THE ACIT,, Visakhapatnam v. M/s Varam Power Projects Pvt., Ltd.,, Srikakulam

ITA 42/VIZ/2015 | 2008-2009
Pronouncement Date: 29-11-2017 | Result: Dismissed

Appeal Details

RSA Number 4225314 RSA 2015
Assessee PAN AABCV2160J
Bench Visakhapatnam
Appeal Number ITA 42/VIZ/2015
Duration Of Justice 2 year(s) 10 month(s) 7 day(s)
Appellant THE ACIT,, Visakhapatnam
Respondent M/s Varam Power Projects Pvt., Ltd.,, Srikakulam
Appeal Type Income Tax Appeal
Pronouncement Date 29-11-2017
Appeal Filed By Department
Tags No record found
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 29-11-2017
Assessment Year 2008-2009
Appeal Filed On 22-01-2015
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH VISAKHAPATNAM . . . BEFORE SHRI V. DURGA RAO JUDICIAL MEMBER & SHRI D .S. SUNDER SINGH ACCOUNTANT MEMBER . / I . T .A.NO. 651 /VIZAG/ 2014 ( / ASSESSMENT YEAR: 2008 - 09 ) M/S VARAM POWER PROJECTS PVT. LTD. D.NO.8 - 4 - 120/3 RAJA COMPLEX SRIKAKULAM VS. ACIT CIRCLE - 4(1) VISAKHAPATNAM [PAN : AABCV2160J ] ( / APPELLANT) ( / RESPONDENT) ./ I.T.A.NO. 42 /VIZAG/ 2015 ( / ASSESSMENT YEAR: 2008 - 09 ) ACIT CIRCLE - 4(1) VISAKHAPATNAM M/S VARAM POWER PROJECTS PVT. LTD. D.NO.8 - 4 - 120/3 RAJ A COMPLEX SRIKAKULAM [PAN : AABCV2160J] ( / APPELLANT) ( / RESPONDENT) C.O. NO.18/VIZAG/2015 (ARISING OUT OF I.T.A.NO.42/VIZAG/2015) ( / ASSESSMENT YEAR: 2008 - 09) M/S VARAM POWER PROJECT S PVT. LTD. D.NO.8 - 4 - 120/3 RAJA COMPLEX SRIKAKULAM [PAN : AABCV2160J] ACIT CIRCLE - 4(1) VISAKHAPATNAM ( / APPELLANT) ( / RESPONDENT) / A SSESSEE BY : SHRI G.V.N. HARI AR / RE VENUE BY : SHRI T.S.N. MURTHY DR / DATE OF HEARING : 15.11.2017 / DATE OF PRONOUNCEMENT : 29 .11.2017 2 ITA NO.651/VIZ/2014 M/S VARAM POWER PROJECTS PVT. LTD. SRIKAKULAM / O R D E R PER D.S. SUNDER SINGH ACCOUNTANT MEMBER : THESE CROSS APPEALS FILED BY THE ASSESSEE AND THE REVENUE ARE DIRECTED AGAINST ORDER PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) {CIT(A)} VISAKHAPATNAM VIDE ITA NO.632/2013 - 14/ACIT C - 4(1) VSP/2014 - 15 DATED 14.11.2014 . T HE CROSS OBJECTIONS FILED BY THE ASSESSEE IS IN SUPPORT OF THE ORDER OF THE CIT(A). 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF GENERATION AND SALE OF POWER. THE ASSESSEE FILED ITS RETURN OF INCOME FOR A.Y.2008 - 09 ON 30.9.2008 CLAIMING THE DEDUCTION OF RS.10 10 44 260/ - U/S.80IA OF THE INCOME TAX ACT 1961 (HEREINAFTER CALLED AS 'THE ACT') AND DECLARED THE TOTAL INCOME OF RS.NIL. THE ASSESSEE ALSO ADMITTED THE BOOK PROFITS OF RS. 10 79 07 294/ - U/S.115JB OF THE ACT AND PAID THE TAXES THEREON. THE CASE WAS SELECTED FOR SCRUTINY AN D THE ASSESSMENT WAS COMPLETED ON 