ACIT, Ajmer V. SHREE CEMENT LTD., BEAWAR

ITA 445/JPR/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5386 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 10 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2016
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 06-06-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: VIJAY SHAH CAS DHK
• Keywords: Gift; Business income; Transfer pricing; Cost of acquisition; Capital receipt
• Section: 143(3); 115JB

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH FOE FLAG ;KN O] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI VIKRAM SINGH YA DAV, AM VK;DJ VIHY LA-@ ITA NO. 445/JP/2014 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2010-11 . ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-2, AJMER. CUKE VS. M/S. SHREE CEMENT LIMITED, BANGUR NAGAR, BEAWAR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AACCS 8796 G VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT C.O. NO. 21/JP/2014 ( ARISING OUT OF ITA NO. 445/JP/2014) ASSTT. YEAR : 2010-11. M/S. SHREE CEMENT LIMITED, BANGUR NAGAR, BEAWAR. CUKE VS. ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-2, AJMER. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AACCS 8796 G VIHYKFKHZ@ APPLICANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI M.S. MEENA (CIT) FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI SOUMEN ADAK & SHRI VIJAY SHAH, CAS LQUOKBZ DH RKJH[K@ DATE OF HEARING : 21.04.2016. ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 27/04/2016. VKNS'K@ ORDER PER SHRI VIKRAM SINGH YADAV, A.M. THE APPEAL IS FILED BY THE REVENUE AND THE CROSS OB JECTION IS FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT (A), A JMER DATED 2 ITA NO. 445/JP/2014 & CO 21/JP/2014. ACIT VS. SHREE CEMENT LTD., BEAWAR. 27.03.2014 FOR THE ASSESSMENT YEAR 2010-11. THE GRO UNDS RAISED IN THE REVENUES APPEAL ARE AS UNDER :- REVENUES GROUNDS : IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CAS E, THE LD. CIT (A), AJMER HAS ERRED IN 1) DELETING THE DISALLOWANCE MADE BY THE AO OUT OF DEDUCTION CLAIMED U/S 80IA AMOUNTING TO RS. 64,31,50,481/-, WITHOUT APPRECIATING THE FACTS OF T HE CASE; 2) TREATING THE CER RECEIPTS AMOUNTING TO RS. 8,60,73,978/- AS CAPITAL RECEIPT INSTEAD OF REVENUE RECEIPTS, WITHOUT APPRECIATING THE FACTS OF THE CAS E; 3) TREATING THE CER RECEIPTS AS CAPITAL RECEIPTS AND T HE SAME IS NOT INCLUDIBLE IN THE BOOK PROFIT U/S 115JB OF THE I.T. ACT, WITHOUT APPRECIATING THE FACTS OF THE CASE; ASSESSEES GROUNDS IN CROSS OBJECTION : 1. THAT ON THE FACTS AND IN THE CIRC UMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME-TAX (APPEALS), WAS NOT JU STIFIED AND ERRED IN LAW IN UPHOLDING THE ACTION OF THE ASS ESSING OFFICER IN DISALLOWING PROFIT ON SALE OF FIXED ASSE TS AMOUNTING TO RS. 84,16,219/- AND PROFIT ON SALE OF INVESTMENT S AMOUNTING TO RS. 64,22,68,406/- WHILE COMPUTING BOO K PROFIT UNDER SECTION 115JB OF THE ACT. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD. COMMISSIONER OF INCOME-TAX (APPEALS), WAS NOT JU STIFIED AND ERRED IN LAW IN CONFIRMING THE DISALLOWANCES MA DE BY THE ASSESSING OFFICER ON ACCOUNT OF GIFT EXPENSES T O THE TUNE OF RS. 2,76,000/-. 3 ITA NO. 445/JP/2014 & CO 21/JP/2014. ACIT VS. SHREE CEMENT LTD., BEAWAR. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD. COMMISSIONER OF INCOME-TAX (APPEALS), WAS NOT JU STIFIED AND ERRED IN LAW IN CONFIRMING THE DISALLOWANCES MA DE BY THE A.O. ON ACCOUNT OF TELEPHONE AND MOBILE EXPENSE S TO THE TUNE OF RS. 3,60,000/-. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FI LED ITS RETURN ON 15.10.2010 DECLARING TOTAL INCOME OF RS. 496,59,17, 844/- FOR THE ASSESSMENT YEAR 2010-11 THEREBY CLAIMING A REFUND O F RS. 55,20,23,680/-. THE CASE OF THE ASSESSEE WAS SCRUT INIZED UNDER SECTION 143(3) OF THE IT ACT, 1961 AND ASSESSMENT WAS COMPL ETED UNDER SECTION 143(3) AT RS. 569,62,82,303/- THEREBY MAKING ADDITI ONS BY THE AO UNDER VARIOUS HEADS AND ON APPEAL LD. CIT (A) ALLOW ED RELIEF TO THE ASSESSEE AGAINST WHICH THE REVENUE HAS COME IN APPE AL BEFORE US. 3. NOW WE WILL TAKE UP THE APPEAL OF THE REVENUE GR OUND-WISE. 4. GROUND NO. 1 RELATES TO DELETING THE DISALLOWANC E MADE BY THE AO OUT OF DEDUCTION CLAIMED U/S 80IA AMOUNTING TO RS. 64,31,50,481/- IN RESPECT OF ASSESSEES POWER UNDERTAKINGS. THE BRIE F FACTS ARE THAT ASSESSEE CLAIMED DEDUCTION U/S 80IA IN RESPECT OF I TS CAPTIVE POWER UNDERTAKINGS. FOR COMPUTING PROFITABILITY OF THE UN ITS CAPTIVELY CONSUMED, IN TERMS OF PROVISIONS OF SECTION 80I(8), THE ASSESSEE COMPANY HAS CONSIDERED THE MARKET VALUE OR ARMS LE NGTH VALUE AT 4 ITA NO. 445/JP/2014 & CO 21/JP/2014. ACIT VS. SHREE CEMENT LTD., BEAWAR. WEIGHTED AVERAGE SALE RATE OF POWER TO VARIOUS CUST OMERS THROUGH INDIAN ENERGY EXCHANGE( IEX) DURING THE YEAR UNDER CONSIDERATION. IN THE ORDER UNDER SECTION 143(3), THE AO HAS REDUCED THE CLAIM BY ADOPTING A DIFFERENT METHOD FROM THE ONE ADOPTED BY THE ASSESSEE WITHOUT ASSIGNING ANY REASON AS TO WHY THE RATE ADO PTED BY THE ASSESSEE CANNOT BE CONSIDERED AS MARKET VALUE. THE AO COMPUTED THE TRANSFER PRICE OF POWER CAPTIVELY CONSUMED ON THE B ASIS OF POWER SOLD, I.E. THE PRICE WHICH REPRESENTS FOR FIRM AND GOOD Q UALITY POWER AS PER AGREED TERMS WITH BUYER UNDER POWER SALE CONTRACTS. THE AO, THEREFORE, CONSIDERING THE ABOVE PRICES FOR CAPTIVE CONSUMPTIO N, CALCULATED THE CLAIM UNDER SECTION 80IA FOR THE ASSESSMENT YEAR AT RS. 420,22,32,316/- INSTEAD OF RS. 484,53,82,797/- AS CLAIMED BY THE AS SESSEE, THEREBY DISALLOWING RS. 64,31,50,481/-. 5. ON APPEAL, THE LD. CIT (A) CONSIDERED THE ASSESS EES SUBMISSIONS AND ALSO GONE THROUGH THE ASSESSMENT ORDER. THE LD. CIT (A) HAS OBSERVED THAT THE ASSESSEE HAD ADOPTED THE WEIGHTED AVERAGE ACTUAL SALE RATE THROUGH INDIAN ENERGY EXCHANGE (IEX) FOR TRANSFER OF POWER FROM ASSESSEES TWO POWER UNDERTAKINGS TO THE CEMEN T PLANT FOR CAPTIVE POWER CONSUMPTION. THE AO HAS SUBSTITUTED THE ABOVE RATE WITH MONTHLY WEIGHTED AVERAGE SALE PRICE OF THE SALES MA DE BY THE ASSESSEE 5 ITA NO. 445/JP/2014 & CO 21/JP/2014. ACIT