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2019 (8) TMI 151 - AT - Income TaxDisallowance of expenses u/s 14 A read with Rule 8D - HELD THAT - Disallowance under section 14 A to be computed read with Rule 8D(iii) having regard to annual accounts for years under consideration. There is categorical observation by Ld.CIT (A) that assessee had sufficient funds to make investments during years under consideration and there has been no interest-bearing fund that has been utilized for the same. Further any disallowance under Rule 8D2(iii) could be made only in respect of such investment that yielded exempt income. Carbon Credit income - characterization of income - revenue or capital receipt - HELD THAT - Assessee submitted that the issue relating to carbon credit income has been decided by Hon ble Karnataka High Court in case of Subash Kabini Power Corporation Ltd 2016 (5) TMI 793 - KARNATAKA HIGH COURT in favour of assessee. Disallowance u/s 14A read with Rule 8D (iii) - CIT (A) held disallowance to be justified for assessment year 2009-10 and 2011-12, whereas he deleted disallowance computed under rule 8D(iii), as there was no exempt income following decision of Hon ble Delhi High Court in case of M/s Cheminvest Ltd 2015 (9) TMI 238 - DELHI HIGH COURT . No infirmity in the aforestated observations of Ld. CIT (A) and accordingly the same is upheld.
Issues:
Revenue's appeal against the order passed by Ld.CIT(A) for multiple assessment years regarding disallowance under section 14A and treatment of carbon credits as capital or revenue receipt. Analysis: 1. The consolidated order by Ld.CIT(A) addressed common issues raised by the revenue for multiple assessment years. The appeals were disposed of through a common order. 2. The primary issues raised by the revenue were related to the disallowance of expenses under section 14A read with Rule 8D and the treatment of carbon credits as either capital or revenue receipt. The appeals challenged the decisions of Ld.CIT(A) on these matters. 3. The assessee contended that the treatment of carbon credit income had been settled by the Hon'ble Karnataka High Court in a previous case. 4. Regarding the disallowance under section 14A read with Rule 8D, it was noted that exempt income was earned by the assessee for certain assessment years, while no exempt income was earned for others. 5. Ld.CIT(A) analyzed the financial statements of the assessee for the relevant years to determine the disallowance under section 14A. It was observed that there were sufficient funds available for investments, and no interest-bearing funds were utilized for the investments that yielded exempt income. 6. The Ld.CIT(A) justified the disallowance under Rule 8D(iii) for certain assessment years based on the presence of exempt income. However, for years where no exempt income was earned, the disallowance was deleted following a decision of the Hon'ble Delhi High Court. 7. The Tribunal upheld the decisions of Ld.CIT(A) regarding the disallowance under section 14A read with Rule 8D, dismissing the grounds raised by the revenue for all the years under consideration. 8. Consequently, the appeal filed by the revenue was dismissed, and the order was pronounced in open court on 31st July 2019.
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