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2023 (10) TMI 834
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....appellant exclusively for business purposes, no part of the interest paid by it, could be disallowed u/s 14A by applying the Rule 8D(2)(ii) and thus he erred in not deleting the entire disallowance u/s 14A/Rule 8D(2)(ii). 2. That on the facts and in the circumstances of the case and in law, the CIT(A) erred in not appreciating the fact that the AO while computing average investment for the purpose of disallowance u/s 14A/Rule 8D has wrongly considered investments in subsidiary and associate entities. 3. That on the facts and in the circumstances of the case and in law, the CIT(A) erred in not appreciating the fact that the disallowance u/s 14A of the Act should not exceed the exempted dividend income. 4. That on the facts and in the circumstances of the case and in law, the CIT(A) erred in not allowing a deduction of Rs. 18,72,74,339/- in AY 2014-15 against the additions made in A YS 2008-09 to 2011-12 on account of alleged illegal mining. 4.1 That the CIT(A) erred in confirming the action of AO of double taxation on the same production quantity once in the year in which production was shown in mining returns and secondly when the same production....
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....e case and in law the Ld. CIT(A) erred in holding that the sum of Rs. 6,38,56,961/- received as Carbon Credit Income is Capital receipt. 6. On the facts and the circumstances of the case and in law the Ld. CIT(A) has erred in holding that the sum of Rs. 6,38,56,961/- received as Carbon Credit Income is Capital receipt relying on the decision of the Hon'ble ITAT in case of Ultratech Cement Ltd. for 2010-11 without appreciating that the said decision has not been accepted by the department and further appeal has been filed in the Hon'ble Bombay High Court". 7. On the facts and the circumstances of the case and in law the Ld. CIT(A) has erred in allowing deduction u/s. 80IA of the Act of Rs. 48,79,600/- disallowed on account of common expenses. 8. On the facts and the circumstances of the case and in law the Ld. CIT(A) has erred in allowing deduction u/s. 80IA of the Act of Rs. 48,79,600/- disallowed on account of common expenses relying on the decision of the Ld. CIT(A) in the case of the assessee for AY. 2011-12 and 2012-13, without appreciating that these decisions were not accepted by the department and further appeal has been pursued. The Appell....
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....arbon Credit treated as Revenue Income 6,38,56,961/- (iii) Disallowance under Section 32AC 55,26,445/- (iv) Disallowance - 80IA Railway Siding Unit 75,52,11,139/- (v) Disallowance - Common Expenses 48,79,600/- (v) Disallowance - Illegal Mining Expenses 18,72,74,339/- 4.3. Being aggrieved the Assessee preferred appeal before CIT(A) against the Assessment Order, dated 30/12/2016. The CIT(A) partly allowed the appeal of the Assessee vide order, dated 26/12/2017. 4.4. Both, the Assessee and the Revenue are now in cross-appeals before us against the order dated 26/12/2017 passed by the CIT(A) on the grounds reproduced in paragraph 2 and 3 above which are taken up hereinafter. The grounds raised by the Assessee and Revenue pertaining to same issues are being considered together Ground No.1, 2 & 3 of Appeal by Assessee along with Ground No. 1 of Appeal by the Revenue 5. Ground No. 1 to 3 of the Appeal by Assessee and Ground 1 & 2 of the Appeal by Revenue pertain to disallowance of INR 31,51,33,449/- (INR 31,60,07,285/- less INR 8,73,836/-) made by the Assessing Officer under Section 14A of the Act read with Rule 8D of the Income Tax Rules....
