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TMI Blog2023 (10) TMI 834X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Vireet Investments Pvt. Ltd. [ 2017 (6) TMI 1124 - ITAT DELHI] AO is directed to verify the same and computed the amount of disallowance u/s14A read with Rule 8D(2)(iii) of the Rules after taking into accounts only investments yielding exempt dividend income during the relevant previous year. As rightly contended by Assessee, disallowance under Section 14A of the Act cannot, in any case, exceed the amount of exempt income earned by the Assessee during the relevant previous year as per the judgment of State Bank of Patiala [ 2018 (11) TMI 1565 - SC ORDER] . Accordingly, it is clarified that the aggregate amount of disallowance under Section 14A of the Act read with Rule 8D of the Rules shall not exceed the amount of exempt income. Short deduction of investment allowance u/s 32AC - investment allowance pertaining to addition to plant and machinery transferred from capital-work-in progress disallowed - HELD THAT:- As we find that substantial part of the Plant Machinery was acquired and erected after 31.03.2013 but before 01.04.2015. The dispute before us pertains to 2.6% of the total addition to plant and machinery only. Further, the stand taken by the Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to disturb the allocation of travelling and conveyance expenses being convinced that the same have been properly allocated to respective undertakings - HELD THAT:- As identical facts and circumstances, the Kolkata Bench of the Tribunal has, in Assessee s own case for the Assessment Year 2009-10 [ 2018 (8) TMI 2133 - ITAT KOLKATA] as find that legal and profession expenses as well as travelling and conveyance expenses incurred by these undertakings were debited to the stand alone account of these eligible undertakings and hence, no further allocation on account of these items of expenses to the eligible undertakings was warranted. DR was unable to controvert this fact which is evident from the documents on record. We, accordingly, uphold the order of the Ld. CIT(A) on this score. - SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER For the Appellant : Shri Yogesh Thar, Ms. Sukanya Jayaram For the Respondent : Shri Biswanath Das ORDER Per Rahul Chaudhary, Judicial Member: 1. These are cross appeals arising out of the order, dated 26/12/2017, passed by the Ld. Commissioner of Income Tax (Appeals)-47, Mumbai [hereinafter re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer's power and not in respect of the power of an Appellate authority and thus he erred in applying the said decision in relation to the claim made by the appellant at the Appeal stage. 6. That on the facts and in the circumstances of the case and in law, the CIT(A) erred in confirming the action of the AO of short allowing investment allowance u/s 32AC by Rs. 55,26,445/-. 3. The Revenue has raised following grounds of appeal in ITA No. 1553/Mum/2018: 1. On the facts and the circumstances of the case and in law the Ld. CIT(A) erred in giving on the issue of disallowance u/s 14A of the Act. 2. On the facts and the circumstances of the case and in law the Ld. CIT(A) erred in directing the AO to follow the decision of the Hon'ble ITAT Kolkata in assessee's own case for A.Y. 2008-09 on the issue of disallowance u/s 14A and consider only those shares which have yielded dividend income during the year under consideration without appreciating that the issue is challenged in further appeal. 3. On the facts and the circumstances of the case and in law the Ld. CIT(A) erred in allowing deduction u/s. 80IA of the Act, of Rs. 75,52,11,139/- in respect o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eturn of income on 30/11/2014 declaring total income of INR 431,30,32,630/-. 4.2. A search seizure action under Section 132(1) of the Act was conducted by the Investigation Wing, Delhi on the basis of information received from the Central Bureau of Investigation (CBI) on 15/10/2013 that during a search action being carried out by CBI at the premises of Aditya Birla Group at 4th Floor, UCO Bank Building, Parliament Street, New Delhi huge amount of cash has been found at the said premises of M/s Aditya Birla Management Corporation Pvt. Ltd. (hereinafter referred to as BMCPL ). The search seizure action resulted into seizure of unaccounted cash, jewellery, bullion and incriminating documents from the office of ABMCPL and from the residence of Shri Shubhendu Amitabh, which were searched. During the search, several books of account, documents, computer hard disks and laptop were also found and seized which included a petty cash book of the Assessee-company. Further, material seized also showed that Assessee-company owned unaccounted income. Therefore, proceedings under Section 153C read with Section 153A of the Act were initiated against the Assessee on 26/11/2014 requiring the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utual Fund. During the assessment proceedings, the Assessing Officer noted that the Assessee had earned interest income of INR 49.16 Crores and incurred interest expenses of INR 267.19 Crores, thus, suffering a loss of INR 217.98 Crores. According to the Assessing Officer that there was no presumption under the provisions of the Act that if an assessee had interest free loans as well as interest bearing funds and such assessee earned exempt income as well as taxable income, then it should be presumed that exempt income was earned out of the own funds of such assessee. Therefore, the Assessing Officer invoked provisions of Section 14A of the Act read with Rule 8D of the Rules to make disallowance of INR 26,66,31,950/- under Rule 8D(2)(ii) and INR 4,93,75,335/- under rule 8D(2)(iii) of the Rules. 