deduction under section 80IA of the Act qua such bad debts recovery. However, this dispute has been resolved by the ITAT (Ahmeda....
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.... on manufacturing activities and it is not confined to only current year's profit as per P&L account. The deduction under section 80-IA or 80-IB is available on profits and gains computed in accordance with section 20A-43D which includes section 41(1) also. 12. Thus where Assessing Officer finds that claim has already been allowed in the earlier year then such benefit under section 80-IA should be given to the profits taxed under section 41(1). The argument of ld. AR is that once it has declared profits under section 41(1) it would mean that assessee has already claimed and allowed deduction thereof in earlier years but in our considered view it requires verification and for that matter we restore the matter to the file of Assessing Officer. Accordingly this ground of assessee is allowed for statistical purposes. 45.1 From the above, there remains no ambiguity to the fact that the assessee is eligible for deduction under section 80 IA of the Act with respect to the impugned bad debt recovery shown as income in the year under consideration. Thus the ground of appeal of the assessee is allowed. 69.1 Before us, no material has been placed on record by the Revenue to demonstra....
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.... the eligible undertaking. Therefore, the same should be eligible for deduction under section 80 IA of the Act. 75. On the other hand, the ld. DR vehemently supported the order of the authorities below. 76. 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 interest on FD and income tax refund came up 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 against the assessee. The relevant finding of the Bench is extracted as under: 52. We have heard the rival contentions of both the parties and perused the materials available on record. Undeniably, the fixed deposits were made by the eligible undertakings and interest was earned thereon. On perusal of the order of the AO, we also note that there was surplus fund available with the assessee which was parked in the fixed deposits. The relevant contentions of the assessee before the AO reads as under: "the assessee company submitted that it has invested its money in fixed deposits so as....
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....d rental income of T 6,19,431/- (Rs. 5,36,138 + Rs. 83,293/-) is eligible for deduction under section 80-IA of the Act. The assessee alternatively contended that if it is denied the benefit of deduction under section 80-IA of the Act, then only the net income from the rent after adjusting the corresponding expenses should only be considered for excluding from the amount of deduction. 78.1 The AO was of the view that the impugned rental income has no connection with the power distribution activity. Therefore, the same cannot be allowed as deduction under section 80-IA of the Act. Likewise, the alternate contention of the assessee was also rejected by the AO in the absence of the necessary information about the expenditure incurred by it against such rental income. Thus, the AO excluded the gross amount of rental income of Rs. 6,19,431/- from the amount eligible for deduction under section 80-IA of the Act. 79. Aggrieved assessee preferred an appeal to the learned CIT (A) who also confirmed the finding of the AO. 80. Being aggrieved by the order of the learned CIT (A), the assessee is in appeal before us. 81. The learned AR before us contended that the employees from whom the ren....
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....section 80-IA of the Act then in our considered view the corresponding depreciation should also be excluded from the profit of the eligible undertaking. Likewise, the expenses incurred in connection with the maintenance of such staff quarters should also be excluded. Accordingly, we direct the AO to exclude the rental income from the amount of eligible profit net of the expenses qua to such rental income. Hence the ground of appeal of the assessee is partly allowed. 83.1 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 hereby set aside the finding of the learned CIT(A). Thus, the ground of objection raised by the Assessee is hereby partly allowed. 84. The next objection raised by the asses....
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....tribution Company Ltd (MSEDCL). Admittedly, the incentive given by MSEDCL is not connected with the generation and distribution activity of the assessee. Thus, the same is not eligible for deduction under the provisions of section 80IA of the Act. However, while excluding the impugned miscellaneous receipt, the assessee is eligible for deduction of the expenses incurred, if any, against such miscellaneous (incentive income) receipt. 90.2 Moving further, we note that the amount of Rs. 14,53,059/- represents the receipts from the contractors on account of various reasons such as detailed below: i. late submission of the bill ii. penalty for poor quality iii. HR penalty iv. safety violation penalty 90.3 Admittedly, the miscellaneous receipts discussed above is not connected with the generation and distribution activity of the assessee. Thus, the same is not eligible for deduction under the provisions of section 80IA of the Act. However, while excluding the impugned miscellaneous receipt, the assessee is eligible for deduction of the expenses incurred, if any, against such miscellaneous receipt. 90.4 With respect to the other income of Rs. 31,53,127/-, we find that no detail....