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....computing disallowance under Section 14A of the Act. Without prejudice to the aforesaid, Learned Authorised Representative for Assessee submitted that the disallowance under Section 14A of the Act could not, in any case, exceed the amount of exempt income. In support of the said contentions, the Learned Authorised Representative for Assessee relied upon the following judicial precedents - decisions of Kolkata Bench of the Tribunal in the case of the Assessee for the Assessment Year 2008-09, 2008-09 and 2009-10 in ITA. No. 786/Kol/2013, ITA. No. 1069 & 2064/Kol /2013 and ITA. No. 1004 & 1294/Kol /2013, respectively as well the judgment in the case of South India Bank Ltd. Vs. CIT [2021] 438 ITR 1 (SC) and Assistant Commissioner of Income-tax, Circle 17 (1), New Delhi Vs. Vireet Investment Pvt. Ltd.: [165 ITD 27] (Delhi Trib.) 5.5. Per contra, Ld. Departmental Representative relied upon the order passed by the Assessing Officer and submitted that the Assessing Officer was correct in making the additions under Section 14A of the Act as per method of computation specified in Rule 8D of the Rules. 5.6. We have heard the rival submissions, perused the material on record and examine....
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....e is partly allowed and Ground No. 1 & 2 raised by the Revenue are dismissed. Grounds No. 4 & 5 of Appeal by Assessee 6. In Ground No. 4 & 5 raised by the Assessee, claim of deduction of expenses in respect of addition of illegal mining income made in Assessment Years 2008-09 to 2011-12 was set up by the Assessee. During the course of hearing the Counsel for the Assessee stated under instructions that the Assessee does not wish to press the aforesaid grounds as the corresponding additions stand deleted. In view of the aforesaid, Ground No. 4&5 are dismissed as being not pressed. Grounds No. 6 of Appeal by Assessee 7. Ground No. 6 raised by the Assessee pertains to short deduction of investment allowance under Section 32AC of the Act by INR 55,26,445/- by the Assessing Officer which was confirmed by the CIT(A). 7.1. During the course of assessment proceedings the Assessing Officer asked the Assessee to show cause why the claim of deduction of INR 55,26,445/- in respect of investment allowance pertaining to addition to plant and machinery of INR 3,68,42,969/- transferred from capital-work-in progress should not be disallowed. 7.2. In response the Assessee filed repl....
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....that the judgement of Euro Pratik Ispat Pvt ltd, supra is distinguishable on facts. 42.2 In view of these facts and circumstances, this Ground of Appeal No 9 is dismissed." 7.5. The Assessee in now in appeal before us on this issue. 7.6. Both the sides reiterated the stand taken before authorities below. We find that substantial part of the Plant & Machinery was acquired and erected after 31.03.2013 but before 01.04.2015. The dispute before us pertains to 2.6% of the total addition to plant and machinery only. Further, the stand taken by the Assessee is supported by the decision of Mumbai Bench of the Tribunal in the case of UltraTech Cement Ltd. Vs. DCIT [ITA No. 2462/Mum/2018] wherein in identical facts and circumstances the deduction for investment allowance was allowed. Therefore, we direct the Assessing Officer to allow investment allowance of INR 55,26,445/-. Ground No. 5 raised by the Assessee is allowed. Additional Ground raised by the Assessee 8. The additional ground raised by the Appellant, vide letter dated 23.08.2021, pertains to claim for deduction for Education Cess and Secondary & Higher Education Cess (collectively referred to as 'Education Ces....
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....or the Assessee. 9.2. Being aggrieved, the Assessee carried the issue before CIT(A). During the appellant proceedings before CIT(A), the Assessee relied upon the decision of the Tribunal in the case of UltraTech Cement Ltd. for the Assessment Year 2010-11 whereby the order of the CIT(A) relied upon by the Assessing Officer was overturned by the Tribunal vide order dated 05/04/2017 in ITA No. 7631/Mum/2014. Relying upon the aforesaid order Mumbai Bench of the Tribunal, the CIT(A) directed the Assessing Officer to allow the claim of the Assessee under Section 80IA(4) of the Act. 9.3. Being aggrieved, by the Revenue has challenged the above relief granted by the CIT(A) in Ground No.3 & 4 of the appeal. 9.4. We have considered the rival submission and perused the material on record. The Assessing Officer has, in the assessment order, dealt with the issue under consideration at Paragraph 13. The conclusions derived by the Assessing Officer are in paragraph 13.2 onwards and the same read as under: "13.2 The assessee's submission has been considered carefully and is found not acceptable because:- 13.2.1 After verification the submissions filed by the assessee an....
