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TMI Blog2022 (12) TMI 1484X X X X Extracts X X X X X X X X Extracts X X X X ..... e income earning activity are both carried out using the common kitty of funds, it would be reasonable to apportion the interest burden between the two activities. d) In confirming that disallowance under Rule 8D would be interest u/r 8D(2)(ii) plus direct expenses u/s 8D(2)(i) and disallowance u/r 8D(2)(iii). e) In respect of addition of disallowance u/s 14A read with Rule 8D for computing Book profit u/s 115 JB. f) In extending explanation to section 115JB to sub-section (2) & (3) of section 14A and by adding the amount disallowed u/s 14A read with Rule 8D to book profit computed u/s 115JB of the Act." 3. Learned Counsel for the assessee pointed out that the issues raised in the above ground relate to disallowance of expenses incurred by the assessee pertaining to exempt income earned, as per the provisions of Section 14A of the Income-tax Act, 1961 [hereinafter referred to as "the Act"] read with Rule 8D of the Income-Tax Rules, 1962, as also the adjustment of the impugned disallowance of expenses under Section 14A to the book profits of the assessee for the purposes of Minimum Alternate Tax (MAT) to be paid on the book profits as per the provisions of Section 115JB o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer, the matter was carried in appeal before the learned CIT(A), where besides other arguments raised, the assessee pointed out calculation errors in computing the disallowance as per Rule 8D of the Rules, which he pointed out was allowed by the Ld.CIT(A) in A.Y 2011-12 and the DRP in A.Y 2013-14. It was pointed out that the disallowance as per the correct working came to Rs.3,45,82,170/- as against Rs.7,92,83,524/- worked out by the AO. The Ld. CIT(A) found merit in the contention of the assessee and directed disallowance to be reworked as allowed in A.Y 2011-12 after reducing the suo-moto disallowance made by the assessee amounting to Rs.80,73,433/-. 8. Before us, learned Counsel for the assessee pointed out that the Hon'ble jurisdictional High Court in the case of the assessee itself had held that the disallowance under Section 14A of the Act, in any case, cannot exceed the exempt income. He drew our attention to the decision of Hon'ble jurisdictional High Court in the case of PCIT Vs. Gujarat Fluorochemicals Ltd (assessee before us) in Tax Appeal No. 11 and 28 of 2019 dated 17.06.2019. Drawing our attention to paragraph Nos. 19 to 21 of the order where the issue was dealt wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... administrative expenditure of earning dividend income at Rs.43.35 lakhs. Accordingly, both these grounds are partly allowed. We confirm disallowance at Rs.1.55 crores (Rupees One Crore and Fifty Five Lakhs) in the assessment year 2012-13 and Rs.75 lakhs (Rupees Seventy Five Lakhs) in the assessment year 2013-14. Rest of the disallowance made by theAO are deleted. 20. In taking aforesaid view, the ITAT placed reliance on the following decisions:- (1) Corrtech Energy P. Ltd. 223Taxman 130 (2) CIT, Vadodara-2 Vs. Vision Finstock Ltd. Tax Appeal No.486 of 2017 (Guj. High Court) (3) CIT, Vadodara-2 Vs. Vision Finstock Ltd. SLP Civil No.13152 of 2018 (SC) (4) Joint Investment Pvt. Ltd. Vs. CIT (ITA No. 117/2015) (Del HC) 21. The aforesaid second question is squarely covered by the decision of this Court in the case of Correctch Energy Pvt. Ltd. (supra). In our opinion, no error not to speak of any error of law could be said to have been committed by the ITAT in this regard." 9. With regard to the issue of adjustment to the book profits of the assessee by adding the disallowance of expenses made under Section 14A of the Act for the purposes of Minimum Alternate Tax (MA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of CIT Vs. Geotze India Ltd., 361 ITR 505. According to the Id. DRP, this decision has been considered by the Special Bench in the case of Vireet Investment P. Ltd, (supra) but placed reliance upon Hon'ble Bombay High Court in the case of Vodafone India Services P. Ltd. ACIT, 361 ITR 0531 (Bom) and held, that DRP is not bound by the ratio laid down by the Special Bench. The discussion made by the DRP on this issue in the assessment year 2013-14 -reads as under: "10.3 In the case of Viraj Profiles Ltd. [2015] 64 taxmann.com 52 (Mum Trib), the Hon'ble Bench has elaborately discussed the issue and held that the disallowance is liable to be calculated as per Rule 8 D of the Rules. After discussing the decisions which have also been relied on by the appellant, the Hon'ble Bench has concluded that: "In view of our foregoing discussion, we find no infirmity with the orders of the AO and we hold that the AO has rightly disallowed the expenditure of Rs.73,07,018/- by invoking the provisions of Section 14a of the Act read with the Rule 8D of Income Tax Rules, 1962 for computing book profit u/s.115JB(2) of the Act read with clause (f)to Explanation 1 to clause 115JB(2) of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sider the question: "Whether expenditure incurred to earn exempt income computed under section 14A could not be added while computing book profit under section 115JB of the Act." 20. When the Special Bench has considered this question, it was confronted with two decisions of the Hon'ble Delhi High Court diagonally opposite to each other. One referred by the Id. DRP also in the present case, rendered in the case of CIR Vs. Goetze India Ltd. (Supra) and other in the case of Pr. CIT Vs. Bhushan Steel ITAT, Special Bench has reproduced both these orders in Vireet Investment P. Ltd. (supra) and thereafter it considered as to which decision ought to be followed by a subordinate authority. The department advanced an argument that in the case of Bhushan Steel, Hon'ble Delhi High Court failed to consider subsequent decision of CIT Vs. Goetze India Ltd. (supra). However, the Tribunal after placing reliance upon the decision of Hon'ble Supreme Court in the case of CIT Vs. Vegetable Products Ltd., 88 ITR.192 (SC) and other decisions has held that it is incumbent upon it follow the decision of Hon'ble Delhi High Court in the case of Bhushan Steel. In this case, Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reported in (2013) 358 ITR 323 (Gujarat) Where this court has held in paragraph Nos.6 to 6.5 this court has observed as under: 6. So far as the fourth question is concerned, it pertains to addition of Rs.1,14,43,040/- under Section 115JB of the Act being the expenditure estimated on earning of dividend income under Section 14A of the Act. 6.1 The Assessing Officer on referring to the said provision of Section 115JB(2) of the Act added the said amount considering that any amount of expenditure relatable to the income exempted under Section 10 of the Act shall need to be added in the profit shown in the 'Profit and Loss Account'. When the matter travelled to the CIT (Appeals), since it deleted the addition of Rs.1,14,43,040/- while deciding the question No. 1, it consequently deleted such addition under Section 115JB of the Act on the ground that this would not serve any purpose. The Tribunal decided the said issue as follows: "94. We have considered the rival submissions and we find that similar issue was raided by Revenue as per ground No.3 above in respect of regular assessment of income and while deciding that ground, we have already upheld that disallowance o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said case? ...... 4. So far as question (b) is concerned, the impugned order of the Tribunal followed its decision in M/s. Essar Teleholdings Ltd. Vs. DCIT in ITA No.3850/Mum/2010 to held that an amount disallowed under section 14A of the Act cannot be added to arrive at book profit for purposes of Section 115JB of the Act. The Revenue's Appeal against the order of the Tribunal in M/s. Essar Teleholdings (supra) was dismissed by this Court in Income Tax Appeal No.438 of 2012 rendered on 7th August, 2024. In view of the above, question (b) does not raise any substantial question of law. 24. Respectfully following the above decision, we hold that no addition in the book profit would be made on the basis of calculations worked out under section 14A of the Act. We allow this ground of appeal in both the years and delete the additions." 23. We take notice of the fact that in context with the third proposed question, the ITAT placed reliance on the following decisions :- (1) CIT Vs. Alembic Ltd. (Tax Appeal No.1249/2014) (2) CIT-I Vs. Gujarat State Fertilizers & Chemicals Ltd. (2013) 358 ITR 323 24. The issue is squarely covered and in our opinion, no error c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d) On the basis of (a) above, in recomputing the losses of other captive power undertakings eligible for deduction u/s 80IA." 14. Drawing our attention to the facts of the case from paragraph Nos. 5 to 5.3 of the learned CIT(A)'s order, learned Counsel for the assessee pointed out that during the impugned year the assessee had claimed deduction under Section 80IA of the Act amounting to Rs.33,28,49,068/- in respect of Captive Power Generation Plants. The Assessing Officer noted that, for the purposes of computing the said deduction, the assessee had claimed an amount of Rs.1,42,60,85,488/- as total notional revenue of the 80IA claiming Captive Power Plant units from sale of electricity of total 21,89,94,687 KWH units. The assessee had contended that for the different Captive Power Plants (CPP) the rate taken for the units sold to it was on the basis of the variable rate charged by the respective State Electricity Companies, i.e the selling price of the Electricity companies i.e. Madhya Gujarat Vij Company Limited, Dakshin Gujarat Vij Company Limited, etc. The Assessing Officer, however, held that the appropriate rate which the assessee ought to have applied for determining the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t takes the view as under:- 3. In both the tax appeals though slightly differently worded, the questions concerning the same assessee are identical and concern the issue of deduction under section 80IA of the Income 'Tax, Act granted to the assessee by the Tribunal on captive power generation plant. The second question is with respect to recognising such claim on the basis of purchase price of power from GEB and substituting the rates of 2.47 per unit adopted by the Assessing Officer. 4. Since both the issues are covered by various Judgments of this Court, we do not find it necessary to record facts at any length. Division Bench of this Court by judgment dated 22.11.2011 in Tax Appeal No.2092/2010 in somewhat similar controversy observed as under: 3. With respect to Question [B], the issue pertains to sub-Section (8) of Section -80IA of the; Income Tax Act, 1961. The assessee had a CPP Unit generating electricity which was supplying it to a general unit. The electricity generated is being supplied to other consumers also. The CPP unit charged Rs.5.40 ps. per unit from the general unit. The Assessing Officer applying sub-Section (8) of Section .80IA restricted the same t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duction u/s 80-IA(4) of the Act, applying the ratio laid down by it in the case of Gujarat Alkalies (supra). 19. The learned Departmental Representative was unable to point out any distinguishing facts nor was any contrary decision of the Hon'ble jurisdictional High Court or the Hon'ble Apex Court brought to our notice. 20. In view of the above, since the issue already stands decided in favour of the assessee in its own case by the Hon'ble jurisdictional High Court, the disallowance made by the Assessing Officer and confirmed by the learned CIT(A) of deduction claimed under Section 80IA of the Act to the extent of Rs.31,98,48,171/- is directed to be deleted. 21. Ground No. 2 of appeal of the assessee is accordingly allowed. 22. Ground No.3 raised by the assessee reads as under:- "Learned CIT(A) erred 3. in respect of claim of revenue from Carbon credit as capital receipts. a) In not accepting the appellants contention that the revenue earned from the sale of carbon credits (net of expenses) as a Capital Receipt, not subject to tax and not directing the Assessing Officer to exclude the same while computing taxable income. b) In considering that the revenue from carbon ..... X X X X Extracts X X X X X X X X Extracts X X X X
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