Income Tax Appellate Tribunal - Delhi
Malana Power Co Ltd, New Delhi vs Dcit, New Delhi on 27 April, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'E' NEW DELHI
BEFORE SHRI G.D. AGRAWAL, HON'BLE PRESIDENT
AND
SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER
ITA No. 2281/Del/2013
AY: 2009-10
Malana Power Co. Ltd., vs JCIT (OSD),
Bhilwara Bhawana, Circle-6(1),
40-41, Community Centre, New Delhi.
New Friends Colony,
New Delhi.
(PAN: AABCM1108R)
ITA No. 3100/Del/2013
AY: 2009-10
DCIT, vs Malana Power Co. Ltd.,
Circle 6(1), Bhilwara Bhawana,
New Delhi. 40-41, Community Centre,
New Friends Colony,
New Delhi.
(Appellant) (Respondent)
Assessee by : Shri Ajay Vohra, Sr. Advocate
Shri Deepak Jain, CA
Department by: Shri S.R. Senapati, Sr. DR
ITA No. 1550/Del/2015
AY: 2011-12
Malana Power Co. Ltd., vs. Addl. CIT,
C/o M/s Jain Raj Associates Range 6,
(Chartered Accountants),208, New Delhi.
Hans Bhawan,
1, Bahadurshah Zafar Marg,
New Delhi-110002
ITA No. 3957/Del/2015
AY: 2010-11
Malana Power Co. Ltd., vs. DCIT,
C/o M/s Jain Raj Associates Circle 6(1),
(Chartered Accountants),208, New Delhi.
Hans Bhawan,
1, Bahadurshah Zafar Marg,
New Delhi-110002
ITA 1550, 3957, 2319, 4685/D/2015
Assessment year 2010-11, 2011-12
ITA No. 2319/Del/2015
AY: 2011-12
ITA No. 4685/Del/2015
AY: 2010-11
DCIT, vs Malana Power Co. Ltd.,
Circle 16(1), Bhilwara Bhawana,
New Delhi. 40-41, Community Centre,
New Friends Colony,
New Delhi.
(Appellant) (Respondent)
Assessee by : Shri P.K. Jain, CA
Department by: Shri S.R. Senapati, Sr. DR
Date of Hearing: 31.01.2018
Date of Pronouncement: 27.04.2018
ORDER
PER BENCH:
ITA No.2281/Del/2013 has been preferred by the assessee
against the order dated 8.3.2013 passed by the Ld. Commissioner of Income Tax (Appeals)-IX, New Delhi for assessment year 2009- 10 whereas ITA No. 3100/Del/2013 is the department's cross appeal for the same year. ITA 3957/Del/2015 is the assessee's appeal against the order dated 24.4.2015 of the Ld. Commissioner of Income Tax (A)-6, Delhi for assessment year 2010-11 whereas ITA 4685/Del/2015 is the department's cross appeal. ITA 1550/Del/2015 is the assessee's appeal against the order dated 24.4.2015 of the Ld. Commissioner of Income Tax (A)-
6, Delhi for assessment year 2011-12 whereas ITA 2319/Del/2015 is the department's cross appeal. All these 2 ITA 1550, 3957, 2319, 4685/D/2015 Assessment year 2010-11, 2011-12 appeals have identical issues; these were heard together and are being disposed of through this consolidated order for the sake of convenience.