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.... such details are not submitted in present Appellate Hearing hence alternate contention of taxing of net income cannot be allowed. 94. Being aggrieved by the order of the learned CIT-A, the assessee is in appeal before us in the cross objection. 95. The learned AR before us conceded that the issue on hand is covered against the assessee by the order of this tribunal in own case of the assessee for A.Y. 2011-12 bearing CO No. 25/Ahd/2017. 96. On the other learned DR vehemently supported the order of the authorities below. 97. 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 store billing charges came up before this tribunal in the own case of the assessee for AY 2011-12 in CO No. 25/Ahd/2017 where the issue has been decided against the assessee. The relevant finding of the Bench is extracted as under: 222.1 Before parting, we note that the AMC store billing activity of the assessee was not connected with the distribution of power. Therefore the same was not allowed by the learned CIT (A) while computing the....
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.... gain on foreign currency transaction for Rs.15,92,957. So far as income from shifting of services for Rs.3,28,025 is concerned AO has already made separate addition hence disallowance under Section 80-IA made again is deleted. So far as other income being refund of sales tax, rent recovery charges, miscellaneous income and excess provision for depreciation written back are concerned, Appellant has not proved that such incomes are inextricably linked with business operations and even no details were submitted during the course of Assessment Proceedings hence addition made by AO to that extent is confirmed. 101. Being aggrieved by the order of the learned CIT-A, the assessee is in cross objection before us. 102. The learned AR before us contended that the other incomes are directly connected to the activity of power generation and distribution. Therefore, the same should be considered for the purpose of the deduction under section 80-IA of the Act. 103. On the other hand the learned DR vehemently supported the order of the authorities below. 104. We have heard the rival contentions of both the parties and perused the materials available on record. From the preceding discussion, ....
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....d. The Hon'ble Supreme Court in the case of National Thermal Power Co. Limited vs. CIT, reported in 229 ITR 383, has held as under:- " Under section 254 of the Income-tax Act, 1961, the Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. The power of the Tribunal in dealing with appeals is thus expressed in the widest possible terms. The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. If, for example, as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that a non-taxable item is taxed or a permissible deduction is denied, there is no reason why the assessee should be prevented from raising that question before the Tribunal for the first time, so long as the relevant facts are on record in respect of the item. There is no reason to restrict the power of the Tribunal under section 254 only to decide the grounds which arise from the order of the Commissioner of Income-tax (Appeals). Both the assessee as well as the Department have a right to file ....
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....e have already held that in relevant assessment year 2010-11 the incentives 'Interest subsidy' and 'Power subsidy' is a 'capital receipt' and does not fall within the definition of 'Income' under Section 2(24) of Income Tax Act, 1961 and when a receipt is not on in the character of income it cannot form part of the book profit under Section 115JB of the Act, 1961. In the case of AppolloTyres Ltd. (supra) the income in question was taxable but was exempt under a specific provision of the Act as such it was to be included as a part of the book profit. But where a receipt is not in the nature of income at all it cannot be included in book profit for the purpose of computation under Section 115JB of the Income Tax Act, 1961. For the aforesaid reason, we hold that the interest and power subsidy under the schemes in question would have to be excluded while computing book profit under Section 115 JB of the Income Tax Act, 1961. 111.1 In view of the above we hold that the amount received by the assessee on the sale of carbon credit being capital in nature cannot be made subject to tax under the provisions of MAT as specified under section 115 JB of the Act.....
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....borrowed funds for making interest free advances to subsidiary companies of Rs.7,49,50,542/- 5) that the Ld.CIT(A) has erred in law and on the facts in deleting the addition made on account of disallowing deductions claimed by the assessee company u/s.80G of Rs.25,00,000/- and u/s.80GGB of Rs.3,50,00,000/- 6) that the Ld.CIT(A) has erred in law and on the facts in deleting the addition to Book Profit u/s.14A r.w.r. 8D of the Act of Rs.10,79,29,887/- 114. The first issue raised by the Revenue vide ground No. 1 of its appeal is that the learned CIT-(A) erred in treating income on sale of certified emission Reduction for Rs. 41,45,02,512/- as capital receipt. 115. At the outset, we note that the issue raised by the Revenue in its grounds of appeal for the AY 2013-14is 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. 10 of this order against the Revenue. At the time of hearing, the learned AR and the DR also ....
