TaxTMI 
TaxTMI 
2022 (5) TMI 1685
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....which does not form part of total income and consequently, ought to have held that no amount of expenditure is inadmissible U/s. 14 of the Act. Accordingly, the Ld. C.I.T. (Appeals) ought to have directed the Ld. AO to delete the disallowance of Rs. 37,91,963/- made U/S.14A of the Act by invoking Rule 8D(2)(iii) of the Rules. 1.2 Without prejudice to the above and in the alternate, on the facts and circumstances of the case and in law, the Ld. C.IT.(Appeals) ought to have held that the investments of Rs. 6,000 Lakhs in the Optionally Convertible Fully Redeemable Non-Cumulative Preference Shares of Rs. 10/- each fully paid-up of Mafatlal Industries Limited (the Preference Shares) were not capable to earn income which would not have form part of total income (tax free income) for the year ended 31st March, 2010. Accordingly, the Ld. CIT (Appeals) ought to have directed the Ld. AO to exclude the Preference Shares of Rs. 6,000 Lakhs in quantifying the average value of investments in terms of Rule 8D (2) of the Rules for working out the inadmissible expenditure U/S.14A of the Act at an amount equal to 0.5% of the average value of investments as per Rule 8D(2)(iii) of the Rules.....
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....,963/- u/s 14A of the Act by invoking Rule 8D (2)(iii) of the I.T. Rules: 3. During the course of assessment the A.O noticed that assessee has earned dividend income of Rs. 43,34,000/- as exempt income and against the same assessee has disallowed a sum of Rs. 871,240/- u/s 14A of the Act. The assessee was asked to explain the basis of calculation of disallowance computed u/s 14A of the Act. Regarding computation of disallowance u/s 14A read with Rule 8D (2)(iii) the assessee submitted that none of the investment were acquired during the year except investment of Rs. 12.74 lac of Mafatlal Services Ltd. and the entire expenditure incurred during the year was related to the business of the assessee, therefore, no expenditure could be allocated as attributable to earning tax free investment. However, the A.O has not agreed with the submission of the assessee and computed disallowance of Rs. 37,91,963/- u/s 14A of the Act. 4. Aggrieved, the assessee filed appeal before the ld. CIT(A). However, the ld. CIT(A) has dismissed the appeal of the assessee. 5. Heard both the sides and perused the material available on record. The assessee has filed alternative plea that investment on w....
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....iabilities in the year ended 31st March, 2012 established the fact that the same were not payable. Therefore addition of Rs. 61,38,615/-on account of unmoved creditors outstanding for more than 3 years was made u/s 41(1)(a) of the Act. 7. The assessee filed the appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal the assessee. 8. Heard both the side and perused the material available on record. During the course of the appellate proceedings before us at the outset the ld. counsel submitted that identical issue on similar facts has been adjudicated by the coordinate bench of the ITAT for A.Y. 2009-10 vide ITA No. 7797/Mum/2012 dated 09.08.2017. On the other hand, the ld. D.R could not contrary disprove the fact that issue is covered by the decision of coordinate bench of the ITAT in favour of the assessee. We have perused the above cited decision of the ITAT. The relevant part of the decision is reproduced as under: "23. Ld. DR vehemently supported the orders of the authorities below. 24. We have heard the rival submissions, perused the orders of the authorities below. Almost on identical facts in the case of CIT v. Enam Securities (P.) Lt....
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....ed before us, we find that, so far as disallowance of interest is concerned, admittedly, assessee's own funds far exceeds the investment made and, therefore, in line of the ratio laid down by the Hon'ble Jurisdictional High Court in the aforesaid cases, we hold that, no disallowance of interest should be made. Accordingly, we direct the Assessing Officer to delete the disallowance of interest. As regards the indirect expenditure, we agree with the contention of the ld. Counsel that 2% of the dividend income would be sufficient to cover the disallowance of expenditure for the purpose of section 14A under the facts and circumstances of the case, as there was no systematic activity for making the investment. Accordingly, we direct the Assessing Officer to restrict the disallowance of the 2% of the dividend income. With this direction, ground No. 2 is treated as partly allowed. The ld. Counsel has also mentioned that similar issue on identical facts has also adjudicated by the ITAT in the case of the assessee itself for A.Y.2008-09 and 2009-10 vide ITA No. 1192/Mum/2012 and 7797/Mum/2012. The relevant operating para is reproduced as under: "12. We have heard the rival submi....
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....l, the ld. CIT(A) stated that since the same related to world environment concern the sale proceeds received on sale of CER is capital receipt not chargeable to tax. The relevant part of the decision of CIT(A) is reproduced as under: "The assessee company is engaged in the business of manufacture and trading of chemicals and refrigerant gases. One of the gases produced by the assessee company is HCFC-22 and during the process, a by-product gas HFC-23 is 'generated which has global warming potential (COM Project). As per Kyoto protocol, production of gases which are responsible for global warming makes the business entity entitled to avail CER i.e. Certified Emission Reduction. On implementation of the COM Project, the assessee company has generated CERs which are sold to various entities in Annex. I Countries. Since the same relates to world environment concern the sale proceeds received on sale of CER is a capital receipt not chargeable to tax. Reliance is placed on the following legal decisions: (a) My Home Power Ltd. V/s. DCIT (Hyderabad ITAT) (2012) 81 DTR 173. Note: Affirmed by Hon. High Court (365 ITR 82.) (b) Pr. CIT V/s. Rajasthan State Mines ....
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....round of appeal is allowed." 16. During the course of appellate proceedings before us the ld. D.R has placed reliance on the order of A.O. The ld. Counsel contended that identical issue on similar facts has been adjudicated by the Hon'ble Bombay High Court in favour of the assessee i.e Carbon Credit Entitlement is capital receipt not chargeable to Income tax i.e Pr. CIT VS. Dodson Lindblom Hydro Power P. Ltd. (Bombay High Court) 27.02.2019 (ITA No. 1820, 1821 & 1840 of 2016). 17. With the assistance of the ld. Representative we have gone through the decision of Hon'ble Bombay High Court as referred supra. The relevant part of the decision is reproduced as under: "3. Income Tax Appeal No. 1820 of 2016 relates to Assessment Year 2007-2008. Revenue has urged the following questions for our consideration :- (i) Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT, is correct in holding that sale of carbon credit is to be considered as Capital Receipt and not liable for tax under any head of income under Income Tax Act, 1961? (ii) Whether on the facts and in the circumstances of the case and in law, the Hon'ble I....