ACIT, Mohali V. M/s Kotla Hydro Power Private Limited, Noida

ITA 681/CHANDI/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8416 (ITAT-CHANDIGARH)
• Duration Of Justice: 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 02-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Business income; Earning of tax free income; Capital receipt
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH,CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO. 681/CHD/2016 ASSESSMENT YEAR: 2012-13 THE ACIT, VS M/S KOTLA HYDRO POWER P.LTD. , CIRCLE 6(1), # 2587, PHASE-XI,MOHALI MOHALI. (NOW AT B-37, SECTOR 1, NOIDA 201301. PAN: AABCK9253B (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MANJIT SINGH RESPONDENT BY : SHRI TEJ MOHAN SINGH DATE OF HEARING : 11.01.2017 DATE OF PRONOUNCEMENT : 13.01.2017 O R D E R PER BHAVNESH SAINI,JM THIS APPEAL BY REVENUE HAS BEEN DIRECTED AGAINST THE ORDER OF LD. CIT(APPEALS)-2 CHANDIGARH DATED 02.03.2016 FOR ASSESSMENT YEAR 2012-13 ON THE FOLLOWING GROUNDS : I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.4,73,19,316/- WHICH WAS MADE BY THE A.O. BY DENY ING THE BENEFIT OF DEDUCTION CLAIMED BY THE ASSESSEE UNDER THE PROVISIONS OF SECTION 80-IA OF THE ACT SINCE THIS I NCOME OF RS. 4,73,19,316/-RECEIVED ON RATE OF 'CARBON CREDIT S' WAS NOT 'DERIVED FROM' THE ELIGIBLE BUSINESS OF THE ASS ESSEE. 2 II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE CIT(A) HAS ERRED IN TREATING THE RECEIPTS OF RS .4,73,19,316/- FROM THE SALE OF CERS AS CAPITAL RECEIPTS. III) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 1, 61,52,452/- ON THE GROUND THAT NO TAX FREE INCOME HAS BEEN EARNED BY T HE ASSESSEE IN THE INSTANT YEAR, W 7 HEREAS BOARD'S CIRCULAR NO. 5/2014 DATED 11.02.2014 PROVIDES FOR DISALLOWANCE OF THE EXPENDITURE EVEN W HERE TAXPAYER IN A PARTICULAR YEAR HAS NOT EARNED ANY EXEMPT INCOME 2. ON GROUND NO. 1 AND 2, THE ASSESSING OFFICER MAD E THE ADDITION ON ACCOUNT OF INCOME EARNED FROM SALE OF CARBON CREDITS BY TREATING IT AS REVENUE RECEIPT AN D NOT CAPITAL RECEIPTS. THE BRIEF FACTS ON THIS ISSUE AR E THAT DURING THE YEAR UNDER CONSIDERATION, ASSESSEE EARNE D INCOME OF RS. 4,73,19,316/- ON ACCOUNT OF SALE OF CERTIFIED EMISSION REDUCTION (CER) UNITS. IN THE ORIGINAL RETURN, ASSESSEE CLAIMED IT TO BE REVENUE RECEIPT AND CLAIMED DEDUCTION UNDER SECTION 80IA OF THE ACT IN RESPECT OF THIS INCOME. SUBSEQUENTLY, RETUR N WAS REVISED AND RECEIPT FROM SALE OF CER UNIT WAS CLAIM ED AS CAPITAL RECEIPTS. THE ASSESSING OFFICER HELD IT TO BE REVENUE RECEIPT/BUSINESS INCOME AND ALSO DISALLOWED DEDUCTION UNDER SECTION 80IA OF THE ACT BECAUSE INC OME FROM SALE OF CER IS NOT DIRECTLY DERIVED FROM INDUS TRIAL UNDERTAKING AND THESE ARE ANCILLARY PROFITS AND NOT ELIGIBLE FOR CLAIM OF DEDUCTION UNDER SECTION 80IA OF INCOME TAX ACT. THE ASSESSEE SUBMITTED THAT IN ASSESSMENT YEAR 2009-10, SIMILAR CLAIM OF ASSESSEE HAVE BEEN ALLOWED. THE ISSUE OF CER AS CAPITAL RECEIPT IS SQUARELY COVERED IN ASSESSEE'S OWN CASE FOR ASSESSM ENT 3 YEAR 2009-10 BY ORDER OF LD. CIT(APPEALS), CHANDIGA RH AND UPHELD BY ITAT CHANDIGARH BENCH. THE ASSESSEE FILED COPIES OF THESE ORDERS BEFORE LD. CIT(APPEALS ). THE LD. CIT(APPEALS) NOTED THAT ISSUE HAVE BEEN DECIDED BY ITAT CHANDIGARH BENCH IN THE CASE OF THE ASSESSEE F OR ASSESSMENT YEAR 2009-10 VIDE ORDER DATED 15.04.2015 IN ITA 389/CHD/2013. THE ORDER OF THE TRIBUNAL IS REPRODUCED IN THE IMPUGNED ORDER IN WHICH THE TRIBU NAL HELD THE INCOME FROM SALE OF CARBON CREDIT AS CAPIT AL RECEIPT AND DECIDED THE ISSUE AGAINST THE REVENUE. THE LD. CIT(APPEALS), THEREFORE, FOUND THAT ISSUE IS CO VERED IN FAVOUR OF THE ASSESSEE BY ORDER OF ITAT CHANDIGA RH BENCH IN THE CASE OF THE SAME ASSESSEE AND HELD THA T PROFIT ON SALE OF CER IS CAPITAL RECEIPT. APPEAL O F THE ASSESSEE WAS, ACCORDINGLY, ALLOWED. 3. CONSIDERING THE ABOVE FACTS, WE ARE OF THE VIEW DEPARTMENTAL APPEAL HAS NO MERIT IN BOTH THE ABOVE GROUNDS OF APPEAL. COPY OF THE ORDER OF THE TRIBUN AL DATED 15.04.2015 IS PLACED ON RECORD AND LD. DR DID NOT DISPUTE THE CLAIM OF THE ASSESSEE THAT ISSUE IS COV ERED IN FAVOUR OF THE ASSESSEE BY THE AFORESAID ORDER OF THE TRIBUNAL. THE LD. CIT(APPEALS), THEREFORE, RIGHTLY FOLLOWED THE ORDER OF THE TRIBUNAL FOR THE PURPOSE OF DELETING THE ADDITION. THUS, GROUNDS OF APPEAL OF THE REVENUE ARE, ACCORDINGLY, DISMISSED. 4. ON GROUND NO. 3, ASSESSING OFFICER DISALLOWED AMOUNT OF RS. 1,61,52,452/- UNDER SECTION 14A READ 4 WITH RULE 8D. BRIEF FACTS ON THIS ISSUE ARE THAT ASSESSEE HAD INVESTED RS. 25.19 CR IN EQUITY INSTRUMENTS AND PREFERENCE SHARES AND THE INCOME EARNED/ACCRUED FROM THESE INVESTMENTS IS EXEMPT FRO M TAX. THE ASSESSING OFFICER OBSERVED THAT ASSESSEE H AD DEBITED INTEREST EXPENSES ON BORROWED FUNDS FOR ITS BUSINESS. AS THE ASSESSEE HAS BORROWED FUNDS ON WH ICH INTEREST IS BEING PAID AND ALSO FUNDS HAVE BEEN INV ESTED IN SHARES, INCOME FROM WHICH IS NOT INCLUDIBLE IN T HE TOTAL INCOME OF THE ASSESSEE, ASSESSING OFFICER MAD E THE ABOVE ADDITION. THE ASSESSEE SUBMITTED BEFORE LD. CIT(APPEALS) THAT INVESTMENTS HAVE BEEN MADE FROM I TS OWN ACCUMULATED FUNDS AND THAT ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME OR HAS NOT CLAIMED/DISALLOWED ANY AMOUNT IN THE RELEVANT YEAR UNDER SECTION 14A OF THE ACT. 4(I) THE LD. CIT(APPEALS) RELIED ON THE ORDER OF IT AT CHANDIGARH BENCH IN THE CASE OF M/S BCL INDUSTRIES & INFRASTRUCTURE PVT. LTD. IN ITA 1002/2013 DATED 13.01.2016 FOR ASSESSMENT YEAR 2010-11 IN WHICH THE TRIBUNAL FOLLOWED THE JUDGEMENT OF THE HON'BLE PUNJ AB & HARYANA HIGH COURT IN THE CASE OF CIT VS LAKHANI MARKETING INC 272 CTR 265 IN WHICH IT WAS HELD THAT IN CASE THERE IS NO EXEMPT INCOME, NO DISALLOWANCE SHO ULD BE MADE, DIRECTED NOT TO MAKE DISALLOWANCE UNDER SECTION 14A OF THE ACT. THE LD. CIT(APPEALS) FOLLOW ING THE ABOVE ORDER OF ITAT CHANDIGARH BENCH HELD THAT NO 5 DISALLOWANCE UNDER SECTION 14A CAN BE MADE IN THIS CASE AND DELETED THE ADDITION. 5. AFTER CONSIDERING RIVAL SUBMISSIONS, WE ARE OF T HE VIEW LD. CIT(APPEALS) CORRECTLY DELETED THE ADDITIO N BECAUSE IN THE YEAR UNDER APPEAL, ADMITTEDLY THE ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME DURING TH E RELEVANT YEAR ON THE INVESTMENT SO MADE. THE ISSUE IS, THEREFORE, COVERED BY ORDER OF ITAT CHANDIGARH BENC H IN THE CASE OF M/S BCL INDUSTRIES & INFRASTRUCTURE (SU PRA) AND JUDGEMENT OF HON'BLE PUNJAB & HARYANA HIGH COUR T IN THE CASE OF CIT VS LAKHANI MARKETING INC (SUPRA) . THERE IS NO MERIT IN GROUND NO. 3 OF APPEAL OF THE REVENUE, SAME IS ACCORDINGLY, DISMISSED. 6. IN THE RESULT, DEPARTMENTAL APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (ANNAPURNA GUPTA) (BHAVNESH SAIN I) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 13 TH JANUARY,2017. POONAM COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT,DR ASSISTANT REGISTRAR, ITAT/CHD