19.11.2010 ACCEPTING THE INCOME RETURNED. SUBSEQUENTLY THE ASSESSING OFFICER (A.O.) NOT ICED THE PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDING 31.3.2008 THAT THE ASSESSEE COMPANY HAD RECEIVED AN AMOUNT OF RS.8 43 74 059/ - 3 ITA NO.651/VIZ/2014 M/S VARAM POWER PROJECTS PVT. LTD. SRIKAKULAM TO WARDS CARBON CREDITS FROM UNFCCC AND RS. 13 83 730/ - TOWARDS SALE OF ASH. THE ASSESSEE HAD SHOWN THESE INCOME AS REVENUE RECEIPT IN THE PROFIT AND LOSS ACCOUNT AND CLAIMED THE DEDUCTION U/S.80IA. THE A.O. TOOK THE VIEW THAT THESE RECEIPTS DO NOT QUALIFY FO R DEDUCTION U/S.80IA AS THE SAME ARE NOT DERIVED FROM THE ASSESSEE'S BUSINESS ACTIVITY OF GENERATION OF POWER. THEREFORE THE A.O REOPENED THE ASSESSMENT AND I SSUED THE NOTICE U/S.148 OF THE ACT. DURING THE REASSESSMENT PROCEEDINGS THE ASSESSE EXPLAINED T HEIR CASE AND A FTER CONSIDERING THE ASSESSEE'S SUBMISSIONS THE A.O. CAME TO THE CONCLUSION THAT THE SAID RECEIPTS OF CARBON CREDITS AND THE SALE OF ASH ARE NOT DIRECTLY AND INEXTRICABLY RELATED TO THE GENERATION AND SALE OF POWER AND ACCRUED TO THE ASSES SEE IN VIEW OF IMPLEMENTATION OF THE CDM PROJECT FOR ITS EXISTING BUSINESS THE PURPOSE OF WHICH WAS REDUCTION OF POLLUTION. THE A.O. FELT THAT TO THIS EXTENT THE CERS ACCRUED IN THE COURSE OF BUSINESS OPERATIONS BUT ARE NOT DIRECTLY CONNECTED TO THE BUSI NESS OF AN INDUSTRIAL UNDERTAKING AND ARE NOT ELIGIBLE FOR DEDUCTION U/S.80IA. THE A.O. RELYING ON THE RATIO OF THE HONBLE SUPREME COURT IN THE CASE OF STERLING FOODS VS. CIT (237 FIR 579) PANDIAN C HEMICALS LTD. VS. CIT (233 FIR 497) CAME TO THE CONCLUSI ON THAT THESE RECEIPTS ARE NOT DERIVED DIRECTLY FROM THE ASSESSE'S BUSINESS OPERATIONS. THE A.O. 4 ITA NO.651/VIZ/2014 M/S VARAM POWER PROJECTS PVT. LTD. SRIKAKULAM ALSO RELIED ON THE DECISION OF THE HONBLE HIMACHAL PRADESH HIGH COURT IN THE CASE OF CIT VS. KIRAN ENTERPRISES (327 AIR 520) AND CIT VS. LIBERTY INDIA (317 IT R 218 SC) AND NOTED THAT THERE IS A DISTINCTION BETWEEN THE PROFIT ATTRIBUTABLE TO AND DERIVED FROM AND IN ASSESSEE'S CASE THE INCOME FROM SALE OF CARBON CREDITS AND SALE OF ASH CANNOT BE SAID TO BE DERIVED FROM ITS POWER GENERATION BUSINESS SO AS TO CLAIM THE DEDUCTION U/S.80IA. THE A.O. ALSO FELT THAT THE DECISION RELIED UP ON BY THE ASSESSEE OF THE HONBLE ITAT B BENCH HYDERABAD IN THE CASE OF MY HOME POWER LTD. VS. DCIT IS NOT APPLICABLE TO THE FACTS OF THE CASE. ACCORDINGLY THE INCOME RECEIVED ON SALE OF CARBON CREDITS OF RS. 8 43 74 059/ - AND SALE OF A SH OF RS. 13 83 730/ - WERE ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 3. AGGRIEVED BY THE ORDER OF THE AO THE ASSESSEE WENT ON