2. Brief facts of the case for assessment year 2009-10 are that the assessee company was engaged in the business of generation of hydroelectric power and development of hydroelectric power. The original return of income was filed declaring total income of Rs. 6,51,23,948/- after considering the income from sale of carbon credits as exempt income and claiming deduction of Rs. 142,02,88,285/- u/s 80-IA of the Income Tax Act, 1961 (hereinafter called 'the Act'). Subsequently, the assessee revised its return of income after offering income of Rs. 5,65,49,255/- being income from sale of carbon credit as its business income and, subsequently, increased the claim of deduction u/s 80IA to Rs. 1,47,68,37,540/-. The assessment was completed u/s 143(3) of the Act after making a disallowance of Rs. 2,11,70,140/- u/s 14A of the Income Tax Act, 1961, disallowance of claim u/s 80IA amounting to Rs. 6,65,27,663/- and disallowance of common expenses amounting to Rs. 71,91,980/-. The assessment was completed at a total income of Rs. 16,00,13,730/-. 3 ITA 1550, 3957, 2319, 4685/D/2015 Assessment year 2010-11, 2011-12 2.1 Aggrieved, the assessee approached the Ld. First Appellate Authority who allowed partial relief to the assessee by holding that provisions of section 14A could not be invoked in the case of the assessee as no borrowed funds had been utilised by the assessee for the purposes of investment. The Ld. Commissioner of Income Tax (A), however, dismissed the assessee's ground challenging the restriction of deduction u/s 80IA to Rs. 1,41,03,09,877/- while the actual deduction claimed was Rs. 1,47,68,37,540/- on the ground that income from sale of carbon credits was independent of the main business of power generation and the same cannot be said to have been received in the normal course of business. The Ld. Commissioner of Income Tax (A) also gave partial relief to the assessee in respect of disallowance of common expenses by directing the Assessing Officer. He gave relief of Rs. 16,51,000/- and upheld the remaining addition of Rs. 55,40,980/-.
2.2 Aggrieved by this decision of the Ld. Commissioner of Income Tax (A), the assessee has approached the ITAT and has challenged the upholding of disallowance of claim u/s 80-IA as well as partial upholding of disallowance of common expenses. The department is also in appeal before the ITAT challenging the 4 ITA 1550, 3957, 2319, 4685/D/2015 Assessment year 2010-11, 2011-12 action of the Ld. Commissioner of Income Tax (A) in providing part relief of Rs. 16,51,000/- out of total disallowance of Rs. 71,91,980/- pertaining to common expenses. The department has also challenged the action of the Ld. Commissioner of Income Tax (A) in deleting the disallowance of Rs. 2,11,70,140/- made u/s 14A of the Act.
3. At the outset, the Ld. AR drew our attention to the application dated 20.08.2014 moved by the assessee requesting admission of additional grounds of appeal in terms of Rule 11 of the Income Tax Appellate Tribunal Rules, 1963. The additional grounds raised by the assessee are as under:-
"1. That on the facts and circumstances of the case and in law, consideration of Rs. 5,65,49,255 realized from the sale of Carbon Credits should be held to be in the nature of capital receipt, not liable to tax.
2. That on the facts and circumstances of the case and in law, consideration of Rs.5,65,49,255 realized from the sale of Carbon Credits should held to be excluded from book profits under section 115JB of the Income Tax Act, 1961. "
3.1 The Ld. AR submitted that the assessee had installed hydro power plants for power generation to adopt Clean Development Mechanism and had resultantly earned carbon credits which were 5 ITA 1550, 3957, 2319, 4685/D/2015 Assessment year 2010-11, 2011-12 measured in units of Carbon Emission Reductions (CERs) or Verified Emission Reductions (VERs). It was submitted that there was a net income of Rs. 5,65,49,255/- from the sale of such CERs in AY 2009-10 which the assessee, in its original return of income, had claimed as exempt. It was further submitted that subsequently, the assessee had revised its return after taking into account this amount as business income and had claimed increased deduction u/s 80IA by the same amount which had been denied to the assessee in appeal. It was further submitted that the assessee had, however, paid tax on this amount by including the same in the book profit u/s 115JB of the Act. The Ld. AR further submitted that the assessee had been recently advised that CERs being in the nature of entitlement received to improve the world atmosphere by reducing carbon, heat and gas emissions, are in the nature of capital receipts not liable to tax. It was further submitted by the Ld. AR that the additional grounds were being raised pursuant to the advice received by the assessee. The Ld. AR further submitted that the additional grounds raised a purely legal issue, the facts of which are already available on record. It was prayed that the additional grounds raised by the assessee be admitted and adjudicated on merits. 6 ITA 1550, 3957, 2319, 4685/D/2015 Assessment year 2010-11, 2011-12 Ld. AR also filed case laws favouring the assessee in respect of the proposition that carbon credits were capital receipts. Ld. AR also filed case laws in support of the view that the amount received from carbon credits is to be excluded from computation of book profits u/s 115JB of the Act.
