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2019 (7) TMI 541 - HC - Income TaxDisallowance u/s 14A read with Rule 8D - excess of own funds - recording satisfaction with the correctness of the claim of the assessee - HELD THAT - The language of Section 14A of the Act is plain and clear. Before invoking Rule 8D, the Assessing Officer is obliged to indicate that having regard to the accounts of the assessee, he is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to the income which does not form part of the total income under the Act. To put it in other words, the condition precedent of recording the requisite satisfaction which is a safeguard provided in Section 14A should not be overlooked before going to Rule 8. In such circumstances we are not impressed by the submission canvassed on behalf of the Revenue that once there are mixed funds, Rule 8 would be attracted automatically. We are of the view that the ITAT rightly relied on the decision of the Bombay High Court in the case of CIT Vs. Reliance Utilities Power Ltd. 2009 (1) TMI 4 - BOMBAY HIGH COURT as given a clear finding that the assessee had interest free funds of its own As decided in CORRTECH ENERGY PVT. LTD. 2014 (3) TMI 856 - GUJARAT HIGH COURT assessee did not make any claim for exemption of any income from payment of tax - It was on this basis that the tribunal held that disallowance under section 14A of the Act could not be made MAT computation - disallowance under section 14A in computing the book profit - HELD THAT - 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 section14A Deduction u/s 80IA( 4) at the rate on which the GEB supplied power to its customers - generation of power for captive consumption - HELD THAT - This issue is directly covered by the decision of this Court in the case of CIT Vs. Gujarat Alkalies and Chemicals 2016 (10) TMI 1111 - GUJARAT HIGH COURT for the purposes of deduction under Section 80IA in case of the eligible business as if the transfer had been made at the market value of such goods or services. It is in this context that the question of substituting the actual consideration by the market value comes into picture. We may notice that the Tribunal did not accept the contention of the assessee that the electricity is neither goods nor services and that, transfer of electricity, therefore, would not be covered under subSection (8) of Section 80IA of the Act. However, in so far as the Tribunal's reasoning to adopt the market value of the goods at ₹ 5.40 ps. per unit is concerned, we find no error. Income from the Carbon Credits - revenue or capital receipts - HELD THAT - As decided in ALEMBIC LIMITED 2017 (9) TMI 189 - GUJARAT HIGH COURT Receipts of carbon credit are in nature of revenue receipts. See CIT v. Subhash Kabini Power Corporation Ltd. 2016 (5) TMI 793 - KARNATAKA HIGH COURT ) and Commissioner of Income tax v. My Home Power Limited 2014 (6) TMI 82 - ANDHRA PRADESH HIGH COURT - Tax appeal is dismissed. Disallowance on account of the late payment of employees contribution towards the PF/ESI under section 36( 1)(va) r/w. 2(24)(x) - payment before or after due date - HELD THAT - From the explanation of the assessee, it is discernible that it has made payment before the due date, but on account of certain technical objection, cheques deposited have been returned, which ultimately after removal of objection was cleared. Thus, it could be construed that payment was within the due date and therefore, deduction ought to be granted to the assessee Short term capital gain due to the Slump Sale of Wind Energy Business - HELD THAT - This issue is also squarely covered by the decision of this Court in the case of Commissioner of Income tax Vs. Gauranginiben S. Sodhan Indl. Reported 2014 (2) TMI 78 - GUJARAT HIGH COURT held that income chargeable under the Head Capital Gains, shall be computed by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset, the amounts mentioned therein that is the expenditure incurred wholly and exclusively in connection with such transfer and the cost of acquisition of the asset and the cost of any improvement thereto. Main thrust of section 48 of the Act, therefore, is the full value of consideration received or accruing as a result of the transfer of the capital asset as reduced by expenditure mentioned therein and the cost of acquisition of the asset. Section 55A, as we have noticed, refers to the reference to DVO for ascertaining the fair market value of a capital asset. Such ascertainment of fair market value with the aid of the DVOs report would have no relevance for the purpose of determining full value of consideration received or accruing as a result of the transfer of the capital asset for the purposes of section 48 - reference to DVO for ascertaining the fair market value of the capital asset as on the date of the sale in the present case would be wholly redundant. Date of transfer of the Wind Energy Business of GFL to IRL on slump sale is 30/03/2012 - HELD THAT - This question is corelated to the question aforesaid and squarely covered by Gauranginiben S. Sodhan (supra). ITAT committed no error in passing the impugned order. - Decided against revenue
