TMI Blog2019 (7) TMI 125X X X X Extracts X X X X X X X X Extracts X X X X ..... ach in the past, we do not see any reason to interfere in the orders of the CIT(A). Disallowance on account of contribution to Refrigerant Gas Manufacturer Association - HELD THAT:- In the past, similar expenditures have been allowed to the assessee. Therefore, respectfully following the order of the ITAT in earlier years, we do not see any reasons to interfere in the orders of the CIT(A) on this issue. All these grounds are rejected. Disallowance of loss occurred due to fluctuation of foreign exchange - HELD THAT:- As decided in assessee's own case [ 2013 (11) TMI 1268 - ITAT AHMEDABAD] has examined this issue and held that as per judgment of the Hon ble Supreme Court in the case of Woodward Governor India Pvt. Ltd. [ 2009 (4) TMI 4 - SUPREME COURT] if there is a loss on account of foreign exchange fluctuations and liability was in the revenue account, then such loss is to be allowed to the assessee. The department has not demonstrated before us that this claim made by the assessee was not in revenue account in all these three years. Therefore, we are of the view that the ld.CIT(A) has rightly deleted the disallowance Income from share transactions - Capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted relevant finding of the ld.CIT(A). In view of the above discussion, we are of the view that this disallowance is not discernible. Consequently, ground of appeal raised by the Revenue is rejected, whereas ground of appeal raised by the assessee is allowed. Accrual of income - interest on refund - HELD THAT:- Whatever effect is being given to the orders of the higher appellate authorities in earlier years as well as this year, authorizing the assessee to receive refund, then interest be calculated according to the amount of refund, if any, accrued to the assessee. In other words, according to the assessee, this issue requires to be decided against the assessee, but the amount of refund be determined after giving effect to the appellate orders, and accordingly, interest be computed on such refund. We direct the AO to carry out this exercise while determining the exact amount of interest accrued to the assessee on the basis of the refund. In this way, this ground is allowed for statistical purpose. Capital expenditure allowability - HELD THAT:- Assessee has taken land on lease at Noida for the purpose of business from New Okhla Industrial Development Authority. The said a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... produced by the assessee in the captive power, whereas the case of the assessee is that value of such power be calculated at the rate at which the assessee has been purchasing power from GUVNL.We have dealt with this issue in earlier assessment years as well as Asstt.year 2012-13, 2013-14. These grounds of appeals are allowed in the same term and the AO is directed to follow order of the ITAT in the Asstt.Year 2012-13 and 2013-14. Receipt of proceeds on sale of carbon credit deserves to be treated as capital receipt and requires to be excluded from taxable income - See ALEMBIC LIMITED [ 2018 (3) TMI 1764 - GUJARAT HIGH COURT] Addition regarding claim of capital loss - shares in Inox Global Services Ltd - redemption of the preference shares by subscribing fresh shares - HELD THAT:- The ld.CIT(A) took note of the facts how the assessee has subscribed preference shares in the F.Y.2001-02 and 2002-03, and how they have been redeemed by subscribing fresh cumulative redeemable preferential shares. In fact, there is no loss to the assessee except loss computed on account of indexation. In order to get the return on old investment, it has redeemed the shares by subscribing fres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ather on receipt of money in instalment from the purchaser, HISL, it would buy from others. Thus, assessee was not in position to deliver the shares physically. The ld.CIT(A) has recorded a categorical finding that transaction did not materialize in this year. Transfer of ownership as per share transfer form took place on 9.4.2008 i.e. financial year relevant to the Asstt.Year 2009-10 and not 2008-09. Assessee is not entitled to claim loss on sale of IGSL shares. The loss has rightly been denied and we do not find any merit in this ground of appeal. It is rejected. Penalty u/s 271(1)(c) - pre-operative expenses paid to M/s.Mckinsey Co. - loss in respect of share of IGSL - HELD THAT:- If we examine the facts of the present case, then it would reveal that the assessee has entered into transaction for transfer of such shares on 1.2.2008. It construed the transaction as taken place in the Asstt.Year 2008-09; whereas the AO disagreed with the assessee on the ground that physical delivery of shares as well as payment has taken place in subsequent assessment year i.e. in April, 2008. Therefore, the assessee is not entitled for claiming the loss in the Asstt.Year 2008-09. To our mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessee 17.12.2010 31.12.2009 6 No.1825/Ahd/2010 Asstt.Year 2007-08 Revenue 17.2.2010 31.12.2009 7 172/Ahd/2012 Asstt.Year 2008-09 Assessee 16.11.2011 31.12.2010 8 No.322/Ahd/2012 Revenue 16.11.2011 31.12.2010 Asstt.Year 2008-09 9 135/Ahd/2015 Asstt.Year 2008-09 Assessee 13.11.2014 Penalty Order 31.12.2010 10 2365/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are also required under corporate social responsibility. Therefore, it has constructed/repaired village roads, given assistance to the schools and contribution towards local festivals. These activities create harmonious atmosphere with the management of the assessee-company vis- -vis residents in that area. The ld.AO has disallowed this expenditure on the ground that either these expenditures were in the nature of donation or in the nature of gratuitous payments. There was no business exigency in incurring these expenditures. Dissatisfied with the disallowance, the assessee carried the matter in appeal before the ld.CIT(A). The ld.CIT(A) has deleted the disallowance by observing that similar expenditure were disallowed by the AO in earlier year, which were deleted by the CIT(A). 5. Before us, the ld.counsel for the assessee contended that identical disallowance were made in the Asstt.Years 1999-2000, 2002-03 upto 2004-05. The Tribunal has upheld the deletion of such disallowance. He has placed on record copies of the Tribunal s order passed in ITA No.3472/Ahd/2002 (Asstt.Year 1999-2000); ITA No.898, 1111 and 1108/Ahd/2009 (Asstt.Year 2002-03); ITA No.4 and 33/Ahd/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee, and he disallowed its claim. We find that order of the ld.CIT(A) in the Asstt.Year 2003-04 was upheld by the Tribunal in ITA No.4 33/Ahd/2007. Finding recorded by the Tribunal on this issue reads as under: 10. We have heard the rival submissions, carefully perused the orders of the authorities below and considered the materials on record before us along with the paper book submitted by the assessee. On perusal of the records, it is apparent that this issue has been decided by ITAT Ahmedabad A Bench while adjudicating revenue's appeal in ITA No.3748/Ahd/2003 in assessee's case for AY 2000-01 cited supra in favour of the assessee and against the revenue vide order dated 17-02- 2012 where in the Tribunal in Para 31 of the order has held as under: 31. We have heard the rival contentions and perused the facts of the case. We concur with the view of the Ld. CIT(A) for the reasons that the payment is not a one-time contribution but a recurring one and such contributions have not resulted in creation of any asset for the assessee nor even for the association. There are very few members as only few companies are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned CIT(A) and dismiss this ground of appeal of the revenue. 10. There is no disparity on facts. In the past, similar expenditures have been allowed to the assessee. Therefore, respectfully following the order of the ITAT (supra) in earlier years, we do not see any reasons to interfere in the orders of the CIT(A) on this issue. All these grounds are rejected. 