4. In response, the Ld. Sr. DR vehemently opposed the request for additional grounds being admitted at this stage as they were being raised before the ITAT for the first time. 4.1 The Ld. Sr. DR also argued vehemently against the proposition that carbon credit receipts were capital on nature.
5. We have heard the rival submissions in respect of the assessee's plea for admission of additional grounds and it is our considered opinion that the additional grounds raise a purely legal issue, the facts of which are already available on record. It is well settled that legal ground can be raised any time as per the ratio laid down by the Hon'ble Supreme Court in the case of NTPC Ltd. Vs CIT reported in 229 ITR 383 (SC), therefore, these are admitted.
6. Coming to the merits of the additional grounds of appeal raised by the assessee, we find that this issue is covered in favour of the assessee by the judgment of the Hon'ble Allahabad High 7 ITA 1550, 3957, 2319, 4685/D/2015 Assessment year 2010-11, 2011-12 Court in the case of Pr. Commissioner of Income Tax vs. L.H. Sugar Factory Pvt. Ltd. reported in 392 ITR 568 (All.) wherein the Hon'ble Allahabad High Court had held that income from sale of carbon credits/profits from sale of carbon credits is capital in nature. We also find that ITAT Bangalore Bench in the case of Subhash Kabini Power Corpn. Ltd. vs. CIT reported in (2015) 37 ITR (T)106 (Bang .Trib.) had held that once the Assessing Officer had allowed the assessee's claim of deduction u/s 80-IA in respect of income derived from sale of carbon credits, such order was not amendable u/s 263 of the Act. This order of ITAT, Bangalore Bench was also upheld by the Hon'ble Karnataka High Court.
6.1 Further, ITAT Hyderabad Bench in the case of CIT Vs. My Home Power Ltd. Hyderabad in ITA No. 1114/Hyd/2009 held that carbon credit receipts are capital in nature. This order of ITAT Hyderabad Bench was subsequently upheld by the Hon'ble Andhra Pradesh High Court in 365 ITR 82. The relevant portions of the order of ITAT Hyderabad Bench are as under-
"24. We have heard both the parties and perused the material on record. Carbon credit is in the nature of "an entitlement" received to improve world atmosphere and 8 ITA 1550, 3957, 2319, 4685/D/2015 Assessment year 2010-11, 2011-12 environment reducing carbon, heat and gas emissions. The entitlement earned for carbon credits can, at best, be regarded as a capital receipt and cannot be taxed as a revenue receipt. It is not generated or created due to carrying on business but it is accrued due to "world concern". It has been made available assuming character of transferable right or entitlement only due to world concern. The source of carbon credit is world concern and environment. Due to that the assessee gets a privilege in the nature of transfer of carbon credits. Thus, the amount received for carbon credits has no element of profit or gain and it cannot be subjected to tax in any manner under any head of income. It is not liable for tax for the assessment year under consideration in terms of sections 2(24), 28, 45 and 56 of the Income-tax Act, 1961. Carbon credits are made available to the assessee on account of saving of energy consumption and not because of its business. Further, in our opinion, carbon credits cannot be considered as a by-product. It is a credit given to the assessee under the Kyoto Protocol and because of international understanding. Thus, the assessees who have surplus carbon credits can sell them to other assessees to 9 ITA 1550, 3957, 2319, 4685/D/2015 Assessment year 2010-11, 2011-12 have capped emission commitment under the Kyoto Protocol. Transferable carbon credit is not a result or incidence of one's business and it is a credit for reducing emissions. The persons having carbon credits get benefit by selling the same to a person who needs carbon credits to overcome one's negative point carbon credit. The amount received is not received for producing and/or selling any product, by-product or for rendering any service for carrying on the business. In our opinion, carbon credit is entitlement or accretion of capital and hence income earned on sale of these credits is capital receipt. For this proposition, we place reliance on the judgment of the Supreme Court in the case of CIT vs. Maheshwari Devi Jute Mills Ltd. (57 ITR 36) wherein it was held that transfer of surplus loom hours to other mill out of those allotted to the assessee under an agreement for control of production was capital receipt and not income. Being so, the consideration received by the