ACIT, Circle1(2),, Hyderabad v. M/s. Clarion Power Corporation Ltd.,, Hyderabad

ITA 1482/HYD/2013 | 2008-2009
Pronouncement Date: 12-11-2014 | Result: Dismissed

Appeal Details

RSA Number 148222514 RSA 2013
Assessee PAN AABCC5697M
Bench Hyderabad
Appeal Number ITA 1482/HYD/2013
Duration Of Justice 1 year(s) 3 day(s)
Appellant ACIT, Circle1(2),, Hyderabad
Respondent M/s. Clarion Power Corporation Ltd.,, Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 12-11-2014
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 12-11-2014
Assessment Year 2008-2009
Appeal Filed On 08-11-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B HYDERABAD BEFORE SHRI P.M. JAGTAP ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY JUDICIAL MEMBER ITA NO. 1482/HYD/2013 ASSESSMENT YEAR : 2008-09 ASST. COMMISSIONER OF INCOME- TAX CIRCLE 1(2) HYDERABAD. M/S CLARION POWER CORPORATION LTD. HYDERABAD. PAN AABCC 5697 M (APPELLANT) (RESPONDENT) REVENUE BY SHRI RAJAT MITRA ASSESSEE BY SHRI P. MURALI MOHAN DATE OF HEARING 03-11-2014 DATE OF PRONOUNCEMENT 12 -11-2014 O R D E R PER SAKTIJIT DEY J.M.: THIS APPEAL BY THE DEPARTMENT IS DIRECTED AGAINST ORDER DATED 31/07/13 PASSED BY THE COMMISSIONER OF INCOME-TAX( A)-V HYDERABAD FOR THE ASSESSMENT YEAR 2008-09. THE DE PARTMENT HAS RAISED THE FOLLOWING EFFECTIVE GROUNDS: 2. THE LEARNED CIT(A) ERRED IN DIRECTING TO ALLOW R ELIEF TO THE ASSESSEE HOLDING THAT THE INCOME GENERATED IN SALE OF CARBON CREDITS AS A CAPITAL RECEIPT AND NOT TAXABLE. 3. THE LEARNED CIT(A) ERRED IN ALLOWING RELIEF ON T HE ISSUE OF DISALLOWANCE OF 80IA DEDUCTION ON THE COMPONENT OF INTEREST INCOME OF RS. 7 79 389 AS NO OPPORTUNITY WAS PROVID ED TO THE AO UNDER RULE 46A OF IT RULES TO VERIFY THE CORRECT NESS OF THE CLAIM. 2 ITA NO. 1482/HYD/2013 M/S CLARION POWER CORPN. LTD. 4. THE LEARNED CIT(A) ERRED IN ALLOWING RELIEF ON T HE ISSUE OF THE ADDITION MADE TOWARDS EMPLOYEE COMPENSATION EXPENSE S OF RS. 10 48 500 AS NO OPPORTUNITY WAS PROVIDED TO THE AO UNDER RULE 46A OF IT RULES TO VERIFY THE CORRECTNESS OF THE CL AIM. 2. IN GROUND NO. 2 THE DEPARTMENT HAS CHALLENGED T HE DECISION OF LEARNED CIT(A) IN DELETING THE ADDITION MADE BY AO BY HOLDING THAT THE AMOUNT RECEIVED ON SALE OF CARBON CREDITS IS CA PITAL IN NATURE HENCE NOT TAXABLE. 