5.2. In appeal preferred by the Assessee, the CIT(A) granted relief to the Assessee by directing the Assessing Officer to compute disallowance under Section 14A read with Rule 8D(2)(ii) of the Rules according to the directions issued by the Kolkata Bench of the Tribunal in the case of the Assessee for the Assessment Year 2008-09 (ITA No. 786/Kol/2013, dated 10/03/2017). For the purpose of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order impugned, the CIT(A) has recorded the submissions of the Assessee wherein it has been stated that as on 31.03.2014, the own funds of the Assessee stood at INR 6612.74/- Crores as against the investments of INR 988.54 Crores. Since the own funds were sufficient to cover the amount of investments, no disallowance of interest was warranted under Section 14A of the Act read with Rule 8D(2)(ii) of the Rules. Accordingly, disallowance of INR 26,66,31,950/- made by the Assessing Officer under Rule 8D(2)(ii) of the Rules is deleted. 5.8. Further, for the purpose of computing amount of disallowance under Rule 8D(2)(iii) only the investments yielding exempt income should be considered as per the decision of the Special Bench of the Tribunal in the case of Vireet Investments Pvt. Ltd. 165 ITR 27 (Delhi Trib.) (SB). The Assessee has filed details of investment yielding exempt dividend income during the relevant previous year according to which such investments stood at INR 23,69,68,301/- and INR 19,69,68,307/- as on 31.03.2013 and 31.03.2014, respectively. The Assessing Officer is directed to verify the same and computed the amount of disallowance under Section 14A read with Rule 8D(2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Out of the aforesaid amount of INR 3,68,42,969/-, INR 3,64,00,000/- related to Ore Crushing Plant for which store items (such as MS Plates other Steel Items, Oxygen Cylinders, Electorate, Angles, Bolt, cables and other store items issued from time to time), and included payment to contractors for erection Ore Crushing Plant. As on 31.03.13 these store items were not in the shape of Plant and Machinery and accordingly shown under the head Capital Work-in-Progress and not under the head Plant and Machinery. iii) The erection of Ore Crushing Plant was completed during Previous Year 2013-14 and therefore, the Assessee claimed investment allowance on such amount in the return for the Assessment Year 2014-15. iv) The Plant Machinery were acquired installed in Financial Year 2013-14 whereas in the Financial Year 2012-13 only store items were purchased or payments were made to contractors. 7.3. However, the Assessing Officer was not convinced and therefore, the Assessing Officer proceeded to disallow investment allowance of INR 55,26,445/- against addition to Plant Machinery of INR 3,68,42,969/-. 7.4. The CIT(A) dismissed the ground raised by the Assessee in appeal chal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessee does not wish to pursue the additional ground. Accordingly, the additional ground raised by the Assessee is dismissed as not pressed. Grounds No. 3 4 of Appeal by Revenue 9. The Assessee had claimed deduction under Section 80IA(4) of the Act in respect of Railway Siding Unit situated at P.O. Jajang, District- Keonjhar, Barbil, Orissa. The net profit of the aforesaid unit stood at INR 75,52,11,139/- being around 83% of the gross receipt of INR 90,62,29,259/-. The Railway Siding Unit was treated as infrastructure facility by the Assessee and therefore, deduction under Section 80IA(4) of the Act was claimed in respect of Railway Siding Unit. 9.1. During the assessment proceedings, the Assessing Officer concluded that the railway sidings were being used by the Assessee as a private facility and therefore, the same was not in the nature of infrastructure facility of public utility. The actual operation (i.e. running of goods train) on the private sidings between the serving railway station and the plant premises upto the interchange point/exchange yard was being done by Indian Railways and not by the Assessee. The mining site of the Assessee having private si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is undertaken on the basis of private siding agreement executed by the Zonal Railway concerned with the Authorised representative of the company . 