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....e sidings was notified as independent booking station and the freight was charged by the railway department for the entire distance including the portion of private sidings [upto inter exchange point/ exchange yard]. vi) The notional profit computed for so called rail system has been very exorbitant and the method is also not correct. The net profit ratio of the private siding is 83.33%. The transactions are between two units of the same company and therefore they have been so arranged in the course of business that the business transacted between them produces to the assessee more than the ordinary profits which might be expected to arise in such eligible business. Hence, the provision of section 80IA (10) of the IT Act are also applicable in this case. 13.2.3 The profit of the rail system so claimed was notional and arrived at under the presumption that prior to setting up of private sidings, the assessee used to transport the goods from its plant site to the nearest railway of serving station and in that case it was to carry out loading and unloading of goods at that point too; and that on construction of sidings, the assessee could avoid the expenditure incurr....
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....cer has taken note of the fact that the Assessee is making captive use of railway sidings. Therefore, the Assessee was eligible to claim deduction under Section 80IA(4) of the Act. The aforesaid submissions of the Assessee found favour with the CIT(A) who was pleased to allow deduction under Section 80IA(4) of the Act in respect of Railway Siding Unit holding as under: "30.0 I have gone through the assessment order, the submissions off the appellant company and various other material on record, on this issue. 30.1 The appellant company had commenced operation of its Railway Siding Unit from 29.04.2005, after receiving necessary approvals from the South Eastern Railways. Further, the appellant has been claiming deduction u/s 80IA since AY 2006-07, the initial year. The deduction u/s- 80IA was allowed in the assessment order u/s -143(3) dated 15.12.2008 for 2006-07, which is the initial assessment year. The appellant has stated the deduction u/s- 80IA of the Act was allowed in the original assessment proceedings for all the assessment years starting from AY-2007-08 to AY-2012-13. 30.2 For disallowing the claim of the appellant company u/s- 80IA in the proce....
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....d costs of work done by the party and those by the railway administration .... "c) Clause no. 7(a) - Permanent way materials - "The applicant will provide and deliver at site the permanent way and other materials (which includes Girders, Rails, Sleepers, fastenings, points, crossings, fencings, signals and overhead structures and any other things connected therewith for electric tractions and other machinery and equipments necessary for working of the sidings) in accordance with the Railway administration's standards and specifications. All charges incurred in laying and fitting the permanent way materials and all other equipments which may be provided shall entirely be borne by the applicant." d) Clause No. 17 - Working of the Siding - wherein it is mentioned that " ... the applicant shall provide labour for and bear the cost of all Operations on the siding. The applicant shall be responsible for the strict compliance by himself and his employees and agents of all rules, regulations and standing orders made by the railway administration from time to time for the working of sidings and for all accidents, loss or damage that may be ensured or be caused by reaso....
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....act one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be appropriate to allow the position to be changed in a subsequent year. The above principles have been accepted in the undernoted case: * Shah & Co (HA) v. CIT (1956) (30 ITR 618) (Bom) * Amalgamated Coalfields vs. Janapada Sabha AIR 1964 SC 1013 * South India Trust Association vs. Telugu Church Council (1996) 2 SCC * Radhasoami Satsang vs. CIT (1992) 193 ITR 321 (SC). ............... 63. As per materials placed on record, all the railway systems are established and owned by the assessee which is a Company as defined under the Income tax Act. This is an undisputed fact and there is no adverse remark by the AO or CIT(A) in this regard. 64. As per clause (b) of Section 80IA (4)(i) an agreement has to be entered with the Central Government or a State Government or a Local Authority or any other statutory body for (i) developing or (ii) Operating and maintaining or (iii) Developing, Operating and Maintaining the infrastructure facility. The Indian Railways, with whom the ass....