APPEAL BEFORE THE CIT(A) CHALLENGING THE REOPENING OF THE ASSESS MENT ORDER AS WELL AS THE ADDITION S MADE BY THE AO ON MERITS . LD.CIT(A) HELD THAT THE REOPENING OF ASSESSMENT IS VALID APPLYING THE RATIO LAID DOWN BY HONBLE KERALA HIGH COURT IN THE CASE OF INNOVATIVE FOODS LTD. VS. U OI [356 ITR 319]. WITH REGARD TO CAR BON CREDITS CREDITED TO PROFIT & LOSS A/C THE LD.CIT(A) FOLLOWED THE JUDGEMENT OF HONBLE AP HIGH COURT IN 5 ITA NO.651/VIZ/2014 M/S VARAM POWER PROJECTS PVT. LTD. SRIKAKULAM THE CASE OF CIT VS MY HOME POWER LTD. ITTA NO.60 OF 2014 DATED 19/02/2014AND ALLOWED THE APPEAL OF THE ASSESSE. WITH REGARD TO THE SALE OF ASH THE LD.CIT(A) HELD THAT SALE OF A SH IS NOT DERIVED FROM THE INDUSTRIAL UNDERTAKING AND ACCORDINGLY CONFIRMED THE DISALLOWANCE MADE BY THE AO U/S 80IA OF I.T.ACT. 4. AGGRIEVED BY THE ORDER OF THE LD.CIT(A) THE REVENUE HAS FILED APPEAL BEFORE US AGAINST THE CARBON CREDITS AND THE ASSESSEE HAS FILED CROSS OBJECTIONS SUPPORTING THE ORDER OF THE LD.CIT(A). THE ASSESSEE FILED A SEPARATE APPEAL RAISING THE GROUND THAT THE RECEIPTS ON SALE OF CARBON CREDITS BEING CAPITAL RECEIPTS NOT EXIGI BLE TO TAX U/S 115JB OF I.T.ACT AND ALSO AGITATED AGAINST THE ORDER OF THE LD.CIT(A) FOR SALE OF ASH. 5. DURING THE APPEAL HEARING LD.DR ARGUED THAT LD.CIT(A) HAS COMMITTED AN ERROR BY HOLDING THAT THE CARBON CREDITS ARE CAPITAL RECEIPTS AGAINST THE ASSESSEES ADMISSION THA T THE CARBON CREDITS ARE REVENUE RECEIPTS IN THE P&L ACCOUNT AND OFFERED TO TAX U/S 115JB OF I.T .ACT AND REQUESTED TO SE T A SIDE THE ORDER OF THE LD.CIT(A) AND RESTORE THE AOS ORDER. 6 ITA NO.651/VIZ/2014 M/S VARAM POWER PROJECTS PVT. LTD. SRIKAKULAM 6. ON THE OTHER HAND LD.AR SUBMITTED THAT NOW IT IS SETTLED ISSUE THAT T HE CARBON CREDITS ARE CAPITAL RECEIPTS BY THE DECISION OF HONBLE AP HIGH COURT IN THE CASE OF CIT. VS MY HOME POWER LTD. SUPRA IN IT TA 60 OF 2014 DATED 19.02.2014 HENCE ARGUED THAT NO INTERFERENCE IS CALLED FOR WITH REGARD TO CARBON CREDITS. 7. WE HAVE H EARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL S PLACED ON RECORD. THE LD.CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE AND HELD THAT THE CARBON CREDITS ARE CAPITAL RECEIPTS FOLLOWING THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF MY HOME POWER LTD. CITED SUPRA. THE HONBLE ITAT HYDERABAD IN THE CASE OF MY HOME POWER LTD. HAS HELD THAT THE SALE OF CARBON CREDITS IS NOT TAXABLE AND THEY ARE CAPITAL RECEIPTS. THE RELEVANT PART OF THE DISCUSSION IS EXTRACTED 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 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 CAN NOT BE SUBJECTED TO TAX IN