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....ble income for deduction under section 80IA of the Act. The assessee during the assessment proceeding submitted that it gets discount @ 2% on prompt/timely payment made to GETCO (Gujarat Electricity Transmission Corporation) which is shown under the head supplier discount. Likewise, it also received an amounts of Rs. 11,30,229/- from the suppliers because of late delivery/supply of materials. Thus, both these receipt, ultimately reduced the purchase cost/distribution cost. 119.1 However, the AO disagreed with the submission of the assessee and held that the said receipt is not derived from the activity of power distribution activity as the same has no direct nexus with eligible activity of power distribution. Hence, the AO excluded the receipt of Rs. 1,06,07,470/- &Rs. 11,30,229/- from the income eligible for deduction under section 80IA of the Act. 120. On appeal by the assessee, the learned CIT-A deleted the disallowance of deduction made by the AO by observing as under: "On careful consideration of the entire facts, it is observed the income in form of late delivery payment is inextricably linked with purchase cost of eligible unit and it reduces the cost incurred by appella....
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....aggrieved by the order of the learned CIT(A), the Revenue is in appeal before us. 122. The learned DR before us contended that the said income are not having direct nexus with the eligible business of the assessee. As such the above said receipt are only incidental to the activity of the assessee. Hence same cannot be allowed for deduction. 123. On the hand the learned AR before us contended that impugned incomes are directly connected to the activity of power generation and distribution. Therefore, the same should be considered for the purpose of the deduction under section 80 IA of the Act. 124. 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 in connection with the purchases made by the eligible unit received the certain amount from the supplier on late delivery/supply of material. Thus, it appears that such receipt has direct link from the activity of generation and distribution of power. Besides the above, if the assessee reduces the cost of material purchase by the amount of late delivery charges, there would not have been any question of showing the impugned inco....
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....ts stated above, it is observed that this UI income is nothing but the sale consideration for excess supply of electricity through Gujarat Energy Transmission Corporation (GETCO). As explained earlier many a times the transmitter transmits excess electricity than the quantity billed. Appellant does not come to know about it since the monitoring of such excess or short fall is managed by the mediator which is GETCO itself. When there is short fall appellant is charged and such expense are claimed by the appellant from the respective unit. Such short fall or excess is essentially part of the sales the only difference from the normal trading activity is that, in this case appellant has to supply the electricity to its client through GETCO and the details of such short fall and excesses are maintained by GETCO and the appellant is billed periodically. Considering these facts, it is clear that the activity being part of sale of electricity the income thereon has direct and proximate link with the core activity of the appellant. Accordingly, the claim of deduction u/s 80IA of the Act made by Appellant for UI income for Rs. 3,66,81,586 is allowed. Related ground of appeal is allowed." 12....
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.... Fees, Testing Fees, Fault attending fees, etc. are inextricably linked to the distribution business of the Appellant and has direct and proximate link with the eligible activity, hence it is eligible for claiming deduction u/s 80IA of the Act. It is also observed that even in case of Appellant my predecessor CIT(A) has consistently allowed meter shifting charges as eligible for deduction under Section 80-IA and nature of income remains the same, therefore, hence the claim of deduction u/s 80IA of the Act made by Appellant on Meter fixing Fees, Testing Fees, etc. for Rs. 41,51,680/- is allowed. Related ground of appeal is allowed." 132. The learned DR before us contended that the said income is not having direct nexus with the eligible business of the assessee. As such, the above said receipt is only incidental to the activity of the assessee. Hence, same cannot be allowed as deduction. 133. On the hand, the learned AR before us contended that impugned incomes are directly connected to the activity of power generation and distribution. Therefore, the same should be considered for the purpose of the deduction under section 80 IA of the Act. 134. We have heard the rival contention....