11. Ground No.4, 4 and 3 in the Asstt.Year 2005-06 to 2007-08: Grievance of the Revenue in these grounds is that the ld.CIT(A) has erred in deleting the disallowance of loss occurred due to fluctuation of foreign exchange amounting to ₹ 73,054/-; ₹ 1,65,75,256/-; ₹ 2,16,23,967/- in the Asstt.Years 2005-06 to 2007-08 respectively. The facts on vital points are common. For the facility of reference, we take the facts from the Asstt.Year 2005-06. 12. On scrutiny of the accounts, it revealed to the AO that he assessee has claimed ₹ 6,73,054/- (net) on account of foreign exchange fluctuations loss due to translation of foreign currency transactions at the year end. The AO issued a show cause notice inviting explanation of the assessee as to why this c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also decided against the Revenue. Capital Gain or business income: 15. Next common issue involved in all appeals of the Revenue as well as of the assessee is, whether purchase and sale of shares is to be treated as trading activity or an investment activity. The assessee has treated its activity of sale and purchase of shares as an investment activity and on sale of shares/mutual fund etc., it has shown short term capital gain as well as long term capital gain. The ld.AO did not accept this treatment of the assessee, and treated its activity as trading in shares. It is pertinent to observe that upto Asstt.Year 2007-08, the ld.CIT(A) did not concur with the AO and accepted the claim of the assessee. The ld.CIT(A) has upheld that on sale and purchases of shares and mutual funds gain/loss is to be assessed under the head Short term capital Gain or Long Term Capital Gain/Short Term Capital Loss or Long Term Capital loss . From the Asstt.Year 2008-09, the ld.CIT(A) did not concur with his predecessor and took a contrary view, whereby the alleged investment in the shares has been treated as a trading activity. Gain/loss on sale of such shares has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is respectfully submitted that ground no.(5) relates to AO's action of treating the claim of the assessee for capital gain arising from purchase and sale of shares/units of mutual funds as business income. In support of AO's action, following judicial pronouncements are submitted for kind consideration of Hon'ble Bench. 1) Manoj Kumar Samdaria Vs. CIT [228 Taxman 63 (Supreme Court)] Section 28(i), read with section 45 of the Income-tax Act, 1961 - Business income - chargeable as (Business income v. Capital gains: Share transactions) -Assessment year 2007-08 - Assessee declared income arising from sale of shares as short-term capital gain - Tribunal found that assessee had regularly dealt in purchase and sale of share which indicated period of holding to be very short and that he earned only a meager amount of dividend while gains from sale of shares was ₹ 65.45 lakhs - High Court upheld order of Tribunal that income arising from sale of shares was assessable as business income - Whether special leave petition filed against impugned order was to be dismissed - Held, yes [in favour of revenue]. l. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal found as of fact that assessee purchased shares out of borrowed fund and did not make sale on account of any pressing necessity - Whether on facts dominant intention of assessee being to make profit by resale of shares and not to make investment. Tribunal was correct in holding that transaction was adventure in nature of trade - Held, yes 4) CIT Vs. Central News Agency (P) Ltd. [ 53 taxmann.com 305 (Delhi)] Section 45 read with section 28(i), of the Income-tax Act, 1961 - Capital gains -Chargeable as (Capital gain v. business income/dealing in Mutual fund units) -Assessment year 2005-06 - Assessee - company had shown certain shortterm capital gain on sale of mutual fund units - Assessing Officer taxed said income as business income - On appeal, Commissioner(Appeals) upheld order of Assessing Officer but Tribunal held that profit on sale of mutual fund units was assessable as capital gain -whether since Tribunal had not determined whether any dividend had been received on units and frequency and volume of said transactions so as to know actual intention of assessee, matter was to be remanded to Tribunal for fresh consideration - Held, ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or for past several years - During previous year, he sold certain shares and claimed gain arising on sale of shares as short-term capital gain - Assessing Officer treated said gain as business income - Commissioner (Appeals) held transactions to constitute business activity and accordingly upheld order of Assessing Officer - Assessee was maintaining same set of books of account for both its business transactions and purported investment activity out of same common pool of funds - All transactions of assessee were imbued with same profit motive, which continued not only throughout year, but also from year to year - Whether findings by Commissioner (Appeals), that share transactions represented business transactions deserved to be affirmed - Held, yes [para 3] [Partly in favour of assessee]. 8. Burnside Investments Holding Ltd. Vs. DCIT [ 61 ITD 50 (MAD)] Section 28(i) of the Income-tax Act, 1061 - Business income - Chargeable as -Assessment year 1991-92 - After sale of tea estate assessee-company was engaged in business of real estate and purchase and sale of shares - It showed profit on sale of shares on investment account and claimed such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The expression intention as defined in Meriam Webster Dictionary means, what one intends to accomplish or attain, it implies little more than what one has in mind to do or bring out. It suggests clear formulation or deliberation. Thus, it is always difficult to enter into the recess of the mind of an assessee to find out the operative forces exhibiting the intention for entering into the transaction. This would give rise a debate. Nevertheless, we have to look into the curious features of this case which will goad us on just conclusion. 18. Before we embark upon an inquiry on the facts of present case so as to find out, whether the assessee is to be termed as involving in the trading in shares or to be treated as a simplicitor investor, we would like to make reference to certain tests propounded by ITAT, Lucknow Bench in the case of Sarnath Infrastructure P.Ltd. Vs.ACIT, (2009) 120 TTJ 216. ITAT, Lucknow Bench has considered the issue, whether the assessee deserves to e treated as trader or investor. The following tests are worth to note. It reads as under: 13. After considering above rulings we cull out following principles, which ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidence to show that his holding is for investment or for trading and what distinction he has kept in the records or otherwise, between two types of holdings. If the assessee is able to discharge the primary onus and could prima facie show that particular item is held as investment (or say, stock-in-trade) then onus would shift to Revenue to prove that apparent is not real. 8. The mere fact of credit of sale proceeds of shares ( or for that matter any other item in question) in a particular account or not so much frequency of sale and purchase will alone will not be sufficient to say that assessee was holding the shares (or the items in question) for investment. 