ANY MANNER UNDER ANY HEAD OF INCOME. IT/S 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 7 ITA NO.651/VIZ/2014 M/S VARAM POWER PROJECTS PVT. LTD. SRIKAKULAM ACCOUNT OF SAVING OF ENERGY CONSUMPTION AND NOT BECAUSE OF ITS BUSINESS. FURTHER IN OUR OPINION CARBON CREDITS CANNOT BE CONSIDERED AS A B/ - PRODUCT IT IS A CREDIT GIVEN TO THE ASSESSEE UNDER THE KYOTO PROTOCOL AND BECAUSE OF INTERNATIONAL UNDERSTANDING. THUS THE ASSESSEE'S WHO HAVE SURPLUS CARBON CREDITS CAN SELL THEM TO OTHER ASSESSES TO 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 EMISS IONS. THE PERSONS HAVING CARBON CREDITS GET BENEFIT BY SELLING THE SAME TO A PERSON WHO NEEDS CARBON CREDITS TO OVERCOME ONES NEGATIVE POINT CARBON CREDIT. THE AMOUNT RECEIVED IS NOT RECEIVED FOR PRODUCING AND/OR SELLING ANY PRODUCT B/ - PRODUCT OR FOR REND ERING 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 JUDGEMENT OF THE SUPREM E COURT IN THE CASE OF CIT VS. MAHESWARI DEVI JUTE MILLS LTD (57 17W 36) WHEREIN 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 THAT TAXABILITY OF PAYMENT RECEIVED FOR SALE OF LOOM HOURS BY THE ASSESSEE IS ON AC COUNT 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 IN 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 CON SIDERATION. 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 COS T OF PRODUCT 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 SE/F - GENERATED CERTIFIED EMISSION REDUCTIONS (CER5) ISSUED BY THE INSTITUTE OF CHARTERED - A CCOUNTANTS OF INDIA (ICAI) IN JUNE 2009 STATES THAT CERS SHOULD BE RECOGNIZED IN BOOKS WHEN THOSE ARE CREATED BY U/VFCCC AND/OR UNCONDITIONALLY AVAILABLE TO THE GENERATING ENTITY. CERS ARE INVENTORIES OF THE GENERATING ENTITIES AS THEY ARE GENERATED AND H ELD 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 RECOGNIZED AS INVENTORIES THE GENERATIN G ASSESSEE SHOULD APPLY AS - 9 TO RECOGNIZE REVENUE IN RESPECT OF SALE OF CERS.. 8 ITA NO.651/VIZ/2014 M/S VARAM POWER PROJECTS PVT. LTD. SRIKAKULAM 7.1 THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF MY HOME POWER LTD. U PHELD THE VIEW TAKEN BY HONBLE ITAT HYDERABAD AND THE RELEVANT PART OF THE ORDER IS EXTRACT ED AS UNDER : WE HAVE CONSIDERED THE AFORESAID SUBMISSION AND WE ARE UNABLE TO ACCEPT THE SAME AS THE LEARNED TRIBUNAL HAS FACTUALLY FOUND THAT CARBON CREDIT IS NOT AN OFFSHOOT OF BUSINESS BUT AN OFFSHOOT OF ENVIRONMENTAL CONCERNS. NO ASSET IS GENERATE D IN THE COURSE BUSINESS BUT IT IS GENERATED DUE TO ENVIRONMENTAL CONCERNS. WE AGREE WITH THIS FACTUAL ANALYSIS AS THE ASSESSEE IS CARRYING ON THE BUSINESS OF POWER GENERATION. THE CARBON CREDIT IS NOT EVEN