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2021 (3) TMI 1004 - AT - Income TaxMAT computation - exclusion of profit realized from sale of carbon credit to form the book profit - HELD THAT - As decided in own case 2018 (4) TMI 1776 - ITAT DELHI held that income from sale of the carbon credit is capital in nature. Further in para No. 14 it has held that since the income from the sale of carbon credit is essentially in the nature of capital receipt, by no stretch of imagination can be brought to tax under the provisions of minimum alternate tax and thus the ground of appeal of the assessee for Assessment Years 2010-11 and 2011-12 were allowed. In view of the above facts, as the co-ordinate bench has already decided the issue in favour of the assessee, respectfully following the same, we allow first ground of appeal of the assessee. Deduction under Section 80IA - Claim of interest income earned on bank deposit claimed as interest income eligible for deduction under Section 80IA - HELD THAT - Assessee has earned interest income from the fixed deposit receipts. Assessee has submitted that the interest income from short term FDR is only a temporary arrangement for making timely re-payment of loan installments on respective due dates out of the proceeds of the FDR. The interest income has direct link with the industrial undertaking. As assessee has borrowed from banks and financial institutions a sum of ₹ 329 crores and, therefore, the assessee is required to keep funds in fixed deposit receipts for short term for honouring the installments of the loan. Therefore, it is an eligible income derived from industrial undertaking for the purpose of deduction under Section 80IA of the Act. Coming to the decision in CIT Vs. Chambal Fertilizers Chemicals Ltd. 2017 (5) TMI 1595 - RAJASTHAN HIGH COURT it was held that placing of fixed deposit receipts was a mandatory condition on the assessee. Where in the interest was received from trade debtors and Overdue payment from debtors. That is not the fact here. In our opinion the issue is squarely covered in favour of revenue by decision of Honorable Supreme court in case of Liberty India v. CIT 2009 (8) TMI 63 - SUPREME COURT with respect to interest on FDR as it is not derived from the industrial undertaking. Thus, Ground no 2 of appeal is dismissed. Disallowance u/s 14A - HELD THAT - As assessee has not on any exempt income during the year from the above investment and therefore there cannot be any disallowance u/s 14 A of the income tax act. This is an accepted position in the case of the assessee as per the order of the coordinate bench in assessee s own case for assessment year 2008 09. Such is also the mandate of the honourable Delhi High Court in case of Cheminvest Ltd 2015 (9) TMI 238 - DELHI HIGH COURT wherein it has been held that if there is no exempt income received or receivable during the year there cannot be any disallowance u/s 14 A of the income tax act. Therefore respectfully following the decision of the coordinate bench as well as the decision of the honourable Delhi High Court we do not find any merit in the ground number 1 4 of the appeal hence, those grounds are dismissed. Deduction u/s 80IA which is a rental income - HELD THAT - No merit in the appeal of the learned assessing officer on this ground because the refund received from Power Finance Corporation for the excess charges made in the earlier years which has now been returned back of ₹ 3.81 lakhs, liability which were arising out of the business which are now no longer required have been written back by the assessee of ₹ 18,000 and the rent is recovered from the plant site used by the other parties on which the rent is recovered of ₹ 108,000 are necessarily the income derived from the industrial undertaking and therefore they go on to reduce the respective expenditure and hence the deduction u/s 80 IA of the income tax act on them has rightly been allowed by the learned CIT- A. Accordingly the ground number five of the appeal of the learned assessing officer is dismissed. Carbon credit earned by the assessee - Whether is a capital receipt and not subject to tax? - HELD THAT - We find that the above issue is squarely covered in the favour of the assessee by the decision of the honourable Andhra Pradesh High Court in case of CIT versus My home power Ltd 2014 (6) TMI 82 - ANDHRA PRADESH HIGH COURT
Issues Involved:
1. Disallowance under Section 14A of the Income Tax Act. 2. Deduction under Section 80IA of the Income Tax Act on interest income and miscellaneous income. 3. Treatment of income from carbon credits as capital receipt. 4. Computation of book profit under Section 115JB of the Income Tax Act. Issue-wise Detailed Analysis: 1. Disallowance under Section 14A of the Income Tax Act: The Assessing Officer (AO) made a disallowance of ?2,46,47,780 under Section 14A read with Rule 8D, arguing that the assessee had investments yielding exempt income. The CIT(A) deleted this disallowance, noting that the assessee did not have any exempt income during the assessment year. The Tribunal upheld the CIT(A)'s decision, referencing the Delhi High Court's ruling in Cheminvest Ltd. vs. CIT, which mandates that if no exempt income is received or receivable during the year, no disallowance under Section 14A can be made. 2. Deduction under Section 80IA of the Income Tax Act: The AO denied the deduction under Section 80IA for interest income and miscellaneous income, arguing that these were not derived from the industrial undertaking. The CIT(A) allowed the deduction for miscellaneous income of ?5,07,000, considering it as part of the income derived from the industrial undertaking, but upheld the denial for interest income. The Tribunal agreed with the CIT(A) regarding the miscellaneous income but upheld the AO's decision on interest income, citing the Supreme Court's ruling in Liberty India vs. CIT, which states that interest on FDRs is not derived from the industrial undertaking. 3. Treatment of Income from Carbon Credits as Capital Receipt: The CIT(A) treated the income from carbon credits as a capital receipt, not subject to tax, following the Andhra Pradesh High Court's decision in My Home Power Ltd. The AO's appeal against this was dismissed by the Tribunal, which upheld the CIT(A)'s decision, also referencing similar rulings from the Karnataka and Madras High Courts. 4. Computation of Book Profit under Section 115JB of the Income Tax Act: The assessee argued that the net income from the sale of carbon credits should be excluded from the book profit under Section 115JB. The CIT(A) rejected this claim, stating that the profit and loss account, prepared as per Schedule VI of the Companies Act, included this income. The Tribunal, however, allowed the assessee's claim, following its own earlier rulings for previous assessment years, which treated income from the sale of carbon credits as a capital receipt not chargeable to tax under the provisions of minimum alternate tax. Conclusion: The Tribunal partly allowed the assessee's appeal, agreeing on the exclusion of carbon credit income from book profit but denied the deduction under Section 80IA for interest income. The revenue's appeal was dismissed, upholding the deletion of disallowance under Section 14A and the treatment of carbon credit income as a capital receipt. Order Pronounced: The order was pronounced in the open court on 23/03/2021.
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