TMI Blog2022 (12) TMI 1484X X X X Extracts X X X X X X X X Extracts X X X X ..... risdictional High Court in own case in Tax Appeal Nos. 11 28 of 2019 vide order dated 17.06.2019.[ 2019 (7) TMI 541 - GUJARAT HIGH COURT] held that it was the selling price of electricity which was to be considered for determining the Revenue generated from sale to CPP for the purposes of computing profits eligible to deduction u/s 80-IA(4) of the Act, applying the ratio laid down by it in the case of Gujarat Alkalies [ 2016 (10) TMI 1111 - GUJARAT HIGH COURT] DR was unable to point out any distinguishing facts nor was any contrary decision of the Hon ble jurisdictional High Court or the Hon ble Apex Court brought to our notice. Thus since the issue already stands decided in favour of the assessee in its own case by the Hon ble jurisdictional High Court, the disallowance made by the Assessing Officer and confirmed by the learned CIT(A) of deduction claimed under Section 80IA of the Act. Characterization of receipt - revenue from Carbon credit - revenue or capital receipt - HELD THAT:- The issue being covered by the decision of the Hon ble jurisdictional High Court in favour of the assessee in its own case, we hold that the profit earned by the assessee for Carbon Credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Counsel for the assessee stated that both the issues raised in aforesaid ground were covered in favour of the assessee by the decision of Hon ble jurisdictional High Court in the case of the assessee itself in the preceding year both on the issue of disallowance made while computing the taxable income as per normal provisions of the Act and, for the purpose of adjustment made to the book profits as per Section 115JB of the Act. 5. Drawing our attention to the facts of the case from paragraph Nos. 4 to 4.3 of learned CIT(A) s order, it was pointed out that the assessee had shown Rs.51.40 lakhs as Dividend Income exempt from tax under the Act, earned during the impugned year. The Assessing Officer noted that the assessee had interest bearing borrowed funds on which the interest was paid during the year and the business funds were mixed funds. He noted that the assessee did not maintain separate account for source of funds utilized for the investment activities. He, therefore, held that where tax free activities and taxable income earning activities were carried out using a common kitty of funds, interest burden needed to be apportioned between the two activities since the case f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court, learned Counsel for the assessee pointed out that the question proposed by the Revenue before the Hon ble High Court was whether the disallowance under Section 14A read with Rule 8D can exceed the exempt income which the Hon ble High Court held in favour of the assessee following its own decision in the case of Corrtech Energy P. Ltd., 223 Taxman 130. Paragraph Nos. 19 to 21 of the order of the Hon ble High Court in this regard are as under:- 19. The second question proposed by the revenue is; whether the disallowance under Section-14A read withRule-8D can exceed the exempt income [administrative expenses]. In context of the aforesaid question proposed by the revenue, the findings recorded by the ITAT areas follows 15. Next fold of dispute relates to working out of administrative expenses relatable to earning of exempt income. 16. As pointed out by the ld. counsel for the assessee that Hon'ble Gujarat High Court (in Corrotech) and Hon'ble Delhi High Court in (Chemvest) have concurred with each other that if there is no dividend income or tax free income in a year then no disallowance u/s.14A can be made. This explication was amplified and employed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax (MAT) to be paid by the assessee on the book profits as per the provisions of Section 115JB of the Act, the learned Counsel for the assessee pointed out that the issue was squarely covered in favour of the assessee by the decision of the Special Bench of the ITAT in the case of ACIT Vs. Vireet Investment Private Limited, reported in [2017] 82 taxmann.com 415 (Delhi - Trib.) (SB) as well as by the decision of Hon ble jurisdictional High Court in assessee s own case in Tax Appeal Nos. 11 28 of 2019 vide order dated 17.06.2019. Our attention was drawn to paragraph Nos. 22 to 24 of the order of the Hon ble High Court which reads as under:- 22. The third question proposed by the revenue is in context with the adjustment made on account of the disallowance under