VS. SHREE CEMENT LTD., BEAWAR. TO IEX, DISCOM AND UNDER BILATERIAL TRADE AGREEMENT S. THE ASSESSEE HAS EXPLAINED THAT THE INDIA ENERGY EXCHANGE RATES ADOP TED BY THE ASSESSEE IS THE MARKET VALUE IN RESPECT OF POWER SO LD WHICH HAS BEEN MERELY SUBSTITUTED BY ANOTHER VALUE BY THE AO. THE AO HAS NOT POINTED OUT ANY DISCREPANCY IN THE METHOD ADOPTED BY THE AS SESSEE. IT HAS NOT BEEN SHOWN THAT THE TRANSFER BY THE INDUSTRIAL UNDE RTAKING DOES NOT CORRESPOND WITH THE MARKET PRICE. SIMILAR ISSUE HAS BEEN DECIDED BY THE ITAT JAIPUR BENCH IN ASSESSEES OWN CASE IN ITA NO. 503/JP/2012 AND OTHERS VIDE ORDER DATED 27.01.2014 FOR THE ASSESSME NT YEAR 2007-08 AND THE ADDITIONS MADE HAVE BEEN DELETED. THE LD. CIT (A) TAKING INTO CONSIDERATION THE ABOVE FACTS, HAS DELETED THE DISA LLOWANCE MADE THE AO FOR THE YEAR UNDER CONSIDERATION. 6. NOW THE REVENUE IS IN APPEAL BEFORE US. 6.1. THE LD. A/R FOR THE ASSESSEE HAS SUBMITTED THA T THE ABOVE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF I TAT IN ASSESSEES OWN CASE FOR A.Y. 2007-08 IN ITA NO. 503/JP/2012 DA TED 27.01.2014 WHEREIN IT HAS BEEN HELD THAT (1) VALUE ADOPTED BY ASSESSEE AS PER INDEPENDENT THIRD PARTY TRADING TRANSACTIONS OR AS PER POWER EXCHANGE (IEX) ETC.) 6 ITA NO. 445/JP/2014 & CO 21/JP/2014. ACIT VS. SHREE CEMENT LTD., BEAWAR. CONSTITUTE MARKET VALUE IN TERMS OF EXPLANATION T O SECTION 80IA(8). (2) IT IS THE PRINCIPLE AND NOT THE QUANTUM WHICH I S THE DECIDING FACTOR. (3) WHERE A BASKET OF MARKET VALUES ARE AVAILABLE FOR RELEVANT PERIOD THE ASSESSEE HAS DISCRETION TO ADOPT ANY ONE OF THEM AS MARKET VALUE (4) IF THE VALUE ADOPTED BY ASSESSEE IS MARKET VALUE, I T IS NOT PERMISSIBLE FOR RVENUE TO RECOMPUTE THE PROFIT & GA INS OF THE ELIGIBLE UNIT BY SUBSTITUTING IT WITH ANY OTHER MAR KET VALUE. THE LD. A/R SUBMITTED THAT TRANSFER PRICING METHOD OLOGY ADOPTED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION CO NTAINS ALL THE BASIC FEATURES OF MARKET PRICE AS COINED IN SEC. 80IA(8) OF THE ACT ON ACCOUNT OF THE FOLLOWING REASONS :- (1) TRANSACTIONS IN IEX HAVE BEEN ENTERED INTO BETWEEN INDEPENDENT PARTIES THROUGH CLEARING AGENTS. (2) PRICES ARE DETERMINED INDEPENDENTLY BY THE DEMAND A ND SUPPLY FORCES IN THE OPEN MARKET (3) TRANSACTIONS ARE ACTUAL AND REAL AND NOT HYPOTHETIC AL OR FICTITIOUS. 7 ITA NO. 445/JP/2014 & CO 21/JP/2014. ACIT VS. SHREE CEMENT LTD., BEAWAR. (4) SINCE NO ONE CAN DICTATE ANY TERMS OR CONDITIONS, M ARKET ENVIRONMENT IN WHICH TRANSACTION TAKES PLACE IS COM PETITIVE AND FREE (5) MARKET PRICE IS TRANSPARENT AND AVAILABLE IN PUBLIC DOMAIN. IN VIEW OF THE ABOVE SUBMISSIONS AND ALSO PLACING O N THE TRIBUNALS ORDER, SUPRA, THE LD. A/R PRAYED THAT THE ORDER OF LD. CIT (A) DELETING THE ADDITION, BE CONFIRMED. 6.2. ON THE OTHER HAND, THE LD. D/R SUPPORTED THE O RDER OF THE AO AND REQUESTED TO CONFIRM THE ADDITION. 6.3. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED TH E MATERIAL AVAILABLE ON RECORD. WE HAVE ALSO GONE THROUGH THE FACTS OF THE CASE, ASSESSMENT ORDER, ORDER OF LD. CIT (A), THE PRINCIP LES AND THE JUDICIAL DECISIONS RELIED UPON AND DOCUMENTS PRODUCED BY BOT H THE PARTIES. WE FIND MERIT IN THE CONTENTION OF THE LD. A/R OF THE ASSESSEE THAT THE ISSUE IN QUESTION IS SQUARELY COVERED IN FAVOUR OF THE AS SESSEE BY EARLIER ORDER OF THE ITAT IN ASSESSEES OWN CASE IN ITA NO. 503/J P/2012 DATED 27.01.2014 WHEREBY THE DISALLOWANCES WERE DELETED B Y THE TRIBUNAL. THE RELEVANT EXTRACT OF THE SAME IS REPRODUCED AS U NDER :- (A) THE VALUE ADOPTED BY THE ASSESSEE BE IT VALUE AS PE R INDEPENDENT THIRD PARTY TRADING TRANSACTIONS OR AS PER POWER EXCHANGE (IEX) ETC.) OR ANY OTHER INDEPENDENT TRANS ACTION 8 ITA NO. 445/JP/2014 & CO 21/JP/2014. ACIT VS. SHREE CEMENT LTD., BEAWAR. (FOR THE RELEVANT PERIOD AND WHICH HAS TAKEN PLACE IN THE RELEVANT AREA WHERE THE ELIGIBLE UNIT IS LOCATED) C ONSTITUTE MARKET VALUEIN TERMS OF EXPLANATION TO SECTION 80 IA(8); (B) THE VALUE AT WHICH STATE GRID HAS SOLD POWER TO THE CEMENT UNIT OF THE ASSESSEE (AVERAGE ANNUAL LANDED COST) A LSO CONSTITUTE MARKET VALUE IN TERMS OF EXPLANATION T O SECTION 80IA(8) BUT THE VALUE AT WHICH STATE GRID OR THIRD PARTY HAS PURCHASED POWER FROM THE POWER UNIT OF THE ASSESSEE , WHICH REPRESENTS ITS POWER WHICH IS SOLD WHEN NOT R EQUIRED BY THE CEMENT UNIT, DOES NOT CONSTITUTE MARKET VAL UE IN TERMS OF EXPLANATION TO SECTION 80IA(8). IT IS THE PRINCIPLE AND NOT THE QUANTUM WHICH IS DECIDING FACTOR; (C) WHERE A BASKET OF MARKET VALUES ARE AVAILABLE FOR THE RELEVANT PERIOD AND RELEVANT GEOGRAPHICAL AREA WHER E THE ELIGIBLE UNIT IS SITUATED, THE ASSESSEE HAS DISCRET ION TO ADOPT ANY ONE OF THEM AS MARKET VALUE; AND (D) IF THE VALUE ADOPTED BY THE ASSESSEE IS MARKET VAL UE AS EXPLAINED ABOVE, IT IS NOT PERMISSIBLE FOR REVENUE TO RECOMPUTE THE PROFITS & GAINS OF THE ELIGIBLE UNIT BY SUBSTITUTING THE SAID VALUE (AS ADOPTED BY THE ASSE SSEE) BY ANY OTHER MARKET VALUE. RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINA TE BENCH OF THE TRIBUNAL, SUPRA, WE DELETE THE DISALLOWANCE AS MADE BY THE AO UNDER SECTION 143(3) ON ACCOUNT OF DEDUCTION U/S 80IA OF THE ACT. THE GROUND NO.1 OF THE REVENUE IS DISMISSED. 9 ITA NO. 445/JP/2014 & CO 21/JP/2014. ACIT VS. SHREE CEMENT LTD., BEAWAR. 7. GROUND NO. 2 RELATES TO TREATING THE CER RECEIPT S AMOUNTING TO RS. 8,60,73,978/- AS CAPITAL RECEIPT INSTEAD OF REVENUE RECEIPTS. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION RECEIVED A SUM OF RS. 8,60,73,978/- O N ACCOUNT OF TRANSFER OF CERTIFIED EMISSIONS RIGHTS (CERS) AND HAS CLAIME D THE SAME AS CAPITAL RECEIPT NOT CHARGEABLE TO TAX. THE AO DISALLOWED T HE CLAIM OF THE ASSESSEE CONTENDING THAT THE COST OF ACQUISITION IN THE CASE OF CERS IS NIL AS SPECIFIED IN SECTION 55(2)(A) OF THE ACT AND THAT IT DOES NOT HAVE ANY COST OF ACQUISITION CANNOT BE ACCEPTED. THE AO, THEREFORE, CONSIDERED THE AMOUNT RECEIVED BY THE ASSESSEE ON A CCOUNT OF TRANSFER OF CERS AS CHARGEABLE TO CAPITAL GAIN TAX AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 8. ON APPEAL, LD.CIT (A) DISCUSSED THE MATTER AT GR EAT LENGTH AT PAGES 18 TO 27 OF HIS ORDER. THE LD. CIT (A) HELD THAT THE CASE OF THE ASSESSEE IS COVERED BY THE DECISION OF JAIPUR BENCH OF THE TRIBUNAL VIDE ORDER DATED 27.01.2014 FOR A.Y. 2008-09 IN ITA NO. 504/JP/2012 AND FOR A.Y. 2009-10 IN ITA NO. 505/JP/2012 IN ASSESSEES O WN CASE. HE REPRODUCED THE OPERATIVE PORTION OF THE TRIBUNALS ORDER AND RESULTANTLY DELETED THE DISALLOWANCE. 