TMI Blog2015 (7) TMI 1217X X X X Extracts X X X X X X X X Extracts X X X X ..... ICIAL MEMBER Assessee By Shri Arvind Sonde Revenue By Shri Shashi Bhusan Prasad ORDER Per G.S. Pannu, AM The captioned cross appeals are directed against the order of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A) ] dated 19.11.2013, which in-turn has arisen from an order passed by the Assessing Officer u/s 143(3) of the Income Tax Act, 1961(hereinafter referred to as the Act ) dated 21.10.2010 pertaining to assessment year 2008-09. 2. In the appeal of the assessee, the following Grounds of appeal have been raised. 1. The Learned CIT(A) erred in confirming the action of Learned Assessing Officer of not allowing deduction u/s. 80IA of the Income Tax Act, 1961 on income from sale of Certified Emission Reduction (CER) 2. Without prejudice to the above, the Learned CIT(A) erred in holding that receipt from sale of CERs are not capital receipts and are eligible to tax as income from Business and Profession. 3. The Learned CIT(A) erred in law in not following the decision of Hon ble ITAT, Hyderabad Bench which is the only decision on the subject and therefore binding on him following principle of judicial hierarch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss eligible for exemption u/s 80IA of the Act. 4. In appeal before the CIT(A), assessee assailed the order of the Assessing Officer denying exemption u/s 80IA of the Act with respect to the CERs receipts. According to the assessee, such income constituted an income derived from the business of generation of power, and was thus, eligible for the claim of exemption u/s 80IA of the Act. Apart therefrom, assessee raised another plea to the effect that CERs receipt was a capital receipt not chargeable to tax. Both the aforesaid pleas of the assessee have been negated by the CIT(A). According to the CIT(A), though the CERs receipts constituted revenue receipts accruing in the course of business activity, but the same could not be construed as being derived from the business of generation of power. Therefore, he negated the plea of the assessee for exemption u/s 80IA of the Act; and, the plea that CERs receipts are capital receipts not chargeable to tax was also rejected on the ground that the same was earned in the course of carrying on business activity. In this background, assessee is in appeal before us. 5. Before us, the Ld. Representative for the assessee pointed out that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pressed into service the decision of Hyderabad Bench of the Tribunal in the case of. My Home Power Ltd. Vs. DCIT, vide ITA No. 1114/Hyd/2004 holding that sale of Carbon Credits was a capital receipt not chargeable to tax. Notably, the decision of Hyderabad Bench of the Tribunal in the case of My Home Power Ltd. (supra), came up before the Hon ble Andhra Pradesh High Court, wherein the following questions of law were raised:- 1. Whether, in the facts and circumstances of the case and in law, ITAT is correct in holding that sale of Carbon Credits is to be considered as Capital Receipt and not liable for tax under any head of income under Income Tax Act, 1961? 2. Whether, in the facts and circumstances of the case and in law, ITAT is correct in holding that there is no cost of acquisition or cost of production to get entitlement for the Carbon Credits, without appreciating that generation of Carbon Credits is intricately linked to the machinery and processes employed in the production process by the assessee? 9. The Hon ble High Court held as under:- We have considered the aforesaid submission and we are unable to accept the same, as the learned Tribunal has factually ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Hon ble Andhra Pradesh High Court, but the same did not find its favour. Therefore, we conclude by holding that the income received on sale of excess Carbon Credits is liable to be assessed as a capital receipt not chargeable to tax. We order accordingly. Thus, assessee succeeds on this aspect, and the Grounds of appeal Nos. 2 and 3 stand allowed. 12. 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. Thus, Ground of appeal no. 1 is dismissed as infructuous. 13. The next issue in the appeal of the assessee relates to the disallowance of ₹ 29,66,81,836/- made by the Assessing Officer u/s 14A of the Act. In this context, it is to be noted that in the Cross- Appeal, ( by way of Ground of appeal no. 1) Revenue has challenged the action of the CIT(A) in deleting an amount of ₹ 15,32,12,850/- which represented a part of the total disallowance of ₹ 29,66,81,836/- made by the Assessing Officer. Since the two cross-Grounds relate to the same issue, they are being taken-up together. 14. In brief, the relevant facts are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pted the plea of the assessee that there was no indirect interest expenditure relating to the earning of exempt income and accordingly deleted the disallowance of ₹ 15,32,12,850/- made by the Assessing Officer under Rule 8D(2)(ii) of the Rules. This action of the CIT(A) has been challenged by the Revenue in its appeal by way of Ground of appeal no. 1. The third limb of the disallowance relating to administrative expenditure under Rule 8D(2)(iii) of the Rules of ₹ 5,29,15,000/- was also sustained by the CIT(A). 16. Before us, the Ld. Representative for the assessee has not seriously disputed the disallowance of ₹ 9,05,83,986/- 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 of the Act 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... round of appeal no. 2. 19. The result of the aforesaid is that 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 of the Act. 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. 20. The only other aspect which remains for adjudication is the following two Additional Grounds of appeal raised by the assessee, which were hitherto not raised before the lower authorities:- 1 In the facts and circumstances of the case and in law, the learned Assessing Officer ought to have reduced the sum of ₹ 3,186,262,683/- on account of sale of CER being a Capital Receipt while computing the Book Profits U/s 115JB of the Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the Case of National Thermal Power Corporation (supra), the same is liable to be admitted. Nevertheless, the said Ground of appeal was not hitherto raised by the assessee before the lower authorities, therefore, the same is ought to be examined appropriately by the income tax authorities. Thus, the Additional Ground of appeal no. 1 is admitted and the same is restored back to the file of the Assessing Officer for adjudication on merits as per law after allowing the assessee a reasonable opportunity of being heard. 24. The Additional Ground of appeal no. 2 also involves determination of Book Profits for the purpose of section 115JB of the Act. It is canvassed that assessee is entitled to a deduction of ₹ 3,25,83,13098/- on account of loss arising on demerger of its investment division while computing the Books Profits u/s 115JB of the Act. In this context, brief facts are that the assessee company was holding shares of its group companies in its investment division. The investment division was hived off to its subsidiary JSW Energy Investment Pvt. Ltd (JSWEIPL) during the assessment year under consideration in terms of a Scheme of arrangement approved by the Hon ble B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said amount as a non-recurring transaction or a transaction of an exceptional nature irrespective of its nature being Capital or revenue and that it would be inappropriate to directly transfer such amount to the Capital Reserve in the Balance Sheet. On the basis of the ratio of the judgment of Hon ble Bombay High Court, the Ld. Representative pointed out that the loss of ₹ 325.83 crores incurred on demerger of the investment division was required to be considered while computing the Book Profits for the purpose of section 115JB of the Act, though assessee did not route the entry through the Profit Loss Account. 27. We do not deal any further on the merits of the claim because what has to be decided at the threshold is as to whether such a fresh claim can be admitted which was not hitherto raised before the lower authorities. In this context, the Ld. Representative for the assessee submitted that even if the claim was not made in the return of income, it could be made before the appellate authorities and he placed reliance on the Judgment of Hon ble Bombay High Court in the case of Pruthvi Brokers and Share Holders Pvt. Ltd. [2012] 349 ITR 336(Bom). As per the Hon ble ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