Section 14A in computing the book profit. In this context, the findings recorded by the ITAT are as follows:- 17. Next common issue involved in both years is, whether the amount disallowed under section 14A read with rule 3D deserves to be added back in the book profit for the purpose of section 115JB. In other words, whether the additions which have been confirmed by the Tribunal at Rs.1.55 crores in the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause 115JB(2) of the Act. We, therefore, set aside the orders of the CIT(A) and restore the orders of the AO. We order accordingly. In the case of CIT (Central-II) Vs. Goetze (India) Limited, the Hon ble Delhi High Court has in ITA No. 1179/2010 vide order dated 09.12.2013, held that the disallowance u/s.14A is to be taken into consideration for the purposes of calculating book profits u/s.115JB. The relevant paras of the judgment are reproduced below. 36. By order dated 16th May, 2012, the following substantial questions of law were framed in the present appeals:- 11 (i) Whether the Income Tax Appellate Tribunal was right in holding that while computing book profit under Section 115JA (sic. Section 115JB) of the Income Tax Act, 1961, no disallowance under Section 14A was required to bemade? Learned counsel for the respondents-assessee, during the course of hearing, has fairly conceded that the first question has to be answered in favour of the Revenue and against the assessee in view of specific provisions in the Explanation 1 below Section 115JB(2) clause (f) The Assessing Officer it is stated had made anaddition of Rs.88,292/- to the book profits towards ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of Bhushan Steel. In this case, Hon'ble Delhi High Court has held as under:- However, Id. Senior Counsel has relied on the decision in the case of Bhushan Steel Ltd. (supra) wherein it has been held as under:- ITA 593/2015 PR. CIT ....Appellant Through: Mr. N.P. Sahni, Senior Standing Counsel with Mr. Nitin Gutati, Advocate Versus BHUSHAN STEEL LTD. ...Respondent Through: Ms.Kavita Jha, Advocate. With Ms. Roopali Gupta, Advocate. ORDER 29.09.2025 ** ** ** ** ** ** 7. Question No.6 concerns deletion of addition of Rs.89,00,000 made by the AO for computation of the income for the purposes of Minimum Alternate Tax (MAT) under section 115JB of the Act. This pertained to the expenditure incurred for earning exempt income under section 14A read with Rule 3D. The ITAT has rightly held that this being in the nature of disallowance, and with Explanation 115JB not specifically mentioning Section 14A of the Act, the addition of Rs.89,00,000 was not justified. The view taken by the ITAT cannot be faulted with. It is consistent with the decision in Apollo Tyres Ltd. V. Commissioner of Income Tax 255 ITR 273 (SC) which held tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar assessment of income and while deciding that ground, we have already upheld that disallowance of Rs.5 lakh in respect of administrative expenses will meet the ends of justice and no disallowance is called for in respect of interest expenditure. Hence, for the purpose of computing book profit u/s.115 JB of the Act also, we hold accordingly and confirm the addition of Rs.5 lakh. This ground of Revenue's appealis partly allowed. As rightly held by both, the CIT (Appeals) and the Tribunal, this issue has a direct correlation with the first question. It was argued by the Revenue that while computing the book profit under Section 115JB of the Act, the disallowance of interest expenditure on exempt income was wrongly negatived by both the authorities on the ground that it was not the liability for expenses, but a liability relating to assets. We find no fault in the approach adopted by both the authorities. The addition under section 115JB of the Act of a sum of Rs.1,14,43,040/- when was made as an expenditure estimated on earning of dividend income under Section 14A of the Act, without reiterating the rationale of confirming deletion of such amount as has been elabora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Gujarat State Fertilizers Chemicals Ltd. (2013) 358 ITR 323 24. The issue is squarely covered and in our opinion, no error could be said to have been committed by the ITAT in taking the view that no addition in the book profit can be made on the basis of the calculations worked out under section-14A of the Act. 10. The learned Departmental Representative was unable to controvert the above contention of the assessee that both the issues were covered by the decision of the Hon ble jurisdictional High Court and the Special Bench decision of the ITAT as stated by the learned Counsel for the assessee before us nor was he able to point out any distinguishing facts with respect to the said decisions. 