9. NOW THE REVENUE IS IN APPEAL BEFORE US. 10 ITA NO. 445/JP/2014 & CO 21/JP/2014. ACIT VS. SHREE CEMENT LTD., BEAWAR. 9.1. THE LD. A/R FOR THE ASSESSEE SUBMITTED THAT TH E ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ITAT ORDER IN ASSESSE ES OWN CASE DATED 27.01.2014 FOR A.Y. 2008-09 IN ITA NO. 504/JP/2012 AND FOR A.Y. 2009- 10 IN ITA NO. 505/JP/2012. THE LD. A/R FURTHER PLAC ED RELIANCE ON THE JUDGMENT OF HONBLE ANDHRA PRADESH HIGH COURT IN TH E CASE OF CIT VS. MY HOME POWER LTD (2014) 365 ITR 82 (AP). THE LD. A /R HAS ALSO PLACED RELIANCE ON THE FOLLOWING DECISIONS CONTENDI NG THAT CARBON CREDIT IS CAPITAL RECEIPT : ACIT VS. RAJASTHAN STATE MINES & MINERALS LTD. (ITA NO. 124 & 144/JP/2014 DATED 12.02.2016.) SRI VELAYUDHASWAMY SPINNING MILLS (P) LTD VS. DCI T (2013) 27 ITR 106 (CHENNAI) SUBHASH KABINI POWER CORP. LTD. VS. CIT (2015) 37 ITR 106 (BANGALORE TRIB.) IN VIEW OF THE ABOVE, THE LD. A/R PRAYED THAT THE O RDER OF LD. CIT (A) DELETING THE ADDITION BE CONFIRMED. 9.2. ON THE OTHER HAND, THE LD. D/R RELIED ON THE O RDER OF THE A.O. AND SUBMITTED THAT THE RECEIPT ON ACCOUNT OF CARBON CRE DIT IS RELATED TO THE BUSINESS OF THE ASSESSEE AND THE ASSESSEE HAS UNDER TAKEN ACTIVITIES WHICH HAS RESULTED IN THE RECEIPT ON ACCOUNT OF CAR BON CREDITS. HENCE, THE AMOUNT SO RECEIVED HAS TO BE CONSIDERED AS RELA TED TO THE BUSINESS OF THE ASSESSEE AND SHOULD EITHER BE CONSIDERED AS REVENUE RECEIPTS 11 ITA NO. 445/JP/2014 & CO 21/JP/2014. ACIT VS. SHREE CEMENT LTD., BEAWAR. CHARGEABLE TO TAX AS BUSINESS INCOME, OR THE NET AM OUNT AFTER DEDUCTION OF EXPENDITURE, IF ANY, INCURRED FOR THE SAME SHOUL D BE CONSIDERED AS CHARGEABLE TO TAX UNDER THE HEAD CAPITAL GAINS. 9.3. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED TH E MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ISSUE IS SQUA RELY COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF JAIPUR BENCH OF THE TRIBUNAL IN THE ASSESSEE OWN CASE FOR THE A.YS 2008-09 VIDE ORDER DATED 27.01.2014 IN ITA NO. 504/JP/2012 WHEREIN THE TRIBUNAL HAS DISCUS SED THE MATTER AT GREAT LENGTH AT PAGES 31 TO 37 OF ITS ORDER. IT IS NOTED THAT DECISION IN CASE OF MY HOME POWER LTD. RELIED UPON BY THE TRIBU NAL HAS SINCE BEEN CONFIRMED BY HONBLE ANDHRA PRADESH HIGH COURT, 365 ITR 82 (AP). THE OPERATIVE PORTION OF THE TRIBUNALS ORDER IS REPROD UCED HEREUNDER :- 38. WE FIND THAT THE APPELLATE TRIBUNAL IN MY HOME POWE R LTD VS. DCIT [SUPRA], HAVE, AFTER DETAILED EXAMINATION, CON CLUDED THAT THE RECEIPTS FROM CARBON CREDIT ARE CAPITAL IN NATURE. WE ARE INCLINED TO FOLLOW THE SAID DECISION AND THE OTHER TWO DECISION S OF CHENNAI TRIBUNAL IN SRI VELAYUDHASWAMY