TMI Blog2014 (7) TMI 180X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act. Grant of deduction u/s 80IA of the Act - Gain derived from sale of carbon remission reduction certificates – Part of business income or not – Held that:- The amount received on sale of CERCs being capital in nature – Following The Commissioner of Income Tax – IV, Hyderabad Versus M/s. My Home Power Ltd. [2014 (6) TMI 82 - ANDHRA PRADESH HIGH COURT] - it cannot be treated as income of the assessee in the first place - the assessee has treated it as revenue receipt, receipt being in the nature of capital cannot be treated as income - even if AO has allowed the deduction on the amount u/s 80IA treating it as revenue income, no prejudice was caused to the revenue - one of the condition for invoking jurisdiction u/s 263 was not satisfied. Claim of reimbursement of taxes from AP TRANSCO – Computation of book profit u/s 115JB of the Act – Held that:- The Tribunal in the case of the same assessee has directed the AO to delete the addition - it cannot also be considered for the purpose of computing book profit of the assessee u/s 115JB of the Act as it does not accrue as income of the assessee for the assessment year - the AO taking note of the order passed by the Tribunal on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for the assessment record of the impugned assessment year and after verifying the same was of the view that assessment order passed for the impugned assessment year is erroneous and prejudicial to the interests of the revenue, since according to the CIT, the AO either has not at all dealt with or not properly dealt with certain issues, which are as under: 1. allowance of employee compensation expenses 2. allowance of carbon emission reduction certificates 3. difference in claim of short term capital gains 4. difference in the amounts shown under liabilities no longer required. 5. allowance of provision made for fringe benefit tax 6. reimbursement of taxes by APTRANSCO 7. Allowance of deduction u/s 80IA of the Act. 3. On the aforesaid premises, the CIT directed the assessee to show cause as to why the assessment order shall not be revised/set aside being erroneous and prejudicial to the interests of the revenue. In response to the show cause notice issued by the CIT, assessee submitted its reply and also furnished all informations/details to substantiate its claim that the AO having considered all these issues on which the assessment order is proposed to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of scrutiny assessment proceeding, which are placed in the paper book. It was, therefore, submitted by the learned AR that the AO having conducted necessary enquiry and completed the assessment after applying his mind to the facts and materials on record exercise of jurisdiction u/s 263 of the Act is not appropriate in this case. It was submitted that only because the AO has not dealt in detail the issues raised in the show cause notice in the assessment order that by itself would not mean that he has not conducted any enquiry or applied his mind to those issues. The learned AR submitted that the AO having conducted appropriate enquiry and the assessee having submitted all information, it is not the duty of the assessee to instruct the AO how to pass an assessment order. If the facts and materials on record indicate that the AO has conducted necessary enquiry and the assessee has furnished informations called for, the assesses cannot be held responsible if the result of such enquiry is not reflected in detail in the assessment order. The learned AR submitted that in the facts of the present case as there are enough materials on record to show that the issues raised by the CIT in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ime to time raised bills on AP Transco for reimbursement of taxes paid by the company. However, the bills have not been accepted by AP Transco since the inception of the agreement for the reason that Minimum Alternative Tax (MAT) paid by the company is not covered by the agreement. It was submitted that the AP Transco in letter dated 25//08/2006 has made it clear to the assessee that income-tax paid by the company is not eligible for reimbursement as the same is paid under MAT provisions and not under the regular provisions of the Income-tax Act. It was submitted that though for resolving the dispute assessee has taken legal recourse, but, still it is under dispute as the matter is under arbitration as per the direction of the Hon ble AP High Court. It was submitted that while completing the assessment, AO had included the amount of ₹ 12,18,50,000/- to the income of the assessee under the normal provisions. The CIT in the proceeding u/s 263 of the Act was of the view that though the AO has included the aforesaid amount under the regular provisions, but, he has failed to include the same while computing the income under the provisions of section 115JB and accordingly directed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d AR drew our attention to the reply dated 03/12/2010 submitted before the AO during scrutiny assessment proceeding, a copy of which is placed at page 270 of the paper book. It was submitted that the AO having conducted necessary enquiry and allowed the deduction after proper application of mind and having taken a view in respect of nature of receipt and which is one of the possible views, the CIT cannot question the order of the AO on this issue only because in his opinion the view taken by the AO is incorrect. Further, it was submitted, as Accounting Standard (AS)-11 on the effects of changes on foreign exchange rates mandates that exchange fluctuation either on settlement or on reporting in balance sheet should be recorded in profit and loss account, assessee has recognized forex gain of ₹ 15,91,74,961 (both realized and unrealized) as income in the profit and loss account. However, as per the provisions of section 43A adjustment to the cost of the asset is required to be made only to the extent of realized forex gain/loss. Accordingly, in terms with section 43A assessee has adjusted only realized forex gain from cost of assets. In support of such contention, learned AR re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee clearly reveal the fact that the AO has conducted indepth enquiry with regard to all the issues on which the CIT has sought to revise the assessment order. It is further evident that the assessee has not only explained queries raised by the AO, but, has also substantiated it with necessary documentary evidence. Though, it may be a fact that the enquiry conducted by the AO on different issues might not have been reflected in the body of the assessment order, but, that does not mean that the AO has neither conducted any enquiry nor applied his mind to the facts and materials brought on record. Non-mentioning of all the issues on which enquiry was made by the AO in the body of the assessment order does not indicate lack of enquiry or nonapplication of mind. It is quite possible that the AO after considering assessee s reply and other documentary evidences was satisfied with the same, hence, he felt it unnecessary to deal with them in the assessment order. However, non-mentioning of such facts in the assessment order would not make it erroneous and prejudicial to the interests of the revenue. Certainly, assessee cannot be considered to be at fault for non-mentioning of all the is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he revenue. Having considered the submissions of the parties, we are of the view that the amount received on sale of CERCs being capital in nature as per the decision of the coordinate bench of this Tribunal in case of My Homes Pvt. Ltd., which has been upheld by the Jurisdictional High Court in judgment dated 19/02/2014 in ITTA No. 60 of 2014, it cannot be treated as income of the assessee in the first place. Though, the assessee has treated it as revenue receipt, receipt being in the nature of capital cannot be treated as income. Therefore, even if AO has allowed the deduction on the amount u/s 80IA treating it as revenue income, no prejudice was caused to the revenue. One of the condition for invoking jurisdiction u/s 263 was not satisfied. 10. So far as the reimbursement of advance tax from AP Transco is concerned, on perusal of the order passed by the coordinate bench while considering assessee s appeal with regard to the addition made by the AO under the regular provisions, it is to be seen that the coordinate bench of this Tribunal has directed the AO to delete the addition by following its earlier orders. That being the case, it cannot also be considered for the purpose ..... 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