13.2.2 On verification of the details, it was found that the accessee company has developed and operating the Railway Siding after entering into an agreement for the said business with South Eastern Railway. Agreements were entered for constructing the Private Railway for catering their business requirements. As per the agreements the railway did not allow Private Enterprises to operate any Rail system (in between the serving station to the interchange point/buffer end at the plant site) on private siding instead Indian Railway operate the Rail System on the private siding by levying siding charges. The agreements entered between the assessee company and the Railway Authorities with certain terms and conditions as any agreement for development, operation and maintenance of any Rail System. The Rail System of the assessee company is simply a Private siding for own use and not any infrastructure facility for public utility . i) The so called Rail System of the assessee company are simply a private sidings and not any infras ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany. What is deductible u/s 80- IA is the real profit [of any infrastructure such as rail system] derived on actual operation and not notional profit computed the manner as done by the assessee . 13.2.4 Accordingly it is held that assessee s claim of deduction as regards to profit, if any, on its rail system [rather private sidings] made u/s 80IA is patently false, and as such, it is not eligible for any benefit of deduction under section 80IA. Therefore, the deduction claimed under section 80IA(4) of the IT Act on Private Railway Siding amounting to Rs. 75,52,11,139/- is disallowed and added to the total income of the assessee . Penalty proceedings under section 271(1)(c) of the IT Act 1961 is separately initiated for furnishing inaccurate particulars of income. (Emphasis Supplied) 9.5. During the appellant proceedings before the CIT(A), the Assessee pointed out that the order of the CIT(A) in the case of Ultratech Cement for the Assessment Year 2010-11 on which reliance was placed by the Assessing Officer has, since, been reversed by the Mumbai Bench of the Tribunal in ITA No. 7614/Mum/2014 vide order, dated 05/04/2017. It was contended by the Assessee that there wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cerpts of the said order of the Hon ble ITAT are reproduced hereunder: 46. Therefore the agreements as entered into by the assessee with Indian Railways are as envisaged u/s 80- IA(4)(i) and in no case it can be inferred that they are not the required agreements under section 80IA. 47. We also found that no siding charges are levied by Indian Railways for the rail systems developed by the assessee. The assessee has developed, operates and maintains the rail systems. The systems are being operated by the assessee as permitted under the agreements entered into with Indian Railways and under the rules and regulations of Indian Railways from time. The entire cost was borne by the assessee and is appearing in the balance sheet of the assessee as placed on record. We have also verified the same and found it correct .. 49. From the record we found that the rail systems were developed under the agreements entered into with Indian Railways and assessee operates and maintains the same in accordance with terms and conditions of the Agreements, under the supervision and as per guidelines of Indian Railways. We have carefully gone through the relevant clauses of the agreem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms, Wagons, Couplings, Rake formation for dispatch, hauling of Wagons through its own locomotives, etc. Further, in Clause No. 14 - Traffic on Siding - it is mentioned that .... applicant undertakes to shunt the wagons from such point to his premises and back with his own labour and the railway administration would not be responsible for any delay, loss and damages caused in consequence of the failure of the applicant to arrange for such shunting. Thus, the rail system is being operated by the appellant and the cost of above operations is borne by appellant. e) Clause No. 8(b) - Wherein it is mentioned that, Maintenance and other Charges for the portion of the sidings - The applicant will at their own cost and expenses in all things and to the satisfaction of the railway administration and if required by the railway administration under its supervision maintains in good order and repair the said portion of the siding. Such charges as may be fixed by the railway for the supervision rendered shall be paid by the applicant. There are other various clauses wherein it is evident that the Development, Operation and Maintenance is done by the appellant and the entire cost for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iate locations, loading/unloading of wagons within the stipulated time and stipulated methods of Indian Railways through Wagon Loading Machines and Wagon Tipplers, weighing of wagons on Motion Weigh Bridges, wagon couplings and de-couplings, rake formation for dispatch, hauling of wagons through its own locomotives within the factory premises, etc. Thus, the rail system is being operated by the assessee and the cost of above operations is borne by assessee .. 96. In view of the above discussion and respectfully following the order of the Tribunal in assessee's own case for the A.Y.2004-05 to 2008-09, we do not find any merit in the action of the Revenue authorities declining the claim of deduction u/s.80IA(4). Accordingly AO is directed to allow the deduction as claimed by the assessee with respect to its rail system. We direct accordingly. .. 