DIRECTLY LINKED WITH POWER GENERATION. ON THE SALE OF EXCESS CARBON CREDITS THE INCOME WAS RECEIVED AND HENCE AS CORRECTLY HELD BY THE TRIBUNAL IT IS CAPITAL RECEIPT AND IT CANNOT BE BUSINESS RECEIPT OR INCOME. IN THE CIRCUMSTANCES WE DO NOT FIND ANY ELEMENT OF LAW IN THIS APPEAL. FACTS OF THE CASE ARE SIMILAR AND THE OR DER OF THE JURISDICTIONAL HIGH COURT IS BINDING ON THE LOWER COURTS THUS RESPECTFULLY FOLLOWING THE JUDGEMENT OF THE HONBLE JURISDICTIONAL HIGH COURT WE HOLD THAT THE CARBON CREDITS ARE CAPITAL RECEIPT S AND CANNOT BE CONSIDERE D AS BUSINESS INCOME. ACCORDINGLY WE UPHOLD THE ORDER OF THE CIT (A) AND DISMISS THE APPEAL OF THE REVENUE. ITA NO.651/VIZ/2014 (ASSESSES APPEAL) 8. GROUND NOS. 1 AND 5 ARE GENERAL IN NATURE WHICH DOES NOT REQUIRE SPECIFIC ADJUDICATION. 9. GROUND NO.2 IS RELATED TO THE REOPENING OF THE ASSESSMENT. THE ASSESSEE CHALLENGED THE REOPENING OF ASSESSMENT STATING THAT IT IS MERE 9 ITA NO.651/VIZ/2014 M/S VARAM POWER PROJECTS PVT. LTD. SRIKAKULAM CHANGE OF OPINION. IN THIS CASE THE ASSESSMENT YEAR INVOLVED IS 2008 - 09 AND THE ASSESSMENT IS REOPENED WITHIN 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. THE LD. CIT (A) APPLYING THE RATIO LA I D DOWN BY HONBLE KERALA HIGH COURT IN THE CAS E OF INNOVATIVE FOODS LTD. VS. U OI (SUPRA) HELD THAT REOPENING OF ASSESSMENT IS VALID AND ACCORDINGLY UPHELD THE ISSUE OF NOTICE. DURING T HE APPEAL HEARING THE LD. AR DID NOT BRING ANY OTHER CASE LAW TO CONTROVERT THE OBSERVATION OF THE LD.CIT(A). THEREFORE WE UPHOLD THE ORDER OF THE LD.CIT(A) AND HOLD THAT THE REOPENING OF ASSESSMENT IS VALID. THE ASSESSEES APPEAL ON THIS GROUND IS DIS MISSED. 10. GROUND NO.3 IS RELATED TO THE DEDUCTION U/S 80IA OF THE I.T.ACT ON SALE OF A SH. DURING THE ASSESSMENT PROCEEDINGS THE AO DISALLOWED THE DEDUCTION CLAIMED U/S 80IA OF ACT ON SALE OF ASH. THE AO RELIED ON THE DECISIONS OF CIT VS. KIRAN ENTERP RISES [327 ITR 520] (HP) CIT VS. LIBERTY INDIA [317 ITR 218] CIT VS. PANDIAN CHEMICALS LTD. [233 ITR 497] AND HELD THAT SALE OF ASH IS NOT DERIVED FROM THE PROFITS AND GAINS DERIVED FROM AN UNDERTAKING OR AN ENTERPRISE AND IS NOT ELIGIBLE FOR DEDUC TION U/S 80IA HENCE DISALLOWED THE DEDUCTION CLAIMED BY THE ASSESSEE. 10 ITA NO.651/VIZ/2014 M/S VARAM POWER PROJECTS PVT. LTD. SRIKAKULAM 11. AGGRIEVED BY THE ORDER OF THE AO THE ASSESSEE WENT ON APPEAL BEFORE THE CIT AND THE LD.CIT(A) CONFIRMED THE ORDER OF THE AO. 12. AGGRIEVED BY THE ORDER OF THE LD.CIT(A) THE ASSESS EE IS IN APPEAL BEFORE US. APPEARING FOR THE ASSESSEE THE LD.AR ARGUED THAT ASH IS GENERATED FROM POWER GENERATION UNIT AND IS ELIGIBLE FOR DEDUCTION