SPINNING MILLS (P.) LTD. VS. DCIT [SUPRA] AND AMBIKA COTTON MILLS LTD. VS. DCIT (SUPR A) WHERE ALSO IT HAS BEEN HELD THAT RECEIPT ON ACCOUNT OF CARBON CRE DIT IS CAPITAL IN NATURE & NEITHER CHARGEABLE TO TAX UNDER THE HEAD B USINESS INCOME NOR LIABLE TO TAX UNDER THE HEAD CAPITAL GAINS. OUR ABOVE VIEW IS ALSO SUPPORTED BY THE DECISION OF SUPREME COURT IN THE C ASE OF VODAFONE INTERNATIONAL HOLDINGS VS. UOI [SUPRA] WHEREIN SUPR EME COURT HAS HELD THAT TREATMENT OF ANY PARTICULAR ITEM IN DIFFE RENT MANNER IN THE 12 ITA NO. 445/JP/2014 & CO 21/JP/2014. ACIT VS. SHREE CEMENT LTD., BEAWAR. 1961 ACT AND DTC SERVES AS AN IMPORTANT GUIDE IN DE TERMINING THE TAXABILITY OF SAID ITEM. SINCE DTC BY VIRTUE OF THE DEEMING PROVISIONS SPECIFICALLY PROVIDES FOR TAXABILITY OF CARBON CRED IT AS BUSINESS RECEIPT AND INCOME TAX ACT DOES NOT DO SO, OUR VIEW GETS DU LY FORTIFIED BY THE PRINCIPLES STATED IN THE ABOVE DECISION OF SUPREME COURT. ACCORDINGLY THIS GROUND OF THE ASSESSEE IS ALLOWED AND THE ADDI TION MADE BY THE AO IS DELETED. RESPECTFULLY FOLLOWING THE COORDINATE BENCH DECISIO N, SUPRA, WE DELETE THE ADDITION MADE BY THE AO. 10. GROUND NO. 3 RELATES TO TREATING THE CER RECEIP TS AS CAPITAL RECEIPTS AND THE SAME IS NOT INCLUDIBLE IN THE BOOK PROFIT U/S 115JB OF THE ACT. 11. THE ASSESSEE SUBMITTED THAT THE ISSUE IS SQUARE LY COVERED IN FAVOUR OF ASSESSEE BY THE DECISION OF HONBLE TRIBUNAL FOR A. Y. 2008-09 & 2009-10 IN ITS OWN CASE VIDE ORDER DATED 27.01.2014, WHEREIN IT HAS BE EN HELD THAT, ONCE IT IS HELD THAT CARBON CREDIT IS CAPITAL RECEIPT WITHOUT ANY PROFIT ELEMENT EMBEDDED IN IT, THE SAME NEEDS TO BE EXCLUDED U/S 115JB. RELIANCE IN THIS RE GARD WAS PLACED ON THE DECISION IN ASESSEES OWN CASE IN ITA NO. 614, 615 & 635/JP/ 2010 FOR A.Y. 2004-05, 2005-06 AND 2006-07 RESPECTIVELY, WHEREIN IT HAS BEEN HELD THAT CAPITAL RECEIPT NEEDS TO BE EXCLUDED IN COMPUTATION OF BOOK PROFIT AS THEY DON T HAVE ANY PROFIT ELEMENT EMBEDDED IN IT. 11.1. RELYING ON THE AFORESAID DECISION OF HONBLE JAIPUR ITAT IN ORDER DATED 27.01.2014, SIMILAR VIEW HAS ALSO BEEN UPHELD BY HO NBLE LUCKNOW TRIBUNAL IN L.H. SUGAR FACTORY LTD. VS. ACIT (ITA NO. 339/LKW/2013 D ATED 09.02.2016) WHEREIN IT HAS BEEN HELD THAT THE RECEIPT ON ACCOUNT OF TRANSF ER OF CARBON CREDIT WHICH IS HELD 13 ITA NO. 445/JP/2014 & CO 21/JP/2014. ACIT VS. SHREE CEMENT LTD., BEAWAR. TO BE A CAPITAL RECEIPT NEEDS TO BE EXCLUDED FROM P ROFIT WHILE COMPUTING THE BOOK PROFIT U/S 115JB OF THE ACT. 11.2. HONBLE KOLKATA TRIBUNAL IN THE CASE OF DCIT VS. BINANI INDUSTRIES LTD. (ITA NO. 144/KOL/2013 DATED 02.03.2016) HAS HELD THAT CA PITAL RECEIPT WHICH IS NOT CHARGEABLE TO TAX UNDER ANY PROVISIONS OF THE ACT W OULD NOT BE LIABLE FOR BOOK PROFITS TAX U/S 115JB OF THE ACT. 12. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND MERIT IN THE CONTENTION OF THE LD. A/R THAT TH E ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE EARLIER ORDER OF THE TRIBUNA L IN ITA NO. 504/JP/2012 DATED 27.01.2014. THE COORDINATE BENCH OF THE TRIBUNAL IN THE AFOREMENTIONED CASE HAS DECIDED THE APPEAL IN FAVOUR OF THE ASSESSEE BY OBS ERVING AS UNDER :- 40. GROUND NO. 8 IS ON ACCOUNT OF DISALLOWANCE OF CARBON CREDIT IN COMPUTING BOOK PROFIT U/S 115JB OF THE ACT. THIS IS SUE STANDS COVERED ON PRINCIPLE IN FAVOUR OF THE ASSESSEE VIDE THE ORD ER OF THE HONBLE ITAT DATED 9 TH SEPT. 2011 FOR AY 2004-05, 2005-06 AND 2006-07 IN APPELLANTS OWN CASE IN ITA NO. 614, 615 AND 635/JP /2010. HONBLE TRIBUNAL IN THE SAID CASE HAVE HELD THAT CAPITAL RE CEIPT IN THE FORM OF SALES TAX SUBSIDY, NEEDS TO BE EXCLUDED IN COMPUTAT ION OF BOOK PROFIT ALL THE MORE SINCE THEY DONT HAVE ANY ELEMENT OF P ROFIT EMBEDDED IN IT. WE FIND THAT CARBON CREDIT IS ALSO CAPITAL RECEIPT, WHICH DOES NOT HAVE ANY ELEMENT OF PROFIT EMBEDDED IN IT. EVEN HYD. TRI BUNAL IN MY HOME POWER LTD.(SUPRA) HAVE UPHELD THE ABOVE PRINCIPLES. HENCE, IN PRESENT CASE, RECEIPT ON ACCOUNT OF CARBON CREDIT, BEING PU RELY CAPITAL IN NATURE NEEDS TO BE EXCLUDED IN COMPUTATION OF BOOK PROFIT. THE AO IS ACCORDINGLY DIRECTED TO DELETE THE ADDITION MADE ON ACCOUNT OF CARBON 14 ITA NO. 445/JP/2014 & CO 21/JP/2014. ACIT VS. SHREE CEMENT LTD., BEAWAR. CREDIT IN COMPUTING BOOK PROFIT U/S 115JB OF THE AC T. THIS GROUND IS ACCORDINGLY DECIDED IN FAVOR OF THE ASSESSEE. RESPECTFULLY FOLLOWING THE COORDINATE BENCH DECISIO N IN ITA NO. 504/JP/2012 DATED 27.01.2014 IN THE ASSESSEES OWN CASE, WE DECIDE TH IS GROUND AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE. 12. NOW WE TAKE THE ASSESSEES CROSS OBJECTION. 13. THE FIRST GROUND OF THE ASSESSEE RELATES TO DIS ALLOWANCE OF PROFIT ON SALE OF FIXED ASSETS OF RS. 84,16,219/- AND PROF IT ON SALE OF INVESTMENT OF RS. 64,22,68,406/- IN COMPUTING BOOK PROFIT U/S 115JB. AT THE TIME OF HEARING, THE LD. A/R FOR THE ASSESSEE H AS FAIRLY CONCEDED THAT THE ISSUE IS COVERED AGAINST THE ASSESSEE BY THE DE CISION OF HONBLE TRIBUNAL IN ITS OWN CASE VIDE ORDER DATED 27.01.201 4 IN ITA NO. 504/JP/2012. RESPECTFULLY FOLLOWING THE ABOVE DECIS ION OF THE TRIBUNAL, WE DISMISSED THE GROUND OF THE ASSESSEE. 14. THE SECOND GROUND OF THE ASSESSEE RELATES TO DI SALLOWANCE OF RS. 2,76,000/- ON ACCOUNT OF GIFT EXPENSES. THE ASSESS EE HAS INCURRED AN EXPENDITURE OF RS. 55,34,914/- ON ACCOUNT OF GIFT E XPENSES AND THE SAME WAS CLAIMED AS DEDUCTIBLE EXPENDITURE U/S 37(1 ) OF THE IT ACT AS THE GIFTS HAVE BEEN DISTRIBUTED TO THE CUSTOMERS AN D OTHER BUSINESS ASSOCIATES ON VARIOUS FESTIVALS. THE AO WHILE PASSI NG THE ASSESSMENT 15 ITA NO. 445/JP/2014 & CO 21/JP/2014. ACIT VS. SHREE CEMENT LTD., BEAWAR. ORDER UNDER SECTION 143(3) OF THE IT ACT, HELD THAT THE EXPENDITURE INCURRED BY THE ASSESSEE ON ACCOUNT OF GIFT CANNOT BE SAID TO BE WHOLLY AND EXCLUSIVELY MADE FOR THE PURPOSE OF BUSINESS AN D THAT THE GIFTS DISTRIBUTED FOR NON-BUSINESS PURPOSE CANNOT BE RULE D OUT. THEREFORE, THE AO CONSIDERED IT PROPER TO MAKE DISALLOWANCE @ 5% O F THE TOTAL EXPENSES WHICH COMES TO RS. 2,76,000/-. 