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.... the Act. 136. On appeal by the assessee, the learned CIT(A) deleted the disallowance made by the AO by observing as under: "The Appellant has mainly argued that gain on foreign exchange transaction relates to exchange rate fluctuation relating to material imported, equipment purchased and supply of natural gas for generation of electricity. The Appellant has mainly relied upon decisions of Hon'ble Gujarat High Court in the case of Deverson Industries Limited 55 taxman.com 189, Metrochem Industries Limited 79 taxmann.com 440. It is observed that the facts are similar to A.Y. 2012-13 in which my predecessor CIT(A) has held as under: "5.9.3 The submission is considered. It is observed that Appellant has explained the nature of gain on foreign currency transactions during Assessment Proceedings hence AO is not correct in holding that such details were not submitted. So far as merits of the case is concerned, it is observed that gain on foreign exchange fluctuation is on account of different rates of exchange on the dates of transactions and the rate of exchange on the balance sheet date or settlement or liability which is nothing but revenue in nature and directly related t....
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....ble on record. From the preceding discussion, wenote that gain on account of foreign currency rate fluctuation arises to the assessee on the outstanding liability against import of materials, equipment and natural gas utilized in generation of power. Such gain was treated as income not derived from the eligible business activity by the AO. However, on appeal the learned CIT-A was pleased to allowed the plea of the assessee that such income is derived from the eligible business. 139.1 From the preceding discussion we note that impugned gain of foreign currency rate fluctuation arises on import of material, equipment and natural gas which were utilized in generation of power. Thus, the same has direct and live nexus with the eligible business. At this point, we also referred the judgment of Hon'ble Gujarat High Court in case of CIT vs. Deverson Industries Ltd. reported in 55 taxmann.com 440 where it was held as under: 5. So far as question regarding foreign exchange difference is concerned, the same is squarely governed by the decision of this Court in the case of CIT v. Priyanka Gems [2014] 367 ITR 575/51 taxmann.com 259 (Guj.) wherein this Court has answered the question in favo....
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.... No. 45 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 ground of appeal filed by the Revenue is hereby dismissed. 144. The next issue raised by the Revenue in ground No. 5 of its appeal is that the learned CIT (A) erred in deleting the disallowance of deduction claimed under section 80G and 80GGB of the Act. 145. 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. 32 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 hereb....
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.... 16,42,702/- Invoice TCD Income 24,01,431/- GSPL Credit for the period 83,42, 041/- Congestion Charges Payment 1,53,052/- Recovery from Vendors towards Contractual obligation 1,82,000/- Refund of excess demurrage charges 47,000/- Transport Recovery from employees 42,202/- Other Misc. Income 40,521/- Total Miscellaneous Income 1,28,50,949/- 3. On the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the finding of the learned Assessing Officer under section 36(1 )(va) of the Act for Rs. 47,874/- on account of late payment of ESIC, hence no such disallowance is called for. 4. The respondent craves leave to add, alter, amend and/or withdraw any ground or grounds of cross objections either before or during the course of hearing of the same. 149.1 The assessee also filed additional grounds of objection vide letter dated 22-10-2021 which are as under: Appellant craves leave to raise this additional ground of Cross Objections before the Hon'ble ITAT. This is legal ground and therefore, as per the decision of Hon'ble Supreme court in the case of National Thermal Power (229 ITR 383), it can be raised before the Hon....
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.... of this order partly in favour of 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 partly allowed. 154. The next objection raised by the assessee vide ground no. 3 is that the learned CIT(A) erred in sustaining the addition of employee's contribution to ESIC on account of late deposit. 155. At the outset, we note that the issues raised by the assessee in its grounds of cross objection is covered against the assessee by the order of the Hon'ble Jurisdictional High Court in case of GSRTC reported in 366 ITR 170. Thus, respectfully following the same the ground of objection raised by the assessee is hereby dismissed. Now coming to additional grounds of objection 156. 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 it (the assessee) in ground Nos. 1 and 2 of additional grounds of objection. Hence the same are dismissed accordingly as not pressed. 157. The assessee in t....