Issues Involved:
1. Deletion of addition under Section 14A read with Rule 8D. 2. Disallowance under Section 14A exceeding exempt income. 3. Adjustment of disallowance under Section 14A in computation of book profit under Section 115JB. 4. Deduction under Section 80IA(4) at the rate GEB supplied power to its consumers. 5. Treatment of income from carbon credits as capital in nature. 6. Deletion of disallowance for late payment of employees' contribution towards PF/ESI. 7. Non-upholding of addition as income from short-term capital gain on account of slump sale. 8. Date of transfer of Wind Energy Business on slump sale. Detailed Analysis: 1. Deletion of Addition under Section 14A read with Rule 8D: The court addressed whether the ITAT erred in deleting the addition made under Section 14A read with Rule 8D. The Revenue argued that the assessee failed to prove that interest-free funds were available for investment at the relevant time. However, the ITAT found that the assessee had sufficient interest-free funds to cover the investments, thus no interest expenditure should be disallowed under Rule 8D. The court upheld the ITAT's decision, emphasizing that the assessee demonstrated sufficient interest-free funds to cover the investments. 2. Disallowance under Section 14A Exceeding Exempt Income: The court examined whether the disallowance under Section 14A read with Rule 8D can exceed the exempt income. The ITAT noted that various High Courts, including the Gujarat High Court in Corrtech Energy Pvt. Ltd., have held that disallowance should not exceed the exempt income. The ITAT restricted the disallowance to the amount of exempt income, which the court upheld as consistent with precedent. 3. Adjustment of Disallowance under Section 14A in Computation of Book Profit under Section 115JB: The court considered whether the disallowance under Section 14A should be added back in computing book profit under Section 115JB. The ITAT referred to judgments from the Gujarat High Court and the Bombay High Court, which held that such disallowance should not be added back. The court upheld the ITAT's view, citing the binding precedent that no addition in the book profit should be made based on calculations under Section 14A. 4. Deduction under Section 80IA(4) at the Rate GEB Supplied Power to its Consumers: The issue was whether the deduction under Section 80IA(4) should be at the rate GEB supplied power to its consumers or at the rate the power generating company supplied to GEB. The court noted that this issue is covered by the Gujarat High Court's decision in CIT v. Gujarat Alkalies and Chemicals Ltd., which supports the ITAT's view that the deduction should be based on the rate GEB supplied power to its consumers. 5. Treatment of Income from Carbon Credits as Capital in Nature: The court examined whether income from carbon credits should be treated as capital in nature. The ITAT's decision to treat such income as capital was supported by precedents from the Andhra Pradesh High Court and the Karnataka High Court. The court upheld the ITAT's view, aligning with the decisions that carbon credit receipts are capital in nature. 6. Deletion of Disallowance for Late Payment of Employees' Contribution towards PF/ESI: The ITAT allowed the assessee's claim for deduction of ?21,47,672 on account of late payment of employees' contribution towards PF/ESI, citing technical issues with cheque clearance. The court noted that the ITAT's decision was based on the specific facts of the case and upheld it, despite the general precedent set by the Gujarat High Court in GSRTC against such deductions. 7. Non-upholding of Addition as Income from Short-term Capital Gain on Account of Slump Sale: The court addressed whether the ITAT erred in not upholding the addition of ?436.8 crore as income from short-term capital gain due to the slump sale of Wind Energy Business. The court referred to the Gujarat High Court's decision in Commissioner of Income-tax v. Gauranginiben S. Sodhan, which supports the ITAT's view that the fair market value on the date of sale is not relevant for determining full value of consideration under Section 48. 8. Date of Transfer of Wind Energy Business on Slump Sale: The court considered whether the date of transfer of the Wind Energy Business on slump sale was 30/03/2012. This issue was linked to the previous question and covered by the same precedent in Gauranginiben S. Sodhan, which the court upheld. Conclusion: The court found no substantial question of law in the revenue's appeals and upheld the ITAT's decisions on all issues, thereby dismissing both tax appeals.
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