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2016 (2) TMI 829 - ITAT MUMBAI

2016 (2) TMI 829 - ITAT MUMBAI - TMI - Nature of the receipts received on account of forfeiture of warrant/share application money - whether the same is to be treated as capital in nature or the Revenue income of the assessee - Held that:- In the case of “Prism Lt. vs. JCIT” (2006 (3) TMI 204 - ITAT BOMBAY-I ) wherein the Tribunal has held that the amount received on account of forfeiture of NCDs for non payment of call money was to be treated as capital in nature as the issuance of NCDs (non co .....

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onal loss under section 80IA for the purpose of computation of eligible claim/deduction - Held that: We find that the Hon'ble Madras High Court in the case of “Velayudhaswamy Spinning Mills (P) Ltd. vs. ACIT” ( 2010 (3) TMI 860 - Madras High Court)has held that the assessee is entitled to claim deduction u/s 80IA for 10 consecutive years out of 15 years and that initial year of benefit can be opted by the assessee. Losses and depreciation of the years earlier to the initial assessment year which .....

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been preferred by the Revenue against the order dated 16.05.2014 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2010-11. 2. The Revenue has taken the following grounds of appeal: "i. Whether on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in treating the amount retained by the assessee company or forfeiture of share warrants, as capital receipt not liable to tax, without appreciating the .....

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d by the assessee company on share warrants as capital receipt and thus not taxable without appreciating the fact that forfeited shares are available for reissue and thus, forfeited amount is a windfall for company..? ii. Whether on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in treating the amount forfeited by the assessee company on share warrants as capital receipt and thus not taxable without appreciating the fact that the amount forfeited by the asses .....

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the first time without appreciating that the observations of Mumbai ITAT at para 25 in the case of Hercules Hoist Ltd (2013) 022 ITR (trib) 0527 wherein the Hon'ble ITAT has held that the "Initial Assessment Year" will be the year in which the operations have been commenced. ? V. Whether on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deleting the disallowance of ₹ 1,11,14,473/- u/s 80IA without appreciating that in the assessee's .....

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me is to be treated as capital in nature or the Revenue income of the assessee. The second issue raised by the Revenue is relating to the carry forward of notional loss under section 80IA of the Act for the purpose of computation of eligible claim/deduction to the assessee under section 80IA of the Act. 4. So far as the first issue is concerned, the Ld. A.R. of the assessee, at the outset, has stated that the issue is squarely covered in favour of the assessee by various decisions of the Tribuna .....

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edabad Bench of the Tribunal in the case of DCIT vs. Brijlaxmi Leasing & Finance Ltd. (2009) 118 ITD 0546 wherein the Tribunal after considering the nature of such receipts has held that forfeiture of share application money which is credited to capital reserve account is capital receipt and is not chargeable to tax. That the issue of shares not being business of the assessee, the amount cannot be treated as receipt in the normal course of business. The relevant findings of the Tribunal in t .....

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rt question which falls for our consideration is whether the above forfeiture amount is taxable under the provisions of IT Act, 1961 or not. The learned Departmental Representative vehemently placed reliance on the decision of the Hon'ble Supreme Court in the case of CIT vs. T.V. Sundaram Iyengar & Sons Ltd. (supra) for his contention that forfeited amount is taxable as revenue receipt. However, we find that the facts of the case that were before the Hon'ble Supreme Court are disting .....

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inction to that it has credited the same in capital reserve account. In the above facts, in our considered opinion the decision of the Tribunal in the case of Prism Cements Ltd. vs. Jt. CIT (supra) is more applicable which was rendered by the Tribunal after duly considering the aforesaid decision of the Hon'ble Supreme Court in the case of T.V. Sundaram Iyengar & Sons Ltd. (supra). The Tribunal in the said case has held as under: "15. Thus, the earnest money or an advance amount rec .....

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these circumstances, we are constrained to hold that the amount received by the assessee in lieu of issuance of NCDs which were forfeited later, on account of non-payment of call money assumes a character of capital receipt which earlier was shown as a loan liability in the books of account of the assessee. If we consider this receipt to be a business receipt even then it would not be taxable to tax under the provisions of s. 41(1) of the Act, inasmuch as there was no allowance or deduction of t .....

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erein the Tribunal has held that the amount received on account of forfeiture of NCDs for non payment of call money was to be treated as capital in nature as the issuance of NCDs (non convertible debentures) was not a business of the assessee and hence such amount cannot be charged to tax even under section 41(1) of the Act. 6. We find that the issue in the case in hand is identical to the issue involved in the above cited decisions by the Ld. A.R. In the case in hand also, the assessee had forf .....

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ed vide ground Nos.1 to 3 of the Revenue s appeal is decided in favour of the assessee. 8. So far as the second issue is concerned, the facts relating to the issue are that the Assessing Officer (hereinafter referred to as the AO) observed that the assessee has been permitted by the Gujarat Energy Development Agency to set up a Wind Farm of capacity 1.6 MW (2 No. WTG of 800 Kw= 1.6 MW) at Village Navadra of Taluka Kalyanpur, in District of Jamnagar, Gujarat. Assessee acquired two windmills in th .....

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rofit derived from the wind mill project. The AO noted that though the project was started in AY 2006-07, the assessee had claimed deduction u/s. 80IA(4)(iv)(a) for the first time in AY 2009-10 and the year under consideration was the second year of such claim of deduction u/s. 80IA(4)(iv)(a) of the Act. The AO observed that as per the provision of section 80IA(5), while quantifying the amount of deduction under section 80IA, it has to be presumed that the eligible business is the only source of .....

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to claim deduction for a period of 10 consecutive assessment years out of 15 years and also such provisions mandate that the eligible business should be fictionally treated as the only source of income of the taxpayer. The AO held that therefore losses incurred in earlier year have to be first set off and balance profit, if any is only eligible for deduction under section 80IA. He further held that the profit from the eligible business for the purpose of determination of the quantum of deductio .....

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IT(A) however allowed the claim of the assessee. The Revenue is thus in appeal before us. 10. At the outset, the Ld. A.R. of the assessee submitted that assessee is eligible for deduction u/s 80IA of the Act in respect of the profits out of the generation of electricity out of windmill activity and the unabsorbed depreciation and losses of the earlier years to the initial year in which the assessee started to claim the benefit under section 80IA, since already set off with the ineligible profits .....

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