assessee is similar to consideration received by transferring of loom hours. The Supreme Court considered this fact and observed in M/s. Perpetual Energy Systems Limited, Hyderabad that taxability of payment received for sale of loom hours by the assessee is 10 ITA 1550, 3957, 2319, 4685/D/2015 Assessment year 2010-11, 2011-12 on account of exploitation of capital asset and it is capital receipt and not an income. Similarly, in the present case the assessee transferred the carbon credits like loom hours to some other concerns for certain consideration. Therefore, the receipt of such consideration cannot be considered as business income and it is a capital receipt. Accordingly, we are of the opinion that the consideration received on account of carbon credits cannot be considered as income as taxable in the assessment year under consideration. Carbon credit is not an offshoot of business but an offshoot of environmental concerns. No asset is generated in the course of business but it is generated due to environmental concerns. Credit for reducing carbon emission or greenhouse effect can be transferred to another party in need of reduction of carbon emission. It does not increase profit in any manner and does not need any expenses. It is a nature of entitlement to reduce carbon emission, however, there is no cost of acquisition or cost of production to get this entitlement. Carbon credit is not in the nature of profit or in the nature of income.
25. Further, as per guidance note on accounting for Self- generated Certified Emission Reductions (CERs) issued by 11 ITA 1550, 3957, 2319, 4685/D/2015 Assessment year 2010-11, 2011-12 the Institute of Chartered Accountants of India (ICAI) in June, 2009 states that CERs should be recognised in books when those are created by UNFCCC and/or unconditionally available to the generating entity. CERs are inventories of the generating entities as they are generated and held for the purpose of sale in ordinary course. Even though CERs are intangible assets those should be accounted as per AS-2 (Valuation of inventories) at a cost or market price, whichever is lower. Since CERs are recognised as inventories, the generating assessee should apply AS-9 to recognise revenue in respect of sale of CERs.
26. Thus, sale of carbon credits is to be considered as capital receipt. This ground is allowed."
6.2 Accordingly, respectfully following the ratio of the settled judicial precedent as aforementioned, we allow the additional grounds raised by the assessee and hold that the income from sale of carbon credits is capital in nature. In view of the additional grounds being allowed, ground no. 1 originally raised by the assessee in the appeal memo becomes in fructuous and is not being adjudicated.
12 ITA 1550, 3957, 2319, 4685/D/2015 Assessment year 2010-11, 2011-12
7. With respect to ground no. 2 of the assessee's appeal for AY 2009-10, the Ld. AR submitted that the Ld. Commissioner of Income Tax (A) had erred in law and on facts in partly upholding the disallowance of Rs. 55,40,980/- out of total expenditure of Rs. 71,91,980/- incurred through the four related group companies. The Ld. AR submitted that proper bills and vouchers had been maintained by the assessee and had also been produced during the course of the First Appellate proceedings but the Ld. Commissioner of Income Tax (A) had only relied on the order of his predecessor in the immediately preceding previous year and had upheld the addition of Rs. 55,40,980/- without looking to the factual details filed before the Ld. Commissioner of Income Tax (A).
8. In response, the Ld. Sr. DR submitted that the nature of expenses was not clear and, therefore, the disallowance had been made. The Ld. Sr. DR also submitted that ground no. 1 in department's cross appeal was identical and challenged the action of the Ld. Commissioner of Income Tax (A) in giving partial relief to the assessee in this regard. Ld. Sr. DR submitted that the Ld. Commissioner of Income Tax (A) had given relief to the 13 ITA 1550, 3957, 2319, 4685/D/2015 Assessment year 2010-11, 2011-12 assessee without any evidence having been filed by the assessee in support of its claim.
8.1 With respect to the other ground in the department's appeal, the Ld. Sr. DR submitted that the Ld. Commissioner of Income Tax (A) had erred in deleting the disallowance of Rs. 2,11,70,140/- made u/s 14A of the Act while ignoring the fact that the disallowance made under Rule 8D(iii) is not for disallowance of interest expenses but for disallowance of other expenses like administrative expenses.