U/S 80IA. THE ASSESSEE IS NOT DEALING WITH PURCHASE AND SALE OR PRODUCTION OF ASH AND THE GENERATION A SH IS INTERLINKED TO THE ACTIVITY OF POWER GENERATION HENCE THE LD.AR SUBMITTED THAT THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S 80IA ON SALE OF ASH WHICH IS A DIRECT BI - PRODUCT. THE LD. AR FURTHER ARGUED THAT THE HONBLE APEX COURT S DECISIONS IN THE CA SE OF CIT VS. LIBERTY INDIA [317 ITR 218] WHICH IS RELATED TO DEPB ENTITLEMENTS AND IS ONE STEP AWAY FROM THE BUSINESS ACTIVITY AND THE JUDGEMENT IN THE CASE OF CIT VS. PANDIAN CHEMICALS LTD. IS WITH REGARD TO THE INTEREST PAYMENT AND CIT VS. KIRAN ENTERP RISES IS WITH REGARD TO SUBSIDY AND THE ABOVE CASE LAWS HAVE NO APPLICATION IN THE ASSESSEES CASE. SINCE THE SALE OF ASH IS PROFIT DERIVED FROM THE UNIT ELIGIBLE FOR DEDUCTION U/S 80IA T HE LD.AR SUBMITTED THAT THE ASSESSEE IS ENTITLED FOR DEDUCTION AN D REQUESTED TO 11 ITA NO.651/VIZ/2014 M/S VARAM POWER PROJECTS PVT. LTD. SRIKAKULAM SET ASIDE THE ORDER OF THE LD.CIT(A) AND ALLOW THE APPEAL OF THE ASSESSEE. 13. ON THE OTHER HAND LD.DR SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 14. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED ON RECORD. AS SUBMITT ED BY THE LD.AR THE FACTS OF THE HONBLE APEX COURT S DECISION S RELIED UPON BY THE A.O. IN THE CASE OF CIT VS.LIBERTY INDIA AND CIT VS. PANDIAN CHEMICALS CIT VS. STERLING FOODS (SUPRA) ARE ON DIFFERENT FOOTING AND DISTINGUISHABLE. T HE CASE LAWS RELIED U PON BY THE AO IN THE CASE OF CIT VS. KIRAN ENTERPRISES IS WITH REGARD TO FREIGHT SUBSIDY. THE FACTS OF THE CASE LAWS RELIED UPON BY THE AO ARE DISTINGUISHABLE AND NOT APPLICABLE IN THE CASE OF THE ASSESSEE AS THE ISSUE IN THE CASE IS ENTIRELY DIFFERENT. T HE ASH IS GENERATED IN PROCESS OF GENERATION OF POWER FROM THE MANUFACTURING UNIT AND IT IS NOT DISTINCT AND DIFFERENT FROM THE ACTIVITY OF THE MANUFACTURING OF POWER. THE LD.DR DID NOT PLACE ANY EVIDENCE TO SHOW THAT THE ASSESSEE IS NOT GENERATING ASH O UT OF THE MANUFACTURING UNIT. THEREFORE THE SALE PROCEEDS OF ASH ARE DIRECTLY DERIVED FROM THE GENERATION OF POWER AND 12 ITA NO.651/VIZ/2014 M/S VARAM POWER PROJECTS PVT. LTD. SRIKAKULAM AS SUCH THE SAME ARE EL IGIBLE FOR DEDUCTION U/S 80IA. ACCORDINGLY WE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND DIRECT THE ASSE SSING OFFICER TO ALLOW THE DEDUCTION U/S 80IA ON SALE OF ASH. ACCORDINGLY THE APPEAL OF THE ASSESSEE ON THIS GROUND IS ALLOWED. 15. GROUND NO.4 IS RELATED TO THE EXCLUSION OF SALE PROCEEDS OF CARBON CREDITS FROM THE COMPUTATION OF BOOK PROFIT U/S 115JB OF I.T.ACT. THE ASSESSEE HAD INCLUDED THE CARBON CREDITS IