2021 (1) TMI 732 - ITAT MUMBAI

Disallowance u/s. 14A by applying rule 8D - Suo moto addtion made by assessee - No recording of satisfaction by AO - HELD THAT:- AO has not recorded any satisfaction before rejecting the suo moto disallowance made by the assessee and Ld. CIT(A) also clearly accepted this fact that no satisfaction was recorded. We notice from the record that no satisfaction was recorded even in the earlier Assessment Year 2008-09 and 2009-10 [2017 (8) TMI 405 - ITAT MUMBAI] and based on the above facts on record, Coordinate Bench of ITAT has deleted the disallowance made u/s. 14A - Thus delete the addition made u/s. 14A by observing that there is no satisfaction recorded by the AO as per the findings of Ld. CIT(A). - Decided in favour of assessee.

Disallowance u/s. 40A(9) for reimbursement of school expenses -AO rejected the submissions made by assessee and observed that the expenses reimbursed by the assessee are relating to educational institution, which is a separate tax entity and the business of the assessee is not relating to carrying out business of the school thus the provisions of section 40A(9) are clearly attracted in this case - HELD THAT:- We notice that the Coordinate Bench of ITAT in assessee's own case for Assessment Year 2003-04 to 2009-10 [2017 (8) TMI 405 - ITAT MUMBAI] has already allowed the reimbursement of expenses to the educational institution. Therefore, respectfully following the decision of Coordinate Bench of ITAT which is applicable mutatis mutandis in the present case, we are inclined to dismiss the ground raised by the revenue.

Claim of depreciation - Allowance of depreciation for earlier years, when such depreciation was not actually allowed in those years - HELD THAT:- As decided in own case [2016 (5) TMI 1386 - ITAT MUMBAI] it is not open for the Assessing Officer to assume the allowance of depreciation for earlier years, when such depreciation was not actually allowed in those years, because, the situation could have been different, if he would have reopened the assessment of those earlier years. Without amending the assessments of those years, the assumed written down value could not be considered to work out the depreciation of the current year. - Decided against revenue.

VAT subsidy - CIT(A) observed that assessee is making this claim first time during the appellate proceedings and this was not in the return of income or had not claimed during the assessment proceedings, assessee had shown it as income in its return of income - DR submitted that this issue may be remitted back to the AO for factual verification and documents and AO may be given opportunity to verify the claim of the assessee - HELD THAT:- CIT(A) observed that subsidy given by the government is after the commencement of the business and to promote the business and not to set up the business. The creation of the infrastructure is of the State Govt. and assessee cannot take advantage of such objectives of the State Govt. - sales tax subsidy received by the assessee from the Govt. of Madhya Pradesh is after setting up of the new industry and the subsidy received by the assessee is revenue nature and it is liable to tax

We notice that this issue was analyzed and adjudicated by Ld. CIT(A) after verifying the relevant documents submitted by the assessee before him and moreover, the proceedings before Ld. CIT(A) is only extension of assessment, it is otherwise known as extended assessment proceedings, therefore Ld. CIT(A) has applied his mind and came to the conclusion with his own reasoning and rejected the submission /contention of the assessee. Therefore, there is no necessity to remit this issue back to the AO for further verification.

Sales Tax exemption scheme by the Maharashtra Govt. - CIT(A) observed that for the reasons discussed while adjudicating the issue of VAT subsidy received from Madhya state government and the entry tax exemption received from the Madhya Pradesh state government the sales tax exemption received from the Maharashtra state government is also treated as revenue receipts liable to be taxed - HELD THAT:- We notice that this issue was analyzed and adjudicated by Ld. CIT(A) after verifying the relevant documents submitted by the assessee before him and moreover, the proceedings before Ld. CIT(A) is only extension of assessment, it is otherwise known as extended assessment proceedings, therefore Ld. CIT(A) has applied his mind and came to the conclusion with his own reasoning and rejected the submission/contention of the assessee. Therefore, there is no necessity to remit this issue back to the AO for further verification.

Entry Tax Exemption - HELD THAT:- We notice that assessee was awarded a certificate of eligibility for exemption of entry tax considering the fact that assessee has made investments in the Units established in the State of Madhya Pradesh and the Industrial Development Scheme clearly states that the incentive awarded only because, the assessee has made the investments and also the Scheme of incentive clearly based on the range of the investment made by the respective industries. As held in the various decisions, it is not relevant what mechanism was adopted by the State Govt. to award the incentive, but for what purpose this incentive were awarded whether these were awarded to benefit the units to function profitably or in order to bring capital inside the State in order to improve the industrial development in the State. As per the scheme, it is clear that incentives were awarded only because of new industrial units were commenced after 2004 - Thus we are inclined to allow the ground raised by the assessee.

Sale of Carbon Credit - assessee treated the above receipt as capital receipt with the submission that if the absence of any element or profit or gain, income from sale of carbon credit should be treated as capital receipt and should be excluded in computing the total income both under the normal provisions of the Act as well as in computing book profit under section 115JB - HELD THAT:- In Dodson Lindblom Hydro Power Ltd. Bom HC [2019 (4) TMI 1034 - BOMBAY HIGH COURT] which are similar to the facts of the present case, wherein the Hon'ble Jurisdictional High Court held that the sale of carbon credit is to be considered as capital receipt, therefore not liable to tax. The same reasoning was followed by Hon'ble Allahabad and Rajasthan High Court. Therefore, considering the consistent view of the different High Courts in the country, we see no reason to take a different stand since the different High Courts has decided this issue in favour of the assessee. Respectfully following the aforesaid decisions of various High Courts which are applicable mutatis mutandis in the present case, we are inclined to allow the ground raised by the assessee.

MAT computation - exclusion of VAT subsidy, sales tax exemption, entry tax exemption and income from sale of carbon credit while computing income u/s. 115JB - HELD THAT:- We notice that since we have already decided that the subsidies are in the nature of capital receipt and also by following the decision of Ankit Metal & Power [2019 (7) TMI 878 - CALCUTTA HIGH COURT], we direct the AO not to consider these receipts in calculating the book profit as that these incentives/receipts are capital receipt and does not fall within the definition of income under section 2(24) of the Act and also receipts are not in the character of income. Therefore, it cannot form part of the book profit u/s. 115JB of the Act.