30.3 During the course of the appellate proceedings, the appellant has also stated that there is no provision for withdrawal of deduction u/s 80IA for the subsequent year i.e. AY 2013-14 under appeal, unless the deduction granted in initial year i.e. AY 2006-07 is withdrawn. In this regard, reliance is placed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ways Act, by following the decision of the Mumbai Bench of the Tribunal in the case of Ultratech Cement Ltd. [ITA No.7631/MUM/2014, dated 05.04.2017]. As regards the computation of quantum of deduction, we note that the Revenue had contended that the profits of the Railway Siding Units were very high. Since the Assessing Officer had rejected the claim of the Assessee under Section 80IA of the Act, the issue of computation of deduction was not examined. Accordingly we direct the Assessing Officer to verify the computation of deduction claimed by the Assessee keeping in view the applicability or otherwise of the provisions of Section 80IA(8)/(10) of the Act before allowing claim of deduction of INR 75,52,11,139/- under Section 80IA(4) of the Act. In terms of the aforesaid, ground No. 4 5 raised by the Revenue are disposed off as partly allowed. Grounds No. 5 6 of Appeal by Revenue 10. During the relevant previous year the Assessee received INR 6,38,56,961/- on sale of carbon credits. Treating the same as capital receipts, the Assessee did not offer such receipts to tax. The Assessing Officer treated the receipts on sale of carbon credits are revenue receipts and brought ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause (a) of subsection (1). Explanation. For the purposes of this section carbon credit in respect of one unit shall mean reduction of one tonne of carbon dioxide emissions or emissions of its equivalent gases which is validated by the United Nations Framework on Climate Change and which can be traded in market at its prevailing market price. Thus, the income by way of transfer of carbon credit has been given a special treatment as chargeable to tax @ 10% and not as part of the normal business income of the assessee. The said amendment is prospective in nature and therefore, cannot be applied to the assessment years under consideration. 12. The ld. AR for the assessee brought to the notice of the Bench that the identical issue has already been decided by the Co-ordinate Bench of Tribunal in favour of assessee in case cited as DCIT Vs. M/s Dawarkesh Sugar Industry Ltd. in ITA No. 312/Mum/2019 for A.Y. 2014-15 by following the decisions rendered by the Hon ble Andhra Pradesh High Court in the case of My Home Powers Ltd. (2014) 365 ITR 082 (AP). 13. We have perused the order passed by the Co- ordinate Bench of Tribunal in case of M/s Dawarkesh Sugar Industry Ltd. (s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the considered view that sale of Renewable Energy Certificate (Carbon Credit) of income received by the assessee is a capital receipt and could not be business receipt or income nor it is directly linked with the business of the assessee nor any asset is generated in the course of business but it is generated due to environmental concern. So the addition of Rs. 10,20,587/- by the AO from the sale of Carbon Credit and confirmed by the ld. CIT(A) is not sustainable, hence, ordered to be deleted. (Emphasis Supplied) 10.2. We note that the Tribunal has granted relief to the Assessee by placing reliance on the decision of Co-ordinate Bench of the Tribunal in the case of DCIT Vs. M/s Dawarkesh Sugar Industry Ltd [ITA No. 312/Mum/2019, Assessment Year 2014-15] which has in-turn relied upon the decision of the Hon ble Andhra Pradesh High Court in CIT Vs. My Home Power Ltd., [2014] 365 ITR 082 (AP). We note that CIT(A) had also granted relief to the Assessee by placing reliance, inter alia, on the aforesaid decision of the Hon ble Andhra Pradesh High Court wherein the it has been held that Carbon Credit is not an offshoot of business but an offshoot of environmental concerns and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... redecessor CIT(A)'s in A.Y.s 2011-12 and 2012-13. Accordingly, my Predecessor CIT(A)'s in A.Y.s 2011-12 and 2012-13 has deleted the addition made by the A.O. on account of travelling Conveyance expenses. Thus, following the orders of my Predecessor CIT(A)'s, I direct the AO not to disturb the allocation of travelling conveyance expenses, already made by the Appellant Company. 11.5 Thus, the CIT(A) directed the Assessing Officer not to disturb the allocation of travelling and conveyance expenses being convinced that the same have been properly allocated to respective undertakings. The factual finding returned by the CIT(A) have gone uncontroverted in absence of any material on record to support the stand taken by the Assessing Officer. On the other hand, we find that in identical facts and circumstances, the Kolkata Bench of the Tribunal has, in Assessee s own case for the Assessment Year 2009-10 [in ITA No. 1069 2064/Kol/2021, dated 21/08/2018]. The relevant extract of the aforesaid order read as under: 21. Coming to next ground no. 4 taken by the revenue is against the action of the Ld. CIT(A) in restricting the allocation of expenses on legal and prof ..... 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