9. In response, the Ld. AR supported the order of the Ld. Commissioner of Income Tax (A) and placed reliance on the findings contained therein.
10. Ld. AR for appearing on behalf of the assessee for assessment years 2010-11 and 2011-12 submitted that the assessee's appeal in ITA No. 3957/Del/2015 for assessment year 2010-11 and ITA No. 1550/Del/2015 for assessment year 2011- 12 had identical grounds relating to the question as to whether the sale of carbon credits should be held to be excluded from the computation of book profits u/s 115JB of the Act or not. 10.1 Ld. AR also submitted that under the instructions of the assessee, ground no.2 relating to disallowance of claim of 14 ITA 1550, 3957, 2319, 4685/D/2015 Assessment year 2010-11, 2011-12 deduction u/s 80-IA on miscellaneous income and foreign exchange fluctuation income in ITA 1550/Del/2015 was not being pressed.
11. In response, the Ld. Sr. DR placed reliance on the findings of the Ld. Commissioner of Income Tax (A) as well as the Assessing Officer and vehemently argued that the adjustment u/s 115JB with respect of sale of carbon credits had been correctly made.
12. Coming to the department's appeal for assessment year 2010-11 in ITA 4685/Del/2015, the Ld. Sr. DR submitted that the Ld. Commissioner of Income Tax (A) had erred in deleting the disallowance u/s 14A of the Act. Ld. Sr. DR submitted that identical ground in assessment year 2011-12 was also being contested by the department in ITA No. 2319/D/2015 and it was argued that the Ld. Commissioner of Income Tax (A) had erred in deleting the said disallowance.
12.1 Ld. Sr. DR also submitted that ground nos. 4 and 5 in department's appeal for assessment year 2010-11 and ground no. 1 in department's appeal for assessment year 2011-12 were identical and challenged the action of the Ld. Commissioner of Income Tax (A) in deleting the disallowance pertaining to sale of 15 ITA 1550, 3957, 2319, 4685/D/2015 Assessment year 2010-11, 2011-12 carbon credits. In this regard, reliance was placed on the findings recorded by the AO.
13. We have heard the rival submissions and perused the material available on record. As far as the assessee's appeal for assessment year 2009-10 is concerned, we have already allowed the additional grounds raised by the assessee and have held that carbon credit receipts are capital in nature. 13.1 Coming to ground no. 2 of the assessee's appeal for AY 2009-10, it is seen that that the Assessing Officer had disallowed 100% of the common expenses of Rs. 71,91,980/- u/s 40A(2)(b) of the Act. The Assessing Officer has noted that it could not be determined that each and every expense which was commonly incurred was incurred for the purposes of business of the assessee. The Assessing Officer had also noted that expenses incurred had been through different agencies and there was no basis of apportionment of these expenses. On appeal, the Ld. Commissioner of Income Tax (A), after noting the observations of the Assessing Officer, allowed relief to the assessee by following the order of his predecessor in the immediately preceding year wherein common expenses to the extent of Rs. 16,51,000/- had been allowed. Ld. Commissioner of Income Tax (A) also noted 16 ITA 1550, 3957, 2319, 4685/D/2015 Assessment year 2010-11, 2011-12 that the justification for increase in expenses could not be given by the assessee. Thus, it is seen that on the one hand, the assessee was not been able to substantiate the apportionment of common expenses and justify the increase in expenses and on the other hand, the lower authorities have also made the disallowance on an estimate without recording any finding of fact. Under the circumstances, it is our considered opinion that this issue should be examined afresh by the Assessing Officer. Accordingly, this issue is restored to the file of the Assessing Officer for being adjudicated de novo after giving due opportunity to the assessee to present its case. Accordingly, ground no. 2 of the assessee stands allowed for statistical purposes. 13.2 Since Ground no.1 of the department's appeal also challenges the partial relief given by the Ld. Commissioner of Income Tax (A) to the assessee on apportionment of common expenses, in view of our restoring this issue to the file of the AO for being adjudicated afresh, ground no. 1 of the department's appeal is also allowed for statistical purposes. 