TMI Blog2022 (7) TMI 1086X X X X Extracts X X X X X X X X Extracts X X X X ..... (8) TMI 119 - BOMBAY HIGH COURT ] clearly goes in favour of the assessee. Hence, respectfully following Hon ble Bombay High Court s decision, we allow this ground of assessee s appeal. Receipt of carbon credit - nature of receipt - capital or revenue receipt - HELD THAT:- As this issue is fully covered in favour of assessee and against Revenue by the decision of Hon ble Madras High Court in the case of Chemplast Sanmar Ltd. [ 2021 (12) TMI 713 - MADRAS HIGH COURT ] wherein the Hon ble Madras High Court has categorically held that carbon credit is in the nature of capital receipts and it cannot be added to the return of income of the assessee or it cannot be part of profit loss account and in any case, it is part of profit loss account, then it can be claimed as deduction. Accordingly, we reverse the orders of lower authorities on this issue and allow this ground of assessee s appeal. Nature of expenditure - Addition of forex forward premium charges - capital or revenue expenditure - HELD THAT:- As none of the authorities below had adjudicated this issue or gone into the details filed before us by assessee now i.e., page Nos.1 to 3 in Annexure A . The assessee is dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and interest expenditures were incurred only with reference to the business activities of the assessee and are in no way attributable to the investment activities. 2.3 The Commissioner of Income tax (Appeals) ought to have appreciated that in the present case the accounts of the assessee clearly evidence the fact that no expenditure was incurred by the assessee for earning the income by way of dividend, which does not form part of the total income. 2.1 Brief facts are that the AO noted from the investment port folio of the assessee as on 31.03.2012 and the computation of income that the assessee has earned dividend income of Rs.10,18,047/- and the claimed the same as exempt u/s.10(34) of the Act. The assessee has suo-motto quantified the disallowance u/s.14A r.w.rule 8D(2)(iii) i.e., administrative expenses at Rs.57,023/-. The AO by applying formula prescribed under Rule 8D(2)(ii) of the Rules also made disallowance under Rule 8D(2)(ii) i.e., interest disallowance at Rs.4,85,995/-. Aggrieved, assessee preferred appeal before CIT(A). The CIT(A) also confirmed the action of AO. Aggrieved, assessee is in appeal before the Tribunal. 2.2 Now before us, the ld.counsel for the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on credit and adding to the returned income of the assessee amounting to Rs.39,21,338/-. For this assessee has raised following grounds:- 3. The Commissioner of Income tax (Appeals) erred in confirming the disallowance of Carbon credit amounting to Rs.39,21,338/- 3.1 The Commissioner of Income tax (Appeals) ought to have held that carbon credit earned is in the capital field and hence a capital receipt not subject to tax. 3.2 Without prejudice, if the carbon credit receipts are held as revenue receipts, the CIT(A) erred in holding the assessee is not entitled to deduction u/s.80IA in respect of income earned from sale of carbon credit. 3.3 The commissioner of Income tax (Appeals) ought to have appreciated that assessee has earned credit on the basis of reduction of emission, achieved with improved technology and machinery and hence inextricably connected with generation of electricity. 3.4 The Commissioner of Income tax (Appeals) ought to have appreciated that the Carbon Credit is earned out of Wind Farm project (eligible business), the same qualifies for deduction U/sec.80IA of the Act. The appellant relies on the decision of Andhra Pradesh High Court in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the tax liabilities of the assessee in the light of its findings merely because, the findings are inconsistent with the case pleaded by the assessee. The decision of the Hon ble Full Bench of this Court in the case of State of Tamil Nadu vs. Arulmurugan Co., [(1982) 51 STC 381] was referred to wherein, it was held that the Appellate Authorities perform precisely the same functions, as the assessing authority. The above decision and the findings rendered are a clear answer to the arguments raised before us by the Revenue contending that substantial question of law no.4, as framed has to be decided against the assessee. We, thus, have no hesitation to hold that the Tribunal failed to exercise its power in a proper prospective as a final fact finding authority and examining as to whether there is any adjustment required to be made in the assessee s tax liability qua the various decisions of the Court, which have held that receipt on account of sale of carbon credit is capital in nature. 38.In the instant case, the assessee while preferring appeal before the CIT(A), has specifically raised a contention that the receipts from sale of carbon credit is a capital receipt and cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd and accepted. 3.3 The ld.Senior DR heavily relied on the assessment order and the order of CIT(A) and stated that once the assessee has credited the receipts in the profit loss account, now he cannot go back and he has to claim this only through revised return for which now the time limit has expired. 3.4 After hearing rival contentions and going through the facts of the case, this issue is fully covered in favour of assessee and against Revenue by the decision of Hon ble Madras High Court in the case of Chemplast Sanmar Ltd., supra, wherein the Hon ble Madras High Court has categorically held that carbon credit is in the nature of capital receipts and it cannot be added to the return of income of the assessee or it cannot be part of profit loss account and in any case, it is part of profit loss account, then it can be claimed as deduction. Accordingly, we reverse the orders of lower authorities on this issue and allow this ground of assessee s appeal. 4. The next issue in this appeal of assessee is as regards to the order of CIT(A) confirming the action of AO in making addition of forex forward premium charges of Rs.10,56,75,723/-. For this, assessee has raised t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO nor the CIT(A) has gone into these details but observed that it is also seen that the foreign currency loan were taken for capital expenditure purposes . The ld.counsel for the assessee fairly stated that the matter can go back to the file of the AO to examine the nature of expenditure and to verify the details of expenses and then decide accordingly. He stated that even the CIT(A) has not gone into the details. 