9. One has to find out what are the legal requisites for dealing as a trader in the items in question and whether the assessee is complying with them. Whether it is the argument of the assessee that it is violating those legal requirements, if it is claimed that it is dealing as a trader in that item? Whether it had such an intention (to carry on illegal business in that item) since beginning or when purchases were made? 10. It is permissible as per CBDT s Circula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ( e) The fifth test, normally applied in case of partnership firms and companies, is whether the deed of partnership or the memorandum of association, as the case may be, authorizes such an activity. ( f) The last but not the least, rather the most important test, is as to the volume, frequency, continuity and regularity of transaction of purchase and sale of the goods concerned. In a case where there is repetition and continuity, coupled with the magnitude of the transaction, bearing reasonable proposition to the strength of holding then an inference can readily be drawn that the activity is in the nature of business. 20. In the light of the above, let us examine the facts of the assessee s case. The first test propounded by the ITAT, Lucknow Bench as well as by the Hon ble Gujarat High Court is, what was the intention of the assessee at the time of purchase of shares or any other time. The intention can be gathered from the treatment an assessee gives to such purchase in its books of accounts viz. whether it is to be treated as stockin- trade or investment. On this account, the assessee has submitted as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er submitted that the assessee has made the investment without having recourse to borrowed funds. The entire funding for shares/securities has been made out of capital reserves and surplus available from time to time. 23. So far as frequency of purchase and sale of securities are concerned, it is submitted that the following details demonstrate bifurcation of total investment, purchase and sales in respect of shares and mutual funds etc. in the respective assessment years. ( Rs.in crores) Investment in Total Investm ent Purchases of Total Purchas e Sales of Total Sales Asstt. Year Mutual funds bonds Strategic Investment Shares Mutual Funds And Bonds Shares Strategic purchase Mutual fund Bonds Strate gic invest ment Shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 43 570.84 821.80 1.73 3.65 827.18 1005.65 17.51 24.04 1047.20 24. From the above table, it could be seen that out of total investment in shares/securities, investment in shares is very low as compared to investment in mutual funds and bonds and strategic investment. As regards purchase and sales of units in mutual funds cannot be said to constitute trade, since such units cannot be sold in the open market but can only be redeemed by the entity issuing the units. Apart from such entity, there is no buyer for units of mutual funds. Further, as regards the volume of purchase and sales, it can be noticed that out of total purchases, substantial amounts have been utilized for purchase of mutual funds and only minimal holding was made in share. Similarly, in the case of sales also substantial chunk was in respect of mutual funds and only small quantity of shares was sold. 25. It is submitted that if the intention for purchase and sales of securities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 59.91 2009-10 During the year, the company has incurred loss of ₹ 7.33 cores on sale of investments. 2010-11 6.29 (including LTG ₹ 6.29) - (-) 6.01 Capital loss 0.28 2011-12 37.37(including LTG ₹ 32.59) - 5.67 43.04 27. The ld.counsel for the assessee submitted that in the books of accounts, the assessee has valued the shares/securities at cost and not at lower of cost or market value. It is submitted that the main objects of the memorandum of association do not authorise the assessee to undertake business of purchase and sale of shares/securities unless the main objection of MOA permits, the company cannot do trading in shares and securities as business, being a listed company. Subsequently also MOA was amended from time to time bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39 taxmann.com 157 (ITAT, Hyderabad) ix) DCIT Vs. UMIL Share Stock Broking Services Ltd., 96 taxmann.com 168 (Kol-Trib.) x) PCIT Vs. Bhanuprasad D. Trivedi, HUF, 87 taxmann.com 137 (Gujarat) xi) PCIT Vs. Bhhanuprasad D. Trivedi HUF, 94 taxmann.com 114 (SC) He has placed on record copies of the above decisions. 30. We have duly gone through all these details. In the first test i.e. how to find out intention of the assessee that it has purchased shares for investment purpose, the assessee has pointed out that in the books of accounts, it has treated these shares in the investment account. It has not valued the shares at the end of the year at cost or market value whichever is less, rather it has valued them at the cost of acquisition. This treatment in the account is being given when the shares are being purchased in investment account. The assessee has also pointed out that provisions made for diminution in value of investment has been added back in the computation of income. While taking note of the assessee s submissions submitted in tabular form, we have specifically noted the figures. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n ble Bombay High Court decision in the case of CIT Vs. Reliance Utilities Powers Ltd., 313 ITR 340 (Bombay), then it would reveal that one has to draw an inference that the assessee must have made investment out of its own funds. The ld.CIT(A) cannot reject this argument simply for the reason that the assessee has incurred interest expenditure of ₹ 27.64 cores. But this expenditure is attributable to manufacturing activities also. The ld.CIT(A) ought to have visualized the complete details of funds before assigning this reasoning for differing with the ld.CIT(A) in other assessment years. 32. Next reasons which emerges out from the order of the ld.CIT(A) in the Asstt.Year 2008-09 is that there were large number of share transacted by the assessee including in terms of scrip as well as in terms of transactions. The ld.CIT(A) also observed that if weighted average holding period is taken into consideration, then for the purpose of short capital gain it is 86 days. The ld.CIT(A) also took note of the purchases made by the assessee in the Asstt.Year 2003-04 to 2008-09. He observed that since there is a rising trend in purchase of the shares, it shows that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e numbers of cases have already been considered by us. Therefore, the ld.CIT(DR) could not buttress the reasoning of the ld.CIT(A) in the Asstt.Year 2008-09 which has been followed in subsequent years with help of these case laws. We have considered specific reasons assigned by the ld.CIT(A) for differing with conclusions of his predecessor in earlier years. In view of the above discussion, we hold that gain arising on sale of shares or mutual fund is to be taxed in all these years as long term capital gain/short term capital gain. Orders of the ld.CIT(A) in the Asstt.Year 2005-06, 2006-07 and 2007-08 are upheld, whereas the finding of the ld.CIT(A) in the Asstt.Year 2008-09 upto the Asstt.Year 2011-12 are set aside. The finding of CIT(A) in Asstt.Year 2008-09, 2009-10 and 2010-11 that on sale of mutual funds, capital gain is to be assessed in the hands of assessee, is upheld, and ground of Revenue i.e. ground no.3 in Asstt.Year 2008-09, 2009-10 and ground no.1 in the Asstt.Year 2010-11 are rejected. Similarly, all the grounds of Revenue in the Asstt.Year 2005-06 to 2007-08 challenging the finding of the ld.CIT9A) on this issue are rejected; whereas all the ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income, but on protective basis, he disallowed expenditure of ₹ 62,56,732/- out of professional fees and ₹ 1,11,47,627/- on account of interest expenses. He observed that if at any appellate stage the same is held taxable under the heading capital gain then disallowance under section 14A should require to be made and this disallowance would be worked out accordingly. The ld.CIT(A) has held that profit on share transaction is to be assessed as capital gain. We have upheld this finding of the ld.CIT(A) while rejecting the ground of appeal taken by the Revenue in the above discussion. Therefore, we