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2016 (12) TMI 682 - AT - Income TaxDisallowance u/s 14A r.w.r. 8D - suo moto disallowance - Held that:- When the assessee possesses own funds much more than the tax free investments, the disallowance u/s 14A read with Rule 8D cannot be made. There is also merit in the plea of ld. Counsel on the count that the burden of establishing the nexus has been wrongly attributed to the assessee and it was for the Assessing Officer to rebut the assessee’s contention and demonstrate that the tax free investments were not from own funds but from borrowed funds. In the absence of such rebuttal, it cannot be assumed that the assessee made tax free investments out of borrowed funds. The assessee has suo moto offered ₹ 2 lakhs out of income of ₹ 3,18,472/- as disallowed u/s 14A of the Act. In view of our foregoing observations and relying the case of CIT vs. Corrtech Energy Pvt Ltd, [2014 (3) TMI 856 - GUJARAT HIGH COURT] we are of the view that no disallowance beyond what has been suo moto disallowed by the assessee can be made. In the result, the assessee’s ground in this behalf is allowed and that of Revenue is dismissed. Disallowance u/s 40A(2)(b) - Held that:- It is not disputed that the assessee has not paid any expenditure to which Section 40A(2)(b) can be attracted. In our considered view, ld. CIT(A) has rightly appreciated the factual and legal aspects and held that Section 40A(2)(b) is not applicable. His order is upheld and this ground of the Revenue’s appeal is dismissed. MAT computation - Held that:- Debt redemption fund is to be excluded while computing the book profits u/s 115JB of the Act. See Genus Electrotech Ltd case [2016 (5) TMI 1136 - ITAT AHMEDABAD ] Eligibility of deduction u/s 80IA(4) - Held that:- In view of the Hon’ble Gujarat High Court judgment on the same issue in assessee’s own case, the issue in question that the assessee is eligible for computation of deduction u/s 80IA(4) on the rates charged by it at selling price is no more res integra. - Decided in favour of assessee Income from realization of carbon credits - revenue or capital receipts - Held that:- Merely because the assessee was of the opinion that the receipt was Revenue in nature cannot act as an estoppels against it when the law as interpreted by Hon’ble High Courts takes a view at variance with the assessee. The law is settled that the Revenue cannot stand benefited from a tax which is not leviable in right earnest. We find merit in the contentions of the ld. Counsel for the assessee that the Hon’ble Karnataka High Court in the case of Subhash Kabini Power Corporation Ltd (2016 (5) TMI 793 - KARNATAKA HIGH COURT ) and My Home Power Ltd (2014 (6) TMI 82 - ANDHRA PRADESH HIGH COURT ), have taken a view that the carbon credit realization is capital in nature. No contrary judgment is cited. Therefore, respectfully following these judgments, this additional ground of the assessee in respect of realization of carbon credit as capital receipt is allowed. Disallowance u/s 14A read with Rule 8D - MAT calculation - Held that:- The amount in question stands restricted to only ₹ 2 lakhs. We have allowed the ground of the assessee in respect of redemption reserves. The issue in question is only a notional disallowance; therefore, it will not be justified to disallow this expenditure of ₹ 2 lacs while computing the book profit u/s 115JB of the Act. In view thereof, the second additional ground of the assessee is also allowed.
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