13.3 In ground no. 2 of the department's appeal for assessment year 2009-10, the department has challenged the deletion of Rs. 2,11,70,140/- made u/s 14A. It is seen that the Ld. 17 ITA 1550, 3957, 2319, 4685/D/2015 Assessment year 2010-11, 2011-12 Commissioner of Income Tax (A) has recorded a finding that the assessee had made investment in its subsidiary concerns and the funds had been raised by the issuing share capital of Rs. 112.80 crore to its holding companies M/s S.N. Power and M/s Bhilwara Energy Limited. It has also been noted by the Ld. Commissioner of Income Tax (A) that Rs. 26.31 cores have been invested out of self generated funds and further that all related documents, bank accounts were submitted and the trail of funds was established. Thereafter, the Ld. Commissioner of Income Tax (A) has followed the decision of his predecessor in the immediately preceding assessment year wherein it had been held that since no borrowed funds were utilized by the assessee for investment in its subsidiary concern, there was no question of incurring any expenditure on the same. Although the department has contested this action of the Ld. Commissioner of Income Tax (A), no factual or legal infirmity in this adjudication could be specifically pinpointed even during the course of proceedings before us. Therefore, on the facts of the case and in view of the factual findings recorded by the Ld. Commissioner of Income Tax (A), we find no reason to interfere with the adjudication on this 18 ITA 1550, 3957, 2319, 4685/D/2015 Assessment year 2010-11, 2011-12 issue. Accordingly, we dismiss ground no. 2 of department's appeal.
14. In the result, the assessee's appeal for assessment year 2009-10 stands whereas department's appeal for assessment year 2009-10 stands partly allowed for statistical purposes.
15. Coming to the assessee's appeals for assessment years 2010-11 and 2011-12, the only issue in dispute is whether the amount realised from the sale of carbon credits is to be excluded while computing book profits u/s 115JB of the Act. This ground is identical in both the years under appeal i.e. assessment years 2010-11 and 2011-12. We find that this issue is also covered in favour of the assessee. In the case of Shree Cements Ltd. reported in 49 taxman.com 274 (Jaipur), Jaipur Bench of the ITAT was dealing with the issue as to whether subsidy received which was admittedly capital in nature can be subject to MAT. The ITAT held that there was never any intention behind introduction of section 115JB to tax something which is not taxable at all. The ITAT Bench also considered the fact that in respect of earlier year, the Hon'ble Rajasthan High Court did not admit the substantial question of law in this regard. Further, to take care of the judgment of the Hon'ble Apex court in case of Apollo tyres, the 19 ITA 1550, 3957, 2319, 4685/D/2015 Assessment year 2010-11, 2011-12 Tribunal held that a capital receipt (subsidy) which is neither 'profit' nor 'income' and which does not have any element thereof embedded there in, cannot be part of 'profit' as per Profit & Loss account prepared in terms of Part II of Schedule VI to Companies Act. ITAT Jaipur Bench held that clause 2(a) of Part II clearly spells that the profit and loss a/c shall be so made out so as to clearly disclose the result of the working of the company during the period covered by the accounts and since, subsidy can never be income, it should be excluded from the book profits. 15.1 It has been held in other cases that while any assessment u/s 115JB would be concluded exclusively on the basis of book profits as adjusted by the items set out in the explanation there under, in an assessment in terms of section 115JA or 115JB, adjusted book profits would be further subjected to the effect of other provisions of the Act that are specifically brought into play by virtue of sub-section (4) of section 115JA and (5) of section 115JB. It is settled law that the purpose and legislative intent behind introduction of provisions of section 115J/115JA/115JB was to take care of the phenomenon of prosperous zero tax companies which had continued but were paying no income tax even though they had profits and were declaring dividends. It was 20 ITA 1550, 3957, 2319, 4685/D/2015 Assessment year 2010-11, 2011-12 further sought that minimum corporate tax should be paid by these companies and accordingly MAT was introduced. However, it was never the intention of the legislature that any receipts which is not taxable per se within the tax provision or not reckoned as part of net profit as per the profit and loss account as Companies Act can be brought to tax as a book profit. Since income/profits from the sale of carbon credits is essentially in the nature of capital receipts, by no stretch of imagination can it be brought to tax under the provisions of minimum alternate tax u/s 115JB of the Act. Accordingly, we allow the grounds raised by the assessee in this regard in assessment years 2010-11 and 2011-12. Accordingly, ITA 3957/Del/2015 and 1550/Del/2015 stand allowed.