are required to adjudicate what amount ought to be disallowed under section 14A of the Act. A perusal of the record would indicate that the ld.AO has made disallowance under two heads; (a) out of professional fees, and (b) out of interest expenses. As far as out of professional fee of ₹ 62,56,732/- is concerned, this disallowance has been confirmed by the ld.CIT(A) at ₹ 60 lakhs. It has been challenged by the assessee in ground no.4 of ITA No.1379/Ahd/2009. We have discussed this issue while dealing with the issue, whether the assessee was indulged in share trading ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finding of the ld.CIT(A) is that it it was fairly pointed out that on the basis of direct nexus the interest amount of ₹ 19,83,858/- is in respect of investments. This amount worked out without prejudice to the stand that no disallowance is required out of interest on the basis of submissions made earlier. Though the ld.CIT(A) has observed that this expenses has a direct nexus, but it is neither discernible from the assessment order nor from the CIT(A) s order. Major part of the expenses i.e. ₹ 91,63,869/- has been deleted by the CIT(A) by following judgment of Hon ble Bombay High Court in the case of Reliance Utilities and Powers P.Ltd. (supra) on the basis that the assessee was having more interest free funds, than the investment. In this situation, part expenditure cannot be culled out unless a direct nexus has been demonstrated. It is neither discernible in the assessment order nor in the CIT(A) s order. We have extracted relevant finding of the ld.CIT(A). In view of the above discussion, we are of the view that this disallowance is not discernible. Consequently, ground of appeal raised by the Revenue is rejected, whereas ground of appeal raised by the assessee is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital expenditure, whereas the assessee has submitted that it was a paid for protecting the title of the land. The ld.counsel for the assessee has contended that this issue has been decided against the assessee consistently from the Asstt.Year 2002-03. We find that the Tribunal has examined this aspect in detail in the Asstt.Year 2003-04 while deciding ITA No.33/Ahd/2007. Taking into consideration consistent stand of the authorities as well as appeal upto the level of ITAT, we do not find any merit in this ground of appeal. Both these grounds are rejected. Ground No.3 in Asstt.Year 2005-06: 45. In this ground, grievance of the assessee is that the ld.CIT(A) has erred in confirming the disallowance of ₹ 9,883/- which has been disallowed out of sundry balance written off. The ld.counsel for the assessee did not press this ground of appeal on account of smallness of the amount involved therein. Accordingly, it is rejected. 46. Ground No.4. In this ground, grievance of the assessee is that the ld.CIT(A) has erred in confirming the disallowance of ₹ 60 lakhs out of expenses of professional fees. This ground is inter-co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... late stage, the same is held as taxable under the head capital gains , then disallowance under section 14A would be relevant. He has worked out the above disallowance. As far as disallowance out of professional fees is concerned, while deciding the appeal of the assessee, we have already confirmed the finding of the CIT(A) for disallowance to the extent of ₹ 60 lakhs. At the time of hearing also, the ld.counsel for the assessee did not dispute confirmation of this disallowance on the ground that if the profit on share transaction is being taxed under the head capital gain , then disallowance out of professional fees deserves to be confirmed. Therefore, we have rejected the ground of appeal bearing no.2 in ITA No.1380/Ahd/2009 raised by the assessee. As far as disallowance out of interest expenditure is concerned, the ld.CIT(A) has deleted this disallowance. We find that gross investment by the assessee in the Asstt.Year 2006-07 is of ₹ 53,081 lakhs. It has reserves surplus of ₹ 71,153 lakhs. Thus, it has far more interest free funds than the investment. We find that the ld.CIT(A) has noticed the profit earned during the year at ₹ 97 crores. Compensation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PMS 25,27,072 4 Consultancy fees for equity research 84,18,000 5 Out of other expenses estimated 25,00,000/- Total 2,12,75,647/- 55. The ld.AO thereafter worked out disallowance at ₹ 4,85,04,149/- which comprised disallowance of ₹ 2,65,26,656/- out of general administrative expenses and ₹ 2,19,77,493/- on account of interest expenses. The AO has worked out this disallowance by following formulae provided in Rule 8D. Dissatisfied with the disallowance, assessee carried the matter in appeal before the ld.CIT(A). The ld.CIT(A) confirmed methodology adopted by the AO on the ground that Special Bench of ITAT in the case of Data Capital Management P.Ltd., 117 ITD 169 has held that Rule 8D is applicable with retrospective effect, and therefore, disallowance has rightly been computed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s for equity research. This amount is quite sufficient, if considered in the light of total tax free income shown by the assessee. It has earned ₹ 12.40 crores dividend income against a disallowance of roughly ₹ 1.05 crores, is quite reasonable. These expenses are apart from other statutory expenditure incurred by the assessee. Therefore, we do not find any merit in the ground of appeal raised by the Revenue. It is rejected. 59. As far as ground of appeal of the assessee is concerned, it is allowed. 60. We delete the disallowance worked out by the AO on estimate basis. The disallowance already made by the assessee itself was sufficient to take care of the expenditure. Therefore, ground no.1 of the assessee s appeal is allowed. 61. Ground no.6 (a) (b): In these grounds of appeal, grievance of the Revenue is that the ld.CIT(A) has erred in deleting disallowance of ₹ 2,91,97,340/- which was added by the AO by making a disallowance of claim of deduction under section 80IA(4) of the Act. 62. Brief facts of the case are that assessee manufacturers chemicals. It also generates captive power, out of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction under section 80IA(4) of the Income Tax act amounting to ₹ 13,19,37,184/- and ₹ 7,92,94,293/- in the assessment years 2012-13 and 2013-14 respectively. 29. Brief facts of the case are that the assessee has captive power plants at Ranjinagar and Dahej. At Dahej, assessee has coal based captive power plant and gas based captive power plant. According to the AO, it did not claim deduction under section 80IA originally in the assessment year 2013-14. However, after the decision of Hon ble Chhattisgarh High Court in the case of CIT Vs. Godawari Power Ispat Ltd., 223 TAXMANN 234 it has filed a submission claiming deduction. It also revised return of income on 31.3.2015 in the assessment year 2013-14. Similarly, in the assessment year 2012-13, it has enhanced its claim by way of a letter pointing out that the rate for determining the valuation of power generated by it for the purpose of allowing deduction, the rate should be adopted equivalent to the rate at which Madhya Gujarat Vij Company Ltd. ( MGVCL for short) and Dakshin Gujarat Vij Company Ltd. ( DGVCL for short) etc. are supplied the electricity to the assessee s manufacturing unit. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grid is thus incorrect. The ld.DRP under this misconception construed that the rate at which electricity supply-companies are purchasing the electricity should be applied for benchmarking the value of electricity sold by the CPP to its manufacturing units. In other words, the DRP was of the view that non-eligible units cannot be taken for the benchmarking for determining the value at which electricity was sold by the CPP. DRP has emphasized that manufacturing units could have different source of procurement of electricity; say from CPP or from electricity boards. But as electricity producer, in a CPP, it could only be sold to distribution licensee holder. In this way, the ld.DRP observed that value of electricity cannot be benchmarked by adopting the rate at which manufacturing units of the assessee has been purchasing the electricity, rather, according to the DRP, the rate at which supplier companies are purchasing the electricity ought to be applied. Before us, the ld.counsel for the assessee contended that this controversy has been silenced by the Hon ble Gujarat High Court in the case of CIT, Gujarat Alkalis and Chemicals Ltd. He placed on record copy of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ating company supplied its power to GEB? 32. The Hon ble High Court has replied this question by recording the following finding: 3. Since both the issues are covered by various judgments of this Court, we do not find it necessary to record facts at any length. Division Bench of this Court by judgment dated 22.11.2011 in Tax Appeal No.2092/2010 in somewhat similar controversy observed as under : 3. With respect to Question [B], the issue pertains to sub Section (8) of Section 80IA of the Income Tax Act, 1961. The assessee had a CPP Unit generating electricity, which was supplying it to a general unit. The electricity generated is being supplied to other consumers also. The CPP unit charged ₹ 5.40 ps. per unit from the general unit. The Assessing Officer applying sub-Section (8) of Section 80IA restricted the same to ₹ 5.32 ps. per unit and, thereby, restricted the deductions claimed by the assessee under Section 80IA of the Act. This restriction was primarily on the basis that the rate of ₹ 5.40 ps. charged by Gujarat Electricity Board ( GEB for short) was inclusive of 8 paise per uni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s consumers at the same rate. This, therefore, was a market value of the electricity supplied by the CPP Unit to the general unit. The fact that this amount of ₹ 5.40 ps. comprises of a component of 8 paise, which was electricity duty, to our mind, would make no difference in so far as the market value is concerned. To a consumer, the price being paid remains 5.40 ps. per unit. The fact that the seller retains only ₹ 5.32 ps. out of the said collection and passes on 8 paise per unit to the Government in the form of electricity duty, to our mind, would make no difference. This question is, therefore, not required to be considered. 4. This was followed in case of CIT v. Shah Alloys Ltd. in Tax Appeal No. 2093/2010. This was reiterated in Tax Appeal No.1646/2010 in case of ACITv. Pragati Glass Works (P.) Ltd. (order dated 30.1.2012), in which following observations were made : 7. To our mind, Tribunal has committed no error. Assessing Officer and CIT (Appeals) while adopting ₹ 4.51 per unit as the value of electricity generated by eligible unit of assessee and supplied through its non eligible unit only worked out cos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments of the Court held as under : 11. We have considered the submissions made by the learned counsel for the parties. We have also considered the case laws cited by the learned counsel for the assessee. Taking into consideration the judements of this court and other High Courts, cited above, we are of the opinion that the Tribunal has rightly allowed the claim of the assessee. In that view of the matter, we do not find any infirmity in the order of the Tribunal. Therefore, we answer question (C) and (D) in favour of the assessee and against the revenue. 6. Issues are thus considered on number of occasions by the Court and held against the Revenue. Questions are answered against the Revenue. Both the tax appeals are therefore, dismissed. This judgment of Hon ble High Court is directly on the issue. Hon ble Court has considered section 80IA(8), therefore, it is not justifiable at the end of ld.DRP to ignore the judgment of Hon ble jurisdictional High Court. 33. Respectfully following the authoritative pronouncements of the Hon ble jurisdictional High Court, we allow these grounds of appeal. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst any taxable income. 67. The AO disallowed the claim of the assessee by observing that it holds 49.50% shares in Inox Global Services Ltd. and other group concerns are the major share holders. According to him, directors are also common in both the concerns, and therefore, it is a just paper transaction for claiming capital loss, which according to the AO cannot be accepted as a genuine transaction. On appeal, the ld.CI(A) has observed that Inox Global Services Ltd. has not been paying any dividend from the inception of the investment. It has no distributable profit through its operation, out of which it could pay dividend accrued while taking investment. The ld.CIT(A) thereafter referred to section 80 of the Companies Act, 1956 and observed that first proviso to this section provided that no such shares shall be redeemed except out of profits of the company which would otherwise be available for dividend or out of the proceeds of a fresh issue of shares made for the purposes of the redemption . Thus, according to the ld.CIT(A) preferential shares can be redeemed only in two ways, viz. (a) out of profits available for payment of dividend; and/or (b) out of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iation with aid of section 40(a)(ia) r.w.s. 194C of the Act. On the other hand, the assessee has pleaded that provisions of section 40(a)(ia) of the Act does not apply to the purchase of capital assets and consequentially to the depreciation. In other words, the short issue involved in all these grounds is that on acquisition of capital asset, if an assessee failed to deduction TDS, then, can depreciation be disallowed to the assessee by holding that expenses incurred for acquiring the capital asset is not admissible for capitalisation on the basis of interpretation of section 194C and 40(a)(ia) of the Act. 70. Brief facts of the case are that the assessee has established a project to set up 14 units of wind mills at Gude, Panchghani district, Maharashtra. It was a turnkey project and given to M/s.Vestas Wind Technologies India P.Ltd. It has entered into two separate agreements dated 4.1.2007 for supply of 14 units Wind Mills and dated 6.1.2007 for errection and commissioning. The AO was of the opinion that the payments for supply of Wind mills are covered by provisions of section 194C. Since the assessee failed to deduct TDS on such payment, therefore it is requi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were not in respect of payment of interest, commission, brokerage, rent, royalty, fees, etc., but related to payments made to a supplier/contractor. Hence, the only applicable portion of the section would be in respect of carrying out of any work by a contractor or subcontractor on which tax is deductible at source. 12.4 The assessment year in question is AY 2007-08. Hence the applicable provisions would be those which prevailed before the amendment of section 194C w.e.f. 1.10.2009 by Finance (No. 2) Act, 2009. As per the pre-amended provisions, any person responsible for paying any sum to any resident for carrying out any work shall at the time of credit of such sum to the account of the contractor or at the time of payment thereof deduct tax at the rates specified therein. 12.5 From a reading of section 194C as well as section 40(a)(ia), it is clear that the essence of liability to deduct tax arises from the carrying out of any work. Work has not been defined in the section. However, Explanation III of the pre-amended section 194C provided an inclusive definition of work so as to include advertising, broadcasting and telecasting, ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch article or thing passes to the Government or such person only after such article or thing is delivered, the contract will be a contract for sale and as such outside the purview of this section. 