4.3 After hearing both the sides and going through the facts, we are of the view that none of the authorities below had adjudicated this issue or gone into the details filed before us by assessee now i.e., page Nos.1 to 3 in Annexure A . The assessee is directed to file these details before AO and the AO will go into these details and decide this issue accordingly. Hence, this issue of assessee s appeal is allowed for statistical purposes. 5. The appeal of the assessee for assessment year 2012-13 is allowed for statistical purposes. Revenue s Appeal in ITA No.1077/CHNY/2017, AY 2012-13 6. Coming to Revenue s appeal for assessment year 2012-13 in ITA No.1077/Chny/2017. The only issue in this appeal of Revenue is as regards to the order of CIT(A) deleting t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provide various facilities namely laying off roads, other basic infrastructure facility and other community development expenses. These expenses are incurred to run its business smoothly. Therefore, the CIT(A) held that these CSR expenses are incurred for commercial expediency, in order to improve the image of the company and to facilitate carrying on the business. He relied on the decision of Hon ble Karnataka High Court in the case of CIT vs. Infosys Technology Ltd., 360 ITR 714 and held that the CSR expenditure facilitates the business and hence, allowable expenditure under section 37 of the Act. He finally allowed the claim of assessee by observing as under:- I have carefully considered the appellant submissions and find that the CSR expenditures are incurred to facilitate the assessee's business and hence respectfully following the judgement on the issue of CSR expenses of the honourable Karnataka High Court in the case of CIT Vs enforces technology Ltd, 2014, 360 ITR 714, the CSR expenditure is our expenditure which facilitates the business hence allowable expenditure under section 37 of the act. The ground of appeal on this issue is accordingly allowed. Aggrieved, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leting the project. In order to facilitate its employees to reach their establishment safely and early, the assessee has installed traffic signals at Bannerghata Circle. Though it is the responsibility of the State and in particular, the Police Department either to install the traffic signal or control the traffic, the fact remains that in the absence of traffic signal or traffic police being positioned at Circles, the traffic congestion is a regular phenomenon. It seriously affects the free movement of public and in the instant case, the employees of the assessee. The assessee also has corporate social responsibility. In this background, in order to discharge their corporate social responsibility which also facilitates their business if the employees were to reach the place early, they thought of incurring the expenditure for installing the traffic signal at Bannerghata Circle. This expenditure is laid out or expended wholly and exclusively for the purpose of business. Therefore, the said expenditure incurred is allowable as deduction under Section 37(1) of the Act. That is precisely what the Tribunal has held. The aid finding is in accordance with law and based of legal evidence. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -. The AO by applying formula prescribed under Rule 8D(2)(ii) of the Rules also made disallowance under Rule 8D(2)(ii) i.e., interest disallowance at Rs.4,06,526/-. Aggrieved, assessee preferred appeal before CIT(A). The CIT(A) also confirmed the action of AO. Aggrieved, assessee is in appeal before the Tribunal. 8.3 Now before us, the ld.counsel for the assessee stated that he is interested in arguing only the disallowance of interest under Rule 8D(2)(iiii) i.e., amounting to Rs.4,06,526/-. The ld.counsel for the assessee before us filed copy of balance sheet and stated that the assessee has availability of own interest free funds in the shape of share capital and reserves surplus as on 31.03.2014 amounting to Rs.114597.40 lakhs and non-current investment is Rs.114.05 lakhs. The ld.counsel stated that the AO has nowhere proved any nexus that the interest bearing funds are invested in the instruments giving rise to exempt income and once there is no such finding in the assessment order, the presumption go in favour of assessee, in view of the decision of Hon ble Bombay High Court in the case of CIT vs. HDFC Ltd., 366 ITR 505. The ld.counsel for the assessee took us through the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x (Appeals) ought to have appreciated that The commission was paid for procurement of export orders and the foreign agent has not rendered any services. 9.1 Brief facts are that the assessee company has paid commission of Rs.1,18,37,355/- to Jupiter Trading Company, Colombo, Srilanka. The AO noted that since the commission paid to a non-resident, assessee has to deduct TDS u/s.195 of the Act. The assessee has not deducted any TDS, hence invoking the provisions of section 40(a)(i) of the Act made disallowance of commission amounting to Rs.1,18,37,355/- and added back to the total income of the assessee. Aggrieved assessee preferred appeal before CIT(A). 9.2 The CIT(A) confirmed the disallowance vide para 8 as under:- 8. As above, the issue has been held against the assessee by the Hon ble ITAT, Chennai, as per citations quoted by assessee. The facts of the current year are similar to that of the facts of the previous year. In view of the same, the disallowance is sustained. The grounds on this issue are rejected. Aggrieved assessee is in appeal before the Tribunal. 9.3 We have heard rival contentions and gone through facts and circumstances of the case. We noted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idence or place of business or business connection in India; or (ii) the non-resident has rendered services in India. Here in the case before us, there is nothing on record shown by the Revenue for coming to a conclusion that the concerned non-resident agents had rendered any services in India or had a residence or place of business or business connection in India. Assessee having found that income of the non-residents were not chargeable to tax in India was justified in making the remittances without any deduction of tax at source. It is fully supported in this regard by the decision of Hon ble apex Court in the case of GE Technology Centre Pvt. Ltd (supra). We therefore, do not find any infirmity in the order of the Commissioner of Income Tax(A) in deleting the disallowance. Ground No.3 of the Revenue stands dismissed. 9.4 Respectfully following the Co-ordinate Bench decision in assessee s own case, we reverse the orders of lower authorities and allow the claim of assessee and delete the disallowance. This issue of assessee s appeal is allowed. 10. The third issue in this appeal of assessee for the assessment year 2014-15 is as regards to the order of CIT(A) confi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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