15.2 Coming to the department's appeals for assessment years 2010-11 and 2011-12, it is seen that in assessment year 2010- 11, ground nos. 4 and 5 and in assessment year 2011-12, ground no. 2 and 3 challenge the action of the Ld. Commissioner of Income Tax (A) in holding the income from sale of carbon credits to be in the nature of capital receipt and hence not chargeable to tax. As we have already adjudicated this issue in favour of the assessee in assessment year 2009-10 by admitting assessee's 21 ITA 1550, 3957, 2319, 4685/D/2015 Assessment year 2010-11, 2011-12 additional grounds and by holding that income/profit on the sale of carbon credits is a capital receipt, we hold the same for assessment years 2010-11 and 2011-12 as well. Accordingly, ground nos. 4 and 5 in assessment year 2010-11 and ground nos. 2 and 3 in assessment year 2011-12 raised by the department are dismissed.
15.3 Coming to the remaining grounds in department's appeal for assessment year 2010-11, it is seen that ground nos. 1, 2 and 3 challenge the deletion of disallowance u/s 14A of the Act by the ld. Commissioner of Income Tax (A). In this regard, it is seen that the Ld. Commissioner of Income Tax (A) has given a categorical finding that the assessee company did not have any income which was exempt under the Act. Thus, as per provisions of sub- section (1) of section 14A, it is clear that for the said section to apply, the precondition is that there should be an income which does not form part of the total income under the Income Tax Act. Since the assessee company did not have any exempt income under the Act, section 14A will not get attracted. Since exempt income is nil, section 14A will not apply and once section 14A does not apply, the question of application of Rule 8D also will not arise. The Ld. Sr. DR could not point out any factual or legal 22 ITA 1550, 3957, 2319, 4685/D/2015 Assessment year 2010-11, 2011-12 infirmity in the order of the Ld. Commissioner of Income Tax (A) on this issue although he has vehemently argued against the deletion of disallowance. Therefore, on facts, we find no reason to interfere with the findings of the Ld. Commissioner of Income Tax (A) with respect to ground nos. 1, 2 and 3 raised by the department in its appeal for assessment year 2010-11 and the same are dismissed.
15.4 Coming to department's appeal for 2011-12, the only ground remaining for adjudication is ground no.1 which challenges the action of the Ld. Commissioner of Income Tax (A) in deleting the disallowance u/s 14A of the Act. It is seen that in this year also, the Ld. Commissioner of Income Tax (A) has recorded a categorical finding that there was no exempt income earned by the assessee during the year under consideration. Therefore, for the reasons mentioned in our adjudication of identical grounds in department's appeal for assessment year 2010-11, we find no reason to interfere with the finding of the Ld. Commissioner of Income Tax (A) in this year as well and we dismiss the grounds raised by the department.
16. In the result, ITA No. 4685/D/2015 and 2319/D/2015 are dismissed.
23 ITA 1550, 3957, 2319, 4685/D/2015 Assessment year 2010-11, 2011-12
17. In the final result, ITA 2281/Del/2013, ITA 3957/Del/2015 and ITA 1550/D/2015 are allowed whereas ITA 3100/Del/2013, 4685/Del/2015 and 2319/Del/2015 are dismissed. Order pronounced in the Open Court on 27th April, 2018.
Sd/- Sd/-
(G.D. AGRAWAL) (SUDHANSHU SRIVASTAVA)
PRESIDENT JUDICIAL MEMBER
DT. 27th APRIL 2018
'GS'
Copy forwarded to:-
1. Appellant
2. Respondent
3. CIT(A)
4. CIT
5. DR
By Order
Asstt. Registrar
24