14.1. ON APPEAL, THE LD. CIT (A) CONFIRMED THE ACTI ON OF THE AO SUSTAINING THE DISALLOWANCE BY RELYING ON THE DECIS ION OF THE ITAT JAIPUR BENCH FOR THE A.Y. 2007-08 BY OBSERVING AS UNDER :- 6.3. I HAVE CONSIDERED THE CONTENTIONS OF THE APPELLANT AS WELL AS ASSESSMENT ORDER. IT IS SEEN T HAT SIMILAR ISSUE WAS INVOLVED IN A.Y. 2007-08 WHERE OUT OF THE GIFT EXPENSES OF RS. 47,11,876/-, THE DISALLOWANCE OF RS . 16,00,000/- WAS CONFIRMED BY THE TRIBUNAL BASED ON THE DECISION OF THE TRIBUNAL DATED 23.12.2009 FOR THE A .Y. 2003- 04. IN VIEW OF ABOVE, THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF NON BUSINESS PURPOSE OF THE ABOVE EXPENS ES TO THE EXTENT OF RS. 2,76,000/-. 14.2. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE MATERIAL ON RECORD. WE FIND THAT THE FACTS FOR THE YEAR UNDER C ONSIDERATION ARE 16 ITA NO. 445/JP/2014 & CO 21/JP/2014. ACIT VS. SHREE CEMENT LTD., BEAWAR. SIMILAR WITH THE FACTS OF EARLIER YEAR. FOLLOWING THE ABOVE DECISION OF THE ITAT, WE UPHOLD THE ORDER OF LD. CIT (A) AND CONFIR M THE DISALLOWANCE. 15. THIRD GROUND OF THE ASSESSEE RELATES TO DISALLO WANCES ON ACCOUNT OF TELEPHONE AND MOBILE EXPENSES OF RS. 3,60,000/-. WE FIND THAT THE IDENTICAL ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE VIDE ORDER DATED 27.01.2014 IN A.Y. 2007-08 IN ITA NO. 503/JP/2012 AND ORDER DATED 23.12.2009 FOR A.Y. 2003-04 WHEREIN THE TRIBUNAL RESTORED THE MATTER TO THE FILE OF AO BY OBSERVING AS UNDER (ITA NO. 503/JP/2012) :- 16. GROUND NO. 4 OF THE ASSESSEE RELATES TO DISALL OWANCE OF TELEPHONE EXPENSES OF RS. 1,00,000/- CONFIRMED BY C IT(APPEALS) CONSIDERING THE SAME AS PERSONAL IN NATURE. WE FIND THAT TRIBUNAL IN A.Y. 2003-04 IN ITA NO. 751 /JP/07 VIDE ORDER DATED 23 RD DEC. 2009 HAD SET ASIDE THE ISSUE TO THE FILE OF THE A.O. TO EXAMINE THE CONTENTION OF THE ASSESSEE AS THERE CANNOT BE DISAL LOWANCE OF PERSONAL EXPENDITURE IN THE HANDS OF THE COMPANY. ACCORDINGL Y, FOLLOWING THE ORDER OF EARLIER YEAR, WE SET ASIDE THIS GROUND TO THE FILE OF THE AO TO VERIFY THE SAME AFTER GIVING OPPURTUNITY TO THE ASS ESSEE BEFORE DECIDING THE ISSUE. THIS GROUND OF THE ASSESSEE IS THEREFORE ALLOWED FOR THE STATISTICAL PURPOSES ONLY. RESPECTFULLY FOLLOWING THE COORDINATE BENCH DECISIO N IN THE ASSESSEES CASE FOR THE A.Y. 2007-08, WE SET ASIDE THE ORDER O F THE LD. CIT (A) AND 17 ITA NO. 445/JP/2014 & CO 21/JP/2014. ACIT VS. SHREE CEMENT LTD., BEAWAR. RESTORE THE MATTER TO THE FILE OF THE AO FOR FRESH CONSIDERATION. THE GROUND OF THE ASSESSEE IS ALLOWED FOR STATISTICAL P URPOSES ONLY. 16. IN THE RESULT, REVENUES APPEAL IS DISMISSED WH ILE ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES ONLY. ORDER PRONOUNCED IN THE OPEN COURT ON 27/04/2016 . SD/- SD/- VKJ-IH-RKSYKUH FOE FLAG ;KNO (R.P.TOLANI) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER JAIPUR DATED:- 27/04/2016. DAS/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- THE ACIT, CIRCLE-2, AJMER. 2. THE RESPONDENT- M/S. SHREE CEMENT LTD., BEAWAR. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 445/JP/2014 & CO 21/JP/2014) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR