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2015 (7) TMI 1333 - AT - Income TaxDeduction u/s. 80IA - income from sale of Certified Emission Reduction (CER) - capital receipts OR Business and Profession - HELD THAT:- As per the Hon’ble High Court in M/S. MY HOME POWER LTD., [2014 (6) TMI 82 - ANDHRA PRADESH HIGH COURT] the income on sale of excess Carbon Credits was a capital receipt and not a business receipt/income. Notably, even in the case of assessee before the Hon’ble Andhra Pradesh High Court, assessee had earned income on sale of Carbon Credits in the course of carrying on the business of power generation, which is also the fact-position before us. The Hon’ble High Court has held that the income received on sale of excess Carbon Credits was a capital receipt not chargeable to tax. Quite clearly, the said Judgment supports the plea of assessee in the instant case that the receipts on sale of CERs is a capital receipt not chargeable to tax. Following the said Judgment we uphold the plea of the assessee. The Ground of appeal no. 1 relating to claim of exemption u/s. 80IA of the Act on the income from sale of Carbon Credits is rendered academic in view of our decision on Ground of appeal no. 2. Disallowance u/s 14A - HELD THAT:- Representative for the assessee has not seriously disputed the disallowance made by the Assessing Officer on account of direct interest expenditure related to earning of exempt income. Ostensibly, the said working was provided by the assessee itself in the course of hearing before the Assessing Officer. Nevertheless, it is to be noted that the entire issue of the disallowance made by invoking section 14A is quite redundant because the CIT(A) agreed to an omnibus alternate plea of the assessee to the effect that the amount disallowed u/s 14A of the Act resulted in increased profits, which qualified for the benefits of section 80IA of the Act. The aforesaid decision of the CIT(A) is challenged by the Revenue by way of Ground of appeal No.2. We find no reason to interfere with the same inasmuch as the same are unexceptional. The CIT (A) has factually concluded that the disallowance of administrative expenses u/s 14A r.w.r 8D(2)(iii) of the Rules leads to enhanced profits of the eligible business of the generation of power and, therefore, such enhanced profits have been rightly held to be eligible for benefits of section 80IA of the Act. No material has been lead by the Revenue before us which would enable us to distract from the above finding of the CIT(A), which is hereby affirmed and Revenue fails in Ground of appeal no. 2. Whatever income was enhanced on account of disallowance computed u/s 14A of the Act, it has been offset by the exemption available on such enhanced profit in terms of section 80IA of the Act. Thus, on facts it is quite clear that the disallowance u/s 14A of the Act does not impact the net taxable profits as assessee becomes eligible to higher exemption u/s 80IA. Therefore, the dispute pertaining to the efficacy of the disallowance u/s 14A of the Act, r.w. rule 8D(2) of the Rules, which is manifested in Ground of appeal no. 4 of the assessee and in Ground of appeal no. 1 of the Revenue, is academic in nature. Thus, we refrain from adjudicating the same at the present. Determination of ‘Book Profits’ for the purpose of section 115JB - HELD THAT:- Considering the entirety of facts and circumstances and the position of law explained by the Hon’ble Supreme Court in the case of National Thermal Power Corporation [1996 (12) TMI 7 - SUPREME COURT] and by the Hon’ble Bombay High Court in the case of Pruthvi Brokers & Share Holders Pvt. Ltd. [2012 (7) TMI 158 - BOMBAY HIGH COURT] we deem it fit and proper to admit the aforesaid Additional Ground of Appeal no. 2 also. Insofar as the merit of said ground is concerned, it would be in the fitness of things that the same is restored back to the file of Assessing Officer for adjudication, since the same was not before the lower authorities. Needless to say the Assessing Officer shall allow the assessee a reasonable opportunity of being heard in support of the aforesaid Additional Ground of Appeal and thereafter pass an order afresh as per law.
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