12.7 Thus, it has been clearly stated by the Board that the guidelines relating to the provisions of tax deduction at source u/s 194C would not cover contracts for sale of goods, but would only be confined to contracts for fabrication of article or thing. Where the fabrication is carried out with materials supplied by the other specified persons and the fabrication work alone is done by the contractor, in such case tax would have to be deducted from the payment made in this regard. However, where the supply of any article or thing is the subject matter of the transaction and such article or thing is fabricated according to the specifications given by the specified persons, and no material is supplied by such specified persons, and the property in such article or thing passes to such person only after the said article or thing is delivered, then the contract will be a contract for sale and thus outside the purview of section 194C. In the instant case, no material has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under (Head notes) :- TDS - Under s. 194C - Composite contract or separate contracts - Primary and dominant object of assessee being to purchase the material, i.e. two ESP s for its power plant, the contract for supply of material, freight, insurance and supply of spare parts constituted separate contract from, the. contract for civil work .of erection .and , .. commissioning of the plant though there is only one common purchase order - AO was not justified in treating the assessee-in-default by treating the two contracts as composite contract - AO directed to rework the TDS accordingly - Further, if the tax has already been paid by the contractor, the assesssee could not be treated in default under s. 201 12.10 Having regard to the provisions of law as contained in section 40(a)(ia) and 194C, the Boards view in the matter as expressed in Circular No. 681 and the decisions of the Hyderabad and Delhi Benches of ITAT as above, I am of the opinion that the impugned transaction amounted to a contract for sale of 14 numbers of wind turbine generators worth ₹ 149.37 crores and a separate contract for erection and commissioning of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . A perusal of the definition of the work provided in the Act would indicate that if equipments are being manufactured as per design, engineering etc. supplied by the suppliers, which would not result in a work contract. Mores so, even if it is according to the design supplied by the assessee, but material was not purchased from the assessee, then also equipments supplied by the supplier would not fall in the work contract. The assessee has emphasised that it has purchased 14 numbers of wind turbine generators. These were not manufactured on the basis of supplies made by the assessee, rather supplier had purchased the goods or sourced it from third party, and thereafter manufactured them. Thus, for the purpose of 14 numbers of wind turbines, there was a separate contract and it was only for supply of goods. On this purchase price, the assessee was not required to deduct TDS under section 194C. The ld.CIT(A) has made reference to the Circular of the Board bearing no.681, and thereafter followed various orders of the ITAT on this point. The AO has erred in construing the purchases of 14 numbers of wind turbine as a work contract on whose payment the assessee was to deduct TDS. We h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ying suitable business opportunities for growth of the assessee company as well as the group company, has been signed by Shri Deepak Asher, Group Head (Corporate Finance) on the letterhead of the assessee company (GFL). The discussion papers were also addressed by M/s McKinsey Co to GFL. The report was also submitted to GFL. Hence the conclusion of the AO that the consultancy was unrelated to the assessee (GFL) is not strictly speaking correct. The assessee's Group is known as Inox Group. Therefore., it would not be correct to say that the entire expenditure was unrelatable to the assessee company. Subsequent to the submission of the report by McKinsey Co, the assessee, set up a subsidiary company under the name and style of Inox Wind Ltd., for the purpose of manufacture of windmills (WTG). At the same time, the AOs observation that the invoices were raised in the name of the group company has not been controverted: This suggests that the group as a whole gained by commissioning the report from McKinsey Co. Accordingly, in my view it would be fair to consider 20% of the expenditure on consultancy to be relatable to the assessee company (GFL). Regarding the other aspect, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee and did not relate to the present business of the assessee, and job assigned to MC was not complete in the present financial year. It is pertinent to note that except address of Inox on two invoices, there is no other material either discussed by the AO or by the CIT(A) exhibiting that this consultancy was meant for other companies of the group or they have commenced any line of business contemplated in the report. There is no evidence of payment of these charges by any other group company. The CIT(A) basically agreed with the assessee and held that AO is not correct in construing that this report is related to the assessee. There is no specific material with the AO nor he assigned any reason for holding that report was not meant for the assessee. However, simply for reason that one or two invoices contained address of Inox it does not mean that the assessee has used report only to the extent of 20% and rest is used for other. This aspect can be looked into with different angle. The AO could verify whether others have crystallized the amounts or claimed depreciation or revenue expenditure. There is no dispute with regard to obtaining of report as well as recognizi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ground No.1: In this ground the assessee has pleaded that the ld.CIT(A) has erred in confirming the disallowance of long term capital loss of ₹ 1,75,31,935/-. 82. Brief facts of the case are that the assessee has entered into an agreement on 1-2-2008 with Humsay Information Services P.Ltd. (HISPL) for sale of 50.00 lakhs fully paid up equity shares and 18,83,000/- 1% cumulative preference shares of IGSL along with other entities. Out of the above, the assessee was owner of 24,74,930 equity shares (value at ₹ 10/-) and 18,83,000 preferential shares (face value of ₹ 100/- paid up value ₹ 64/-). The assessee had claimed a long term capital loss of ₹ 1,75,31,935/- on sale of shares of IGSL. The AO rejected its claim on the ground that though agreement to sell was executed on 1.2.008, but it did not mention that sale or purchase took place at the time of agreement and there was an addendum signed between the parties on 3.4.2008. Thus, it is evident that transaction did not take place as per agreement dated 1.2.2008. Accordingly, the ld.AO disallowed capital loss. On appeal, it was contended by the assessee that HISPL was to make payment in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ara 3.5 of the Share Purchase Agreement) etc. was also not adhered to and in fact, the Share Transfer Agreement was not given effect to in substance. Since, the contract of sale, i.e Share Purchase Agreement dated 1.2.2008 was not followed in substance and the IGSL shares were actually transferred in FY 2008-09 i.e. on 9.4.2008, the date of transfer cannot be accepted to be in FY 2007-08. It is held that AO was justified^ in not allowing capital gains loss in respect of shares of IGSL in AY 2008-09. 5.2.1 However, there is merit in appellant's contention that addition of ₹ 1,75,31,935/- under the head 'business income' was not required and instead long term capital gains are to be increased to the extent set off was claimed in this year i.e. ₹ 45,79,704/- and balance loss of ₹ 1,38,00,981/- is not allowed to be carried forward, due to transaction not having taken place in this year. AO is directed to modify the addition/disallowance accordingly. Further, as per the Share Purchase Agreement dated 1.2,2008, the rate at which all the shares held by appellant group were to be transferred to HISL was ₹ 2.03 per equity share and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This activity of the assessee has been upheld as investment which would give rise to long term capital gain or short term capital gain to the assessee on sale of shares/mutual funds/bonds. The AO sought explanation of the assessee to demonstrate expenses relatable to earning of such income have been disallowed by the assessee. The assessee has suo moto disallowed a sum of ₹ 2,59,75,022/-. Break-up of this amount has been given at page no.12 of the assessment order. It reads as under: Sr. No. Particulars Amount (Rs) I) Securities Transaction tax I2985I2S 2) Demat Charges 1423333 3) PMS fees 4994001 4) Consultancy Fees for Equity Research Services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It has debited interest expenditure of ₹ 27.64 crores in the accounts. But that expenditure is meant for other manufacturing activity. For the purpose of investment, it has not used the interest bearing funds because surplus interest free funds available with the assessee are far more than the investment. We have considered this aspect while dealing with identical issue in earlier year. We have put reliance upon the decision of Hon ble Bombay High Court in the case of Reliance Utilities Power P.Ltd. (supra) wherein it has been held that if an assessee demonstrates more surplus funds available with it than the investment, then an inference can be drawn that such investments have been made out of surplus fund. Therefore, no interest expenditure is to be allocated for making disallowance under section 14A of the Act. 91. As far as disallowance under clause (iii) of Rule 8D on account administrative expenditure are concerned, the ld.AO has worked out 0.5% of the average investment at ₹ 2,69,25,307/-. This amount deserves to be set off against the expenses suo moto disallowed by the assessee at ₹ 2.59 crores; whereas the activity of the assessee is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal fees and entitled to claim depreciation on such amount. There cannot be any bifurcation. ITA No.2546/Ahd/2012 (Asstt.Year 2009-10): 96. Revenue has taken three grounds of appeal. We have already adjudicated all these three grounds while taking up identical issues in the Asstt.Year 2007-08 and 2005-06 etc. Accordingly this appeal is dismissed. ITA No.106/Ahd/2016 (Asstt.Year 2010-11): 97. Three grounds are taken in this appeal. We have already considered ground no.1 and 2 wherein Revenue has challenged allowance of contribution made to Refrigerant Gas Manufacturers Association and village development expenditure. We have already considered both the issues while taking identical issue in the Asstt.Year 2005-06, and rejected. Hence, these grounds of appeal are also rejected. 98. In ground no.3: Revenue has pleaded that the ld.CIT(A) has erred in holding that adjustment made on account of disallowance under section 14A cannot be made in the book profit under section 115JB of the Act. The ld.counsel for the assessee at the very outset submitted that Special Bench of the Tribunal in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2) Demat Charges 2,81,742 3) PMS fees 6,77,405 4) Consultancy Fees for Equity Research Services 1,12,360 5) Out of other expenses- As estimated by Management 50.00,000 TOTAL 71,75,743 Asstt.Year 2010-11 Sr. No. Particulars Amount (Rs) 1) Securities Transaction tax 14,51,893 2) Demat Charges 1,66,573 3) Out of other expenses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 1794,35,02,000 (iii) 0.5% of Average Investment (0.5% on ₹ 526,10,38,500/-) : ₹ 2,63,05,193/- Total Disallowance : ₹ 18,00,80,159/- Since the assessee itself disallowed an amount of ₹ 71,75,743/-, remaining disallowance of ₹ 17,29,04,416/- is added to the total income of the assessee. Asstt.Year 2010-11: 103. With the assistance of the ld.representatives, we have gone through the record carefully. As observed earlier while dealing with identical issue, we find that the assessee has placed on record details of gross-investments, dividend income as well as surplus interest free fund available with it. A perusal of these details would indicate that the assessee has made gross investment of ₹ 51,861 lakhs, ₹ 77,715 lakhs and ₹ 58,453 lakhs in the Asstt.Years 2009-10, 2010-1 and 2011-12 whereas it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 107. The AO has adopted the purchase rate of GUVNL at ₹ 3.2 per unit as market value of the power produced by the assessee in the captive power, whereas the case of the assessee is that value of such power be calculated at the rate at which the assessee has been purchasing power from GUVNL. 108. We have dealt with this issue in earlier assessment years as well as Asstt.year 2012-13, 2013-14. These grounds of appeals are allowed in the same term and the AO is directed to follow order of the ITAT in the Asstt.Year 2012-13 and 2013-14. 109. In ground No.3 in the Asstt.Year 2009-10 (ITA No.2365/Ahd/2012) the issue agitated in this ground is, whether on sale of shares/ mutual fund capital is to be assessed as business income. 110. We have already decided this issue. 111. No other grounds have been pressed. Therefore, the appeal of the assessee is allowed partly. 112. In the remaining ground no.4 in ITA No.117/Ahd/2016 for the Asstt.Year 2011-12, the assessee has pleaded that receipt of proceeds on sale of carbon credit deserves to be treated as capital receipt and requires to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Departmental Representative, on the other hand, contends that the realization from carbon credits has been treated by the assessee itself as revenue income and offered to tax and in fact in actualities they are revenue receipt. However, no adverse judgment on this has been cited. 20. We have heard the rival contentions, perused the material available on record and gone through the orders of the authorities below. The additional ground stands already admitted. The duty of the ITAT is to ensure that fair, just and proper assessment is made. 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 Id. Counsel for the assessee that the Hon'ble Karnataka High Court in the case of Subhash Kabini Power Corporation Ltd (supra) and the Hon'ble Andhra Pradesh High Court in the case of My Home Power Ltd (supra), have taken a view that the carbon credit re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the year, the Company has received income from Carbon Credit of ₹ 441.69 crores. The said revenue is credited to Profit Loss account and is included in Revenue from Operations. Please refer to Schedule 23 of the Annual accounts. We are enclosing herewith a detail note on this Carbon Credit. In the said note we have explained as under: GFL's Carbon Credit: GFL operates a HCFC-22 plant at Village Ranjitnagar, District Panchmahals, Gujarat, India. During the production of HCFC-22, waste gas called HFC-23 is generated. For each ton of HCFC-22 produced, approximately 2.9% of HFC-23 is generated. HFC-23 is a greenhouse gas (GHG) which has Global Warming Potential of 11,700 of CO2 per ton of HFC- 23. GFL's CDM project consists of incinerating HFC-23 instead of allowing it to be vented into the atmosphere, and thereby reducing GHG emissions CERs awarded = Tones of GHG reduced *GWP of GHG In the year 2005-2006, Gujrat Fluorochemicals Limited (GFL) has impl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax. Hence, while computing total income, the said receipt, net of expenses, may please be excluded as capital receipt. This claim is based on the ITAT order in the case of My Home Power Limited, Hyderabad Bench, which is now confirmed by the Hon'ble Andhra Pradesh High Court. We may state that such claim, that Carbon Credit revenue is Capital receipt not liable to tax, and hence should be excluded from total income, was made during the course of assessment proceedings for A.Y. 2010-11 and 2011-12 also. In the Assessment order, the AO has not accepted the said claim. The Company, has filed appeals for both the years before CIT(A). One of the grounds of appeal is regarding such claim. During the course of appellate proceedings for A.Y. 2010- 11, the CIT(A) has called for the remand report from Assessing officer on the issue. A copy of the said remand report was provided to us and we were asked to make our submissions on the said remand report. We have made our detailed submission dated 02-01-2015 to the CIT(A). The copy of the said submission is enclosed for ready reference in which we have provided our replies to the AOs observations in the remand report an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on account of trading of such carbon credits which are revenue in nature under all circumstances. Hence, following the decision of the earlier order and considering the fact that the appellant is also engaged in the trading of carbon credits, it is held that such revenue in the current year is also taxable in the hands of the appellant as income from business. Alternatively, this is also taxable as short term capital gain as has been held in the appellate order of AY 2010-11. Hence, this ground of appeal is dismissed From CIT(A)order for AY2010-11 11.1 In the present case too, the appellant had profit motive in the establishment of the CDM project. Hence it is held that it is carrying on the business of generation of CERS through this CDM project and accordingly, the revenue on account of sale of such CER. is taxable as profits and gains of business being carried on by the appellant. 11.2 Without prejudice to the finding given above that revenue earned from sale of carbon credits is taxable as income from the business Hi the hands of the appellant, even if it is treated as a capital receipt then also it will be taxable in the han ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the shape of section 115BBG which prescribe levy of tax at the rate of 10% on income from transfer of carbon credit. He took us through explanatory statement of Finance Act, 2017. 38. We have duly considered rival contentions and gone through the record carefully. Issue before us is, whether receipts received by the assessee on sale of alleged carbon credit is revenue in nature or capital in nature. An identical question was formulated by the Hon ble Gujarat High Court in the case of CIT Vs. Alembic Ltd. (supra). The question framed is as under: ( 4) Whether on facts and in the circumstances of the case and in law, the ITAT erred in treating the income from realisation of carbon credits as capital in nature, despite the fact that the realization from carbon credits has been treated by the assessee itself as revenue income and offered to tax? 39. The question has been replied by the Hon ble High Court is as under: 6. The last surviving question pertains to the treatment that the assessee s income from trading of carbon credits should be given. The Tribunal held that receipts should i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in emissions entitles the entity to a credit in the form of a Certified Emission Reduction (CER) certificate. The CER is tradable and its holder can transfer it to an entity which needs Carbon Credits to overcome an unfavorable position on carbon credits. Income-tax Department has been treating the income on transfer of carbon credits as business income which is subject to tax at the rate of 30%. However, divergent decisions have been given by the courts on the issue as to whether the income received or receivable on transfer of carbon credit is a revenue receipt or capital receipt. In order to bring clarity on the issue of taxation of income from transfer of carbon credits and to encourage measures to protect the environment, it is proposed to insert a new section 115BBG to provide that where the total income of the assessee includes any income from transfer of carbon credit, such income shall be taxable at the concessional rate often per cent (plus applicable surcharge and cess) on the gross amount of such income. No expenditure or allowance in respect of such income shall be allowed under the Act. This amendment will ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale proceeds from carbon credit as capital receipts in all these years. ITA No.135/Ahd/2015: 117. Present appeal is directed at the instance of the assessee against order of the ld.CIT(A) dated 13.11.2014 passed for the Asstt.Year 2008- 09. Solitary grievance of the assessee is that the ld.CIT(A) has erred in confirming penalty of ₹ 1,13,00,000/- which was imposed by the AO under section 271(1)(c) of the Act. 118. Brief facts of the case are that the assessee has filed its return of income on 27.9.2008 declaring total income at ₹ 289,33,41,010/-. The ld.AO has passed assessment order under section 143(3) on 31.12.2010 and determined taxable income at ₹ 369,55,61,740/-. During the course of assessment proceedings the ld.AO found that the assessee has capitalized a sum of ₹ 5,10,17,289/- as pre-operative expenses paid to M/s.Mckinsey Co. ( MC ). It is pertinent to observe that the assessee had appointed MC as a consultant for exploring supporting business opportunity for possible expansion. The ld.AO held that this report was obtained for the purpose of group and not relatable to assessee exclusively ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. Its claim was rejected by the AO for two reasons viz. (a) the assessee has failed to demonstrate that it has physically delivered equity shares to the purchaser and since it was a transaction out of stock exchange, therefore, the transfer could be considered if physical delivery of shares were given. In his second reasoning, he observed that after the main agreement, there was an addendum and by virtue of that transaction has taken place in subsequent assessment year. According to the AO the assessee is not entitled for this capital loss. The ld.CIT(A) concurred with the AO. We have also upheld this finding and disallowed the claim of loss made by the assessee. 122. With the assistance of the ld.representatives, we have gone through the record. Section 271(1)(c) of the Income Tax Act, 1961 has direct bearing on the controversy. Therefore, it is pertinent to take note of the section. 271. Failure to furnish returns, comply with notices, concealment of income, etc. ( 1) The Assessing Officer or the Commissioner (Appeals) or the CIT in the course of any proceedings under this Act, is satisfied that any p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... culars, in certain situation, even without there being anything to indicate so, statutory deeming fiction for concealment of income comes into play. This deeming fiction, by way of Explanation I to section 271(1)(c) postulates two situations; (a) first whether in respect of any facts material to the computation of the total income under the provisions of the Act, the assessee fails to offer an explanation or the explanation offered by the assessee is found to be false by the Assessing Officer or Learned CIT(Appeal); and, (b) where in respect of any fact, material to the computation of total income under the provisions of the Act, the assessee is not able to substantiate the explanation and the assessee fails, to prove that such explanation is bona fide and that the assessee had disclosed all the facts relating to the same and material to the computation of the total income. Under first situation, the deeming fiction would come to play if the assessee failed to give any explanation with respect to any fact material to the computation of total income or by action of the Assessing Officer or the Learned CIT(Appeals) by giving a categorical finding to the effect that explanation given ..... X X X X Extracts X X X X X X X X Extracts X X X X
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