11. In view of the above, we hold that the disallowance under Section 14A of the Act of expenses incurred for the purposes of earning exempt income be restricted to the extent of exempt income earned by the assessee during the year amounting to Rs.51,40,000/- in accordance with the decision of the Hon ble jurisdictional High Court in the case of the assessee itself as cited before us. Further, we direct that no adjustment be made to the book profits of the assessee under Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ujarat Vij Company Limited, etc. The Assessing Officer, however, held that the appropriate rate which the assessee ought to have applied for determining the revenue earned from sale of electricity to the CPP units was the weighted average rate at which GUVNL purchased units. Accordingly, he determined the total revenue from sale of power to CPP units at Rs.83,21,79,811/- as against Rs.1,42,60,85,488/- claimed by the assessee. Accordingly, the eligibility of claim of deduction under Section 80IA of the Act was reworked by the Assessing Officer and the deduction claimed by the assessee was restricted to an amount of Rs.1,30,00,897/- as against Rs.33,28,49,068/- claimed by the assessee. Thus, the claim of deduction under Section 80IA of the Act was reduced by an amount of Rs.31,98,48,171/-. 15. The matter was carried in appeal before the learned CIT(A) who upheld the disallowance of deduction following the orders of the learned CIT(A) in the case of the assessee itself in AYs 2009-10 2011-12 and the directions of the DRP in AY 2013-14. 16. Before us, learned Counsel for the assessee contended that this issue was also decided by the Hon ble jurisdictional High Court in favour o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plied to other consumers also. The CPP unit charged Rs.5.40 ps. per unit from the general unit. The Assessing Officer applying sub-Section (8) of Section .80IA restricted the same to Rs.5.32 ps. per unit and, thereby, restricted the deductions claimed by the assessee under Section 801A of the Act. This restriction was primarily on the basis that the rate of Rs.5.40 ps, charged by Gujarat Electricity Board (GEB for short) was inclusive of 8 paise per unit of electricity duty. This component of electricity duty the Assessing Officer discarded for the purposes of ascertaining market value of the electricity generated by the CPP Unit and supplied to its general unit. 4. CIT (Appeals) confirmed the view of the Assessing Officer on the same line of reasoning. The Tribunal, however, on further appeal by the assessee, reversed the orders passed by the Revenue authorities referring to and relying upon the decisions of other Tribunals. The Tribunal was of the opinion that the market value of the electricity supplied by the CPP Unit to the general unit would be the same being charged by GEB from the consumers. 5. Counsel for the Revenue contended that the component of 8 paise per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... credits (net of expenses) as a Capital Receipt, not subject to tax and not directing the Assessing Officer to exclude the same while computing taxable income. b) In considering that the revenue from carbon credit (net of expenses) is either taxable under the head income from business or short term capital gains and consequently there shall be no change in the total income of the appellant. 23. Drawing our attention to the facts of the case from paragraph Nos. 7 to 7.2 of the learned CIT(A) s order, learned Counsel for the assessee pointed out that the revenue earned by the assessee from sale of Carbon Credits, net of expenses was held by the Assessing Officer to be taxable in the hands of the assessee as opposed to the assessee returning the same as capital receipts not subject to tax. The learned CIT(A) upheld the order of the Assessing Officer following his order in the case of the assessee itself for AY 2010-11. 24. Before us, the contention raised by the learned Counsel for the assessee was that this issue now stood covered in favour of the assessee by the decision of Hon ble jurisdictional High Court in assessee s own case in Tax Appeal Nos. 11 28 of 2019 vid ..... X X X X Extracts X X X X X X X X Extracts X X X X
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