3. BRIEFLY THE FACTS RELATING TO THE AFORESAID ISS UE ARE ASSESSEE A COMPANY IS ENGAGED IN GENERATION OF POWER. FOR THE AY UNDER CONSIDERATION ASSESSEE FILED ITS RETURN OF INCOME DECLARING NIL INCOME. DURING THE COURSE OF ASSESSMENT PROCEEDING AO WHILE EXAMINING ASSESSEES CLAIM OF DEDUCTION U/S 80IA N OTICED THAT ASSESSEE HAS RECEIVED AN AMOUNT OF RS. 5 07 45 000 FROM SALE OF CERS (CARBON CREDITS) WHICH HAVE BEEN INCLUDED IN T HE GROSS SALES AND CREDITED TO P&L A/C AND THE ASSESSEE HAS ALSO C LAIMED DEDUCTION U/S 80IA ON THE SAME. WHEN AO PROPOSED TO DISALLOW THE DEDUCTION CLAIMED U/S 80IA ON SALE OF CARBON CREDITS ON THE G ROUND THAT SALE OF CARBON CREDITS CANNOT BE CONSIDERED TO BE INCOME DE RIVED FROM ELIGIBLE BUSINESS OF ASSESSEE THOUGH ASSESSEE OBJ ECTED TO THE PROPOSED DISALLOWANCE AO ULTIMATELY DISALLOWED TH E CLAIM OF DEDUCTION U/S 80IA OF RS. 5 07 45 000 BY EXCLUDING IT FROM BUSINESS INCOME IN THE ASSESSMENT ORDER PASSED BY HIM. ASSES SEE CHALLENGED THE DECISION OF AO IN APPEAL PREFERRED BEFORE THE C IT(A). THE LEARNED CIT(A) FOLLOWING THE DECISION OF THE ITAT HYDERABAD BENCH IN CASE OF M/S MY HOME POWER LTD. VS. DCIT 151 TTJ 616 DELETED THE ADDITION BY HOLDING THAT THE AMOUNT OF RS. 5 07 45 000 ON SALE OF CARBON CREDITS IS IN THE NATURE OF CAPITAL RECEIPT HENCE IS NOT TAXABLE. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE O RDERS OF REVENUE AUTHORITIES AS WELL AS OTHER MATERIAL ON RE CORD. AT THE OUTSET BOTH LEARNED DR AND LEARNED AR AGREED BEFORE US THA T THE ISSUE IN 3 ITA NO. 1482/HYD/2013 M/S CLARION POWER CORPN. LTD. DISPUTE IS SQUARELY COVERED BY THE DECISION OF THE ITAT HYDERABAD BENCH IN CASE OF M/S MY HOME POWER LTD. VS DCIT (SU PRA) WHICH HAS BEEN CONFIRMED BY THE HONBLE JURISDICTIONAL HI GH COURT IN CASE OF SAME ASSESSEE WHILE DISMISSING DEPARTMENTS APPE AL AS REPORTED IN 365 ITR 82 / 46 TAXMAN.COM 314. CONSIDERING SUCH SUBMISSION OF BOTH THE COUNSELS AND AFTER GOING THROUGH THE JUDGM ENT OF THE HONBLE JURISDICTIONAL HIGH COURT AS AFORESAID WE DO NOT F IND ANY INFIRMITY IN THE ORDER OF LEARNED CIT(A) AS THE ISSUE IS SQUAREL Y COVERED IN FAVOUR OF ASSESSEE BY VIRTUE OF THE AFORESAID JUDGMENT OF THE JURISDICTIONAL HIGH COURT. ACCORDINGLY WE UPHOLD THE ORDER OF TH E LEARNED CIT(A) ON THIS ISSUE AND THE GROUND RAISED BY THE DEPARTME NT IS DISMISSED. 