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....s Ultratech Cement Ltd a group concern, the AO is directed to allow the claim of the appellant under section 80IA (4) of the Act" .(Emphasis Supplied) 9.6. In the appellate proceedings before us, both, sides reiterated their respective stand/submission. Having considered the same and on perusal of record, we do not find any infirmity in the order passed by the CIT(A). In the identical facts and circumstances, the claim of the Assessee for deduction under Section 80IA(4) of the Act in respect of Railway Siding Unit was accepted by the Revenue for the Assessment Year 2006-07 to 2012-13. The Assessing Officer had relied upon the decision of the CIT(A) in the case of UltraTech Cement Ltd for the Assessment Year 2010-11 while disallowing deduction under Section 80IA(4) which has been overturned by the Tribunal vide order dated 05.04.2007 passed in ITA No.7631/MUM/2014 and the Tribunal has, in identical facts and circumstances, allowed the claim for deduction under Section 80IA(4) of the Act in respect of railway siding unit utilised for captive use. The CIT(A) has also reproduced the relevant excerpts of the aforesaid decision of the Mumbai Bench of the Tribunal in the case of M/s Ul....
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....ability of Carbon Credit received by assessee amounting to Rs. 10, 20,587/-. We have gone through the order of AO and ld. CIT (A). The decisions of various High Courts and Co-ordinate Benches of Tribunal relied upon by the ld. CIT(A) are distinguishable and not applicable to the facts of the case. 10. Issue is whether receipts received by the assessee on sale of alleged carbon credit is revenue in nature or capital in nature. 11. Thus, taking into consideration resolution of litigation on this issue by the Legislature itself, which had made provision for taxation of such receipts at the rate of 10 per cent from the assessment year 2018-19. Thus, any sum received on account of carbon credit or protecting the environment is not included in the business income however, subsequently there is an amendment by Finance Act, 2017 whereby Section 115BBG has been inserted in the statute w.e.f 01.04.2018 which reads as under: - "Following section 115BBG shall be inserted after section 115BBF by the Finance Act, 2017, w.e.f. 1-4- 2018: Tax on income from transfer of carbon credits. 115BBG. (1) Where the total income of an assessee includes any income by way of transfe....
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....ld that the Tribunal had factually found that Carbon Credit was not off-shoot of business but off-shoot of environmental concerns and no asset was generated in course of business but it was generated due to environment concerns. Further we find that the Hon'ble A.P. High Court agreed with the factual analysis as the assessee carried on business of power generation and Carbon Credit was not even directly linked with power generation. It is held that on sale of excess Carbon Credits income was received and the Tribunal correctly held that it is capital receipt and could not be a business receipt or income. As a matter of convenience, the observations of the Hon'ble A.P. High Court in CIT v/s My Home Power Ltd., [2014] 365 ITR 082 (AP) (supra) is reproduced below: "ITAT have considered the aforesaid submission and ITAT 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' ITAT agree with this factual analysis as the Assessee is carrying on the business o....
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....ible for deduction under Section 80IA/10B of the Act. This has resulted in overcharging of expenses to other business/units and resulting in understatement of income. Therefore, the Assessing Officer allocated the aggregate travelling and conveyance expenses of INR 1127.75 Lakhs to Railway Siding Unit and Wind Power Unit in the ration of turnover. Since the Assessing Officer had disallowed the deduction under Section 80IA(4) in respect of Railways Siding Unit, the Assessing Officer made addition only to the extent of INR 48,79,600/- by disallowing the proportionate conveyance and travelling expenses allocated to Railways Siding Unit. 11.2 In appeal, the CIT(A) deleted the disallowance returning a finding that separate audited accounts for each unit were maintained by the Assessee. Respective expenses including conveyance and travelling expenses have been allocated. 11.3 Being aggrieved the Revenue has carried the issue in appeal before us. 11.4 We have considered the rival submission and perused the material on record. The CIT(A) has deleted the addition/disallowance of INR 48,79,600/- holding as under: "38.0 I have considered the contentions of the A.O. in the as....