2014 (4) TMI 663 - AT - Income Tax

Allowability of deduction u/s. 80IA of the Act - Captive power generating DG sets Rail systems - Nature of benefit Capital OR not - Sales tax exemption benefit - Held that - As decided in assessee s own case for the previous assessment years, it has been held that the claim u/s 80IA in respect of captive power generating DG sets and rail systems is allowed also it has been held that sales tax exemption benefit is on account of capital receipt not liable to tax Decided against Revenue. Deletion made u/s. 14A of the Act r.w. Rule 8D of the Rules Held that - The decision in Godrej Boyce Manufacturing Co. Ltd. Vs DCIT 2010 (8) TMI 77 - BOMBAY HIGH COURT followed - Rule 8D cannot be applied during the assessment year - the assessee has purchased units out of its own funds thus, the matter is remitted back to the AO for fresh adjudication to verify the cash flow statement to see whether the assessee has purchased units from its own funds - the disallowance appears to be reasonable considering the nature of disallowance as computed by the assessee - the interest part shall be considered by the AO after verification and the addition of other expenses set aside Decided partly in favour of Revenue. Exclusion of taxable investment in unit of growth fund Held that - The AO himself has excluded the investment in units of growth fund while calculating the disallowance u/s. 14A of the Act - The CIT(A) seems to have given this direction without appreciating the fact of the case - general observations made by the CIT(A) need not be interfered Decided against Revenue. Disallowance in respect of Employee stock option expenses Held that - Relying upon Biocon Ltd. VS DCIT 2013 (8) TMI 629 - ITAT BANGALORE - the expenditure in respect of ESOP is allowed after considering the SEBI guidelines - the allowability of the claim of the assessee has to be considered afresh thus, the matter is remitted back to the AO to consider the claim of the assessee Decided in favour of Assessee. Nature of Receipts Capital or not - Proceeds from certified emission reduction Receipts generated out of capital projects Held that - The assessee has shown the sale consideration out of sale proceeds of Carbon Credit under the head other income as revenue receipts which now it wants to claim as capital receipts - no new facts have to be verified so far as the claim is concerned realization of Carbon Credit are already shown under the head other income the decision in My Home Power Ltd. Vs DCIT 2012 (11) TMI 288 - ITAT HYDERABAD followed - the AO is directed to treat the Proceeds realized from sale of Certified Emission Reduction (CERs) generated out of Capital Projects registered with UNFCCC as capital receipts Decided in favour of Assessee. Deduction u/s 80IA(2) of the Act Held that - The decision in National Thermal Power Company Limited Versus Commissioner of Income-Tax 1996 (12) TMI 7 - SUPREME Court followed - the facts on record mean the record for the year under consideration - It is a legal claim which involves question of law but at the same time facts relating to the claim have not at all been considered at the assessment stage except that the assessee is having a jetty, nothing more is considered at the assessment stage - the claim u/s. 80IA has to be tested on many factors - Having an infrastructure facility is only one of them - other factors have not been considered and need to be verified by bringing cogent evidences on record the additional ground cannot be admitted Decided against Assessee.

Issues Involved:
1. Allowability of deduction under section 80IA for captive power generating DG sets.
2. Allowability of deduction under section 80IA for rail systems.
3. Treatment of sales tax exemption benefit as capital receipt.
4. Disallowance under section 14A read with Rule 8D.
5. Disallowance of expenditure incurred for purchase of software.
6. Disallowance of Employee Stock Option expenses.
7. Treatment of proceeds from the sale of Certified Emission Reduction (CERs) as capital receipts.
8. Deduction under section 80IA(2) for jetty/port operations.

Detailed Analysis:

1. Allowability of Deduction Under Section 80IA for Captive Power Generating DG Sets:
The Tribunal dismissed the Revenue's grounds (2.1 & 2.2) regarding the allowability of deduction under section 80IA for captive power generating DG sets. This decision was based on the Tribunal's previous rulings for assessment years 2004-05, 2005-06, and 2006-07, where similar claims were allowed, and no new distinguishing facts were presented.

2. Allowability of Deduction Under Section 80IA for Rail Systems:
The Tribunal also dismissed the Revenue's grounds (3.1 & 3.2) concerning the allowability of deduction under section 80IA for rail systems. This was similarly based on prior Tribunal decisions for the same assessment years, where such deductions were upheld.

3. Treatment of Sales Tax Exemption Benefit as Capital Receipt:
The Tribunal dismissed the Revenue's ground (4) regarding the sales tax exemption benefit of Rs. 171.65 crores being treated as a capital receipt not chargeable to income tax. This decision followed the Tribunal's earlier rulings for assessment years 2004-05 and 2005-06, where it was held that the sales tax exemption benefit is a capital receipt.

4. Disallowance Under Section 14A Read with Rule 8D:
The Tribunal addressed the disallowance under section 14A read with Rule 8D, which was a point of contention in both the Revenue's and the assessee's appeals. The Tribunal noted that Rule 8D is applicable from assessment year 2008-09 onwards, as per the Bombay High Court decision in Godrej & Boyce Manufacturing Co. Ltd. vs. DCIT. For A.Y. 2007-08, the Tribunal directed the AO to verify the cash flow statement to ascertain whether investments were made from own funds or borrowed capital. The Tribunal upheld the assessee's calculation of disallowance of other expenses as reasonable and directed the AO to delete the interest disallowance if found correct upon verification. This issue was restored to the AO for further verification and computation.

5. Disallowance of Expenditure Incurred for Purchase of Software:
The Tribunal dismissed the assessee's ground (2) regarding the disallowance of Rs. 22,82,919/- incurred for the purchase of software. This decision was based on the Tribunal's earlier rulings in the assessee's own case, where similar disallowances were confirmed.

6. Disallowance of Employee Stock Option Expenses:
The Tribunal restored the issue of disallowance of Employee Stock Option expenses back to the AO for reconsideration in light of the Special Bench decision in Biocon Ltd. vs. DCIT. The AO was directed to verify the claim following the Special Bench's findings and after providing the assessee an opportunity to be heard.

7. Treatment of Proceeds from the Sale of Certified Emission Reduction (CERs) as Capital Receipts:
The Tribunal allowed the assessee's additional ground regarding the treatment of proceeds from the sale of CERs amounting to Rs. 7,64,56,908/- as capital receipts. This decision followed the Tribunal's rulings in similar cases, such as My Home Power Ltd. vs. DCIT and Ambika Cotton Mills Ltd. vs. DCIT, where such proceeds were treated as capital receipts.

8. Deduction Under Section 80IA(2) for Jetty/Port Operations:
The Tribunal declined to admit the assessee's additional ground regarding the deduction under section 80IA(2) for jetty/port operations. The Tribunal noted that the facts relating to this claim were not discussed or considered at the assessment stage and required verification of several factors. Hence, the additional ground was not admitted.

Conclusion:
The Tribunal's judgment resulted in the partial allowance of appeals for statistical purposes, with specific issues being restored to the AO for further verification. The appeals filed by the Revenue and the assessee were addressed comprehensively, with several grounds being dismissed based on prior Tribunal rulings and legal precedents. The Tribunal's directions emphasized the need for detailed verification and adherence to established legal principles.

← Previous Next →