5. THE NEXT ISSUE AS RAISED IN GROUND NO. 3 IS IN R ESPECT OF DELETION OF DISALLOWANCE OF DEDUCTION U/S 80IA IN R ESPECT OF INCOME OF RS. 7 79 389 BY TREATING IT AS INTEREST INCOME BY AO. 6. BRIEFLY THE FACTS RELATING TO THIS ISSUE ARE DU RING THE ASSESSMENT PROCEEDING AO WHILE COMPUTING ASSESSEE S INCOME IN THE IMPUGNED ASSESSMENT YEAR EXCLUDED AN AMOUNT OF RS. 7 79 389 FROM THE GROSS SALES DECLARED BY ASSESSEE FOR THE P URPOSE OF COMPUTING DEDUCTION U/S 80IA ON THE GROUND THAT THE SAME REPRESENTS INTEREST. ASSESSEE CHALLENGED THE DISALLOWANCE OF D EDUCTION CLAIM U/S 80IA BY PREFERRING APPEAL BEFORE THE CIT(A). 7. IN COURSE OF HEARING OF APPEAL BEFORE THE CIT(A) ASSESSEE CONTENDED THAT THE AMOUNT OF RS. 7 79 389 CONSIST O F RS. 7 14 138 FROM SALE OF SCRAP AND RS. 65 251 TOWARDS INTERES T EARNED ON FIXED DEPOSITS IN ANDHRA BANK. IT WAS SUBMITTED BY ASSESS EE THAT THE AMOUNT RECEIVED FROM SALE OF SCRAP ON WHICH ASSESSE E HAS ALREADY PAID VAT AND TCS IS ELIGIBLE FOR DEDUCTION U/S 80IA AS SUCH INCOME AROSE IN COURSE OF BUSINESS OF ASSESSEE. IT WAS ALS O SUBMITTED BY ASSESSEE THAT EVEN THE INTEREST INCOME OF RS. 65251 IS ALSO INCIDENTAL 4 ITA NO. 1482/HYD/2013 M/S CLARION POWER CORPN. LTD. TO THE MAIN BUSINESS ACTIVITY OF ASSESSEE. IN SUPPO RT OF SUCH CONTENTION ASSESSEE RELIED UPON SOME DECISIONS OF ITAT. 8. THE LEARNED CIT(A) AFTER CONSIDERING THE SUBMISS IONS OF ASSESSEE AND GOING THROUGH THE DECISIONS RELIED UPO N BY ASSESSEE ALLOWED ASSESSEES CLAIM BY DIRECTING AO TO ALLOW D EDUCTION U/S 80IA ON THE AMOUNT OF RS. 7 79 389. 9. THE LEARNED DR SUBMITTED BEFORE US THAT IN COURS E OF ASSESSMENT PROCEEDING ASSESSEE HAS NOT FURNISHED A NY EVIDENCE TO SHOW THAT THE AMOUNT OF RS. 7 79 389 ALSO INCLUDES SCRAP SALES. IT WAS SUBMITTED ONLY IN COURSE OF APPEAL HEARING A SSESSEE HAS FURNISHED DETAILS/BIFURCATION WITH REGARD TO THE AM OUNT OF RS. 7 79 389. THUS LEARNED DR SUBMITTED THAT AS EVIDEN CE SUBMITTED BEFORE THE CIT(A) WAS NOT BEFORE AO CIT(A) WAS NOT JUSTIFIED IN ACCEPTING ASSESSEES CLAIM WITHOUT GIVING OPPORTUNI TY TO AO IN TERMS WITH RULE 46A. 10. THE LEARNED AR ON THE OTHER HAND STRONGLY COU NTERING TO THE SUBMISSIONS MADE BY LEARNED DR SUBMITTED THAT ALL T HE INFORMATIONS WHICH WERE FURNISHED BEFORE THE LEARNED CIT(A) WERE ALSO FILED BEFORE AO . THEREFORE THE DEPARTMENT IS NOT JUSTIFIED IN SAYING THAT THE ORDER PASSED BY THE CIT(A) IS IN VIOLATION OF RULE 46A. 11. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTI ES AND PERUSED THE ORDERS OF REVENUE AUTHORITIES AS WELL AS OTHER MATERIALS ON RECORD. AS CAN BE SEEN FROM THE ASSESSMENT ORDER WHILE COM PUTING ASSESSEES CLAIM OF DEDUCTION U/S 80IA AO HAS EXCL UDED THE AMOUNT OF RS. 7 79 389 BY TREATING IT AS INTEREST INCOME W ITHOUT ASCRIBING ANY REASONS. HOWEVER THE LEARNED CIT(A) AS IT APPEAR S AFTER EXAMINING DETAILS WITH REGARD TO THE COMPONENT OF RS. 7 79 38 9 WHICH INCLUDES RS. 7 14 138 TOWARDS SCRAP SALES AND RS. 65 251 AS INTEREST ON FDRS. HAS ALLOWED ASSESSEES CLAIM OF DEDUCTION U/S 80IA. ON 5 ITA NO. 1482/HYD/2013 M/S CLARION POWER CORPN. LTD. PERUSAL OF LETTER DATED 01/12/2010 ALONG WITH ACCOM PANYING DOCUMENTS SUBMITTED BEFORE ASSESSING OFFICER COPIE S OF WHICH WERE ALSO PLACED ON RECORD IT APPEARS ASSESSEE HAS FURN ISHED THE DETAILS OF OTHER INCOME AMOUNTING TO RS. 7 79 389. HENCE D EPARTMENTS CLAIM THAT LD. CIT(A) HAS CONSIDERED ADDITIONAL EVI DENCE IN VIOLATION OF RULE 46A IS DEVOID OF MERIT. AS THE DEPARTMENT H AS CHALLENGED THE DECISION OF LD. CIT(A) ON THIS ISSUE ONLY ON VIOLAT ION OF RULE 46A WITHOUT GOING INTO MERITS OF ASSESSEES CLAIM OF DE DUCTION WE UPHOLD THE ORDER OF LD. CIT(A). THE GROUND RAISED IS DISMI SSED. 12. GROUND NO. 4 IS IN RESPECT OF ADDITION MADE BY AO OF AN AMOUNT OF RS. 10 48 500 BUT DELETED BY CIT(A). 13. BRIEFLY THE FACTS ARE DURING THE ASSESSMENT PR OCEEDING AO NOTICED THAT ASSESSEE HAS DEBITED AN AMOUNT OF RS. 10 48 500 TOWARDS EMPLOYEES COMPENSATION EXPENSES (ESOPS) IN THE P&L A/C UNDER THE HEAD SALARIES AND WAGES. WHEN THE AO C ALLED UPON ASSESSEE TO JUSTIFY THE EXPENDITURE CLAIMED WITH SU PPORTING EVIDENCE ASSESSEE SUBMITTED THAT UNDER THE EMPLOYEES STOCK O PTION POLICY (ESOP) THE HOLDING COMPANY LANCO INFRATECH LTD. GIV EN THE ESOPS BENEFITS TO ITS OWN EMPLOYEES AND ALL ITS SUBSIDIAR Y COMPANIES. . UNDER THE ESOP POLICY EMPLOYEES HAVE TO PAY RS. 2. 43 PER OPTION AND THE SUBSIDIARY COMPANY WILL BE PAYING RS. 50 PE R OPTION TO LANCO INFRATECH LTD. WHICH IS ACCOUNTED AS EXPENSES IN T HE BOOKS OF SUBSIDIARY COMPANY. IT WAS SUBMITTED THAT AS PART O F ESOP POLICY DURING 2007-08 LANCO INFRATECH LTD. HAS SANCTIONED ESOP TO THE EMPLOYEES OF ASSESSEE COMPANY AND GRANTED OPTIONS O F RS. 1 39 800 NOS OF SHARE AT RS. 50 PER SHARE AMOUNTING TO RS. 6 9 90 000 FOR A PERIOD OF FIVE YEARS AND ACCORDINGLY HAS RAISED DE BIT NOTE TO ASSESSEE. ASSESSEE HAS TAKEN IT IN THE BOOKS OF ACC OUNT AND IN ADVANCES AND WRITING IT OFF ON QUARTERLY BASIS. IT WAS SUBMITTED THAT DURING FY 2007-08 ASSESSEE HAS WRITTEN OFF THREE Q UARTERS @ RS. 3 49 500 EACH AMOUNTING TO RS. 10 48 500. AO HOWEV ER DID NOT 6 ITA NO. 1482/HYD/2013 M/S CLARION POWER CORPN. LTD. ACCEPT ASSESSEES EXPLANATION BY OBSERVING THAT ASS ESSEE HAS NOT PRODUCED ANY EVIDENCE IN SUPPORT OF ITS CLAIM AND A CCORDINGLY DISALLOWED THE EXPENDITURE CLAIM. BEING AGGRIEVED O F SUCH DISALLOWANCE ASSESSEE PREFERRED APPEAL BEFORE THE LEARNED CIT(A). 14. BEFORE THE LEARNED CIT(A) ASSESSEE SUBMITTED L IST OF EMPLOYEES OPTING FOR ESOP ALONG WITH LEDGER ACCOUNT COPY. CIT(A) AFTER VERIFYING THE DETAILS DELETED THE ADDITION B Y OBSERVING AS UNDER: 82. THE SUBMISSIONS MADE BY THE APPELLANT ARE CAREF ULLY CONSIDERED AND THE EVIDENCE FURNISHED BEFORE ME IS VERIFIED UNDER THE POWERS VESTED IN ME U/S 250(4) OF THE ACT AND FOUND TO BE IN ORDER. BEING SO IT IS CLEAR THAT THE APPE LLANT HAS INCURRED EXPENDITURE OF RS. `0.48 500 TOWARDS ESOPS AND IT IS ENTITLED TO CLAIM THE SAME. THE AO IS THEREFORE DIR ECTED TO DELETE THE ADDITION AND THE GROUND OF APPEAL IN THI S REGARD STANDS ALLOWED. 15. WE HAVE HEARD THE PARTIES AND PERUSED THE ORDER S OF REVENUE AUTHORITIES AS WELL AS OTHER MATERIALS ON RECORD. IT IS VERY MUCH EVIDENT FROM THE ORDER OF CIT(A) THAT AFTER VERIFYI NG DETAILS CIT(A) HAS ALLOWED THE EXPENDITURE CLAIM BY ASSESSEE. UNDISPUT EDLY EXPENDITURE INCURRED TOWARDS ESOPS IS AN ALLOWABLE EXPENDITURE. THEREFORE THE ONLY THING WHICH NEEDED VERIFICATION IS WHETHER ASSESSEE HAS ACTUALLY INCURRED THE EXPENDITURE. WHE N THE LEARNED CIT(A) BY VERIFYING THE MATERIAL ON RECORD HAS FOUN D THAT ASSESSEE HAS ACTUALLY INCURRED THE EXPENDITURE THEN NO USE FUL PURPOSE WOULD HAVE BEEN SERVED IN GETTING IT VERIFIED AGAIN THROU GH AO. IN THE AFORESAID VIEW OF THE MATTER WE DO NOT FIND ANY IN FIRMITY IN THE ORDER OF THE CIT(A) IN DELETING THE ADDITION MADE BY AO A ND ACCORDINGLY WE UPHOLD THE SAME. GROUND RAISED BY THE DEPARTMENT IS THEREFORE DISMISSED. 7 ITA NO. 1482/HYD/2013 M/S CLARION POWER CORPN. LTD. 16. IN THE RESULT APPEAL OF THE DEPARTMENT IS DISM ISSED. PRONOUNCED IN THE OPEN COURT ON 12/11/2014. SD/- SD/- (P.M. JAGTAP) (SAKTIJIT DEY) ACCOUNTANT MEMBER JU DICIAL MEMBER HYDERABAD DATED:12 TH NOVEMBER 2014 KV COPY TO:- 1) ACIT CIRCLE 1(2) HYDERABAD. 2) M/S CLARION POWER CORPORATION LTD. PLOT NO. 4 SOFTWARE UNIT LAYOUT HITECH CITY MADHAPUR HYDERABAD. 3) CIT(A)-V HYDERABAD 4) CIT-I HYDERABAD 5)THE DEPARTMENTAL REPRESENTATIVE I.T.A.T. HYDER ABAD.