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TMI Blog2021 (3) TMI 1004X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RASHANT MAHARISHI, A. M. 1. These are the cross appeals filed by the assessee as well as the ld. AO against the order of ld. CIT (Appeals) 38, New Delhi, dated 20.02.2017 for Assessment Year 2012-13. 2. ITA 3713/Del/2017 is filed by the ld. AO raising the following grounds of appeal:- 1. Whether on facts and in circumstances of the case, the Ld. CIT(A) is legally justified in deleting disallowance of ₹ 2,46,47,780/- u/s 14A of the Income Tax Act, 1961 (the Act) r.w. R 8D of the Income Tax Rules (the Rule) without considering legislative intent of introducing section 14A by the Finance Act 2001 as clarified by the CBDT Circular No.5/2014 dated 10.02.2014? 2. Whether on facts and in circumstances of the case, the Ld. CIT(A) is legally justified in not upholding the disallowance u/s 14A of the Act amounting to ₹ 2,46,47,780/- even when section 14A of the Act stipulates mandatory computation of direct and indirect expenses relating to the income not forming part of total income under all the clauses (i), (ii) and (iii) of Rule 8D(2) of the Rule? 3. Whether on facts and in circumstances of the case, the Ld. CIT(A) is legally justified in not upholding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up 86MW Hydro Electric Project at Himachal Pradesh. On 29.09.2012 assessee filed its return of income for Assessment Year 2012-13 declaring NIL income after claiming deduction under Section 80IA of the Act of ₹ 42,93,35,930/-. The book profit under Section 115JB of the Act was also shown at ₹ 29,90,04,927/-. Subsequently the return of income was revised without any change in the returned income. The ld. Assessing Officer noted that assessee has made an investment in one company of ₹ 492,95,56,000/-. The dividend income therein would be exempt. Assessee did not make any voluntary disallowance under Section 14A. Assessee stated that there is no expenditure incurred with respect to interest expenditure as its investment is out of own funds. The ld. AO stated that even if the investment in shares did not yield any exempt income in the form of dividend during the year then also disallowance as per provisions of Section 14A is required to be made. In response to the submission of the assessee identical issue has been dealt with and decided in favour of the assessee for Assessment Years 2008-09 and 2009-10 by the CIT (Appeals), He rejected the explanation of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterest income of ₹ 1,48,80,000/- he held that the actual amount is ₹ 1,41,80,000/- and same is not income derived from industrial undertaking, hence he held that on interest income deduction under Section 80IA of the Act is not available. 7. During the course of appeal before him the assessee pointed out a fact that before the AO, assessee has raised an issue that income of carbon credit is not in the nature of income, but a capital receipt and, therefore, same may be allowed as exempt receipt not subjected to tax. The ld. AO held that same is not a capital receipt and is also not income derived from industrial undertaking. The ld. CIT (Appeals) following the decision of Hon ble Andhra Pradesh High Court in My Home Power Ltd. held that net income of carbon credit of ₹ 1,29,16,998/- is a capital receipt and not of business income and, therefore, corresponding deduction under Section 80IA should be reduced. With respect to the adjustment of carbon credit received from the computation of book profit, he rejected the same holding that since Profit * Los account of the assessee prepared in accordance with the provisions of Schedule VI to the Companies Act, certifie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 12. The second ground of appeal is with respect to claim of the interest income earned on bank deposit of ₹ 1,41,80,000/- claimed as interest income eligible for deduction under Section 80IA of the Act. The ld. AR submitted that these are the bank interest from short term FDR out of the business funds and, therefore, deduction under Section 80IA should be allowable on this sum. He specifically relied upon the decision of the Hon ble Rajasthan High Court in the case of CIT Vs. Chambal Fertilizers Chemicals Ltd. 95 taxman.com 313 against which the Special Leave Petition has been dismissed by the Hon ble Supreme Court. He also referred to the decision of the Hon ble Delhi High Court in 300 ITR 6 and ITA 1441/2006. He further submitted that such interest income cannot be assessed under the head Income from Other Sources . 13. The ld. DR vehemently relied upon the order of the ld. Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing officer recording of satisfaction that assessee has claimed expenditure management and acquisition of shares which the assessee has held as investment and not as stock in trade hence the disallowance of expenditure incurred on assets, the income from which is exempt is computed as per the provisions of rule 8D of the income tax rules. Thereafter he worked out the disallowance according to rule 8D of the income tax rules 1962 of ₹ 24,647,780/ . The disallowance under rule 8D (i) and (ii) was nil however he disallowed 2,46,47,780 Under rule 8D (iii) of the act. The assessee preferred an appeal before the learned CIT A on this issue wherein in para number 3.2.1 the learned and CIT noted that there is no dividend income received by the assessee on the above investment and there cannot be any disallowance Under Section 14 A read with rule 8D of the income tax act he further noted that ITAT in the case of the assessee for assessment year 2008 09 has upheld the relief granted by the learned CIT A wherein the disallowance u/s 14A was deleted. The learned assessing officer aggrieved with the above order has preferred this appeal before us. 17. On hearing the rival content ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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. 20. The ground number six is with respect to CIT A holding that carbon credit earned by the assessee is a capital receipt and not subject to tax. 21. On careful consideration of the rival arguments of the learned authorised representative and the learned departmental representative 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 ver ..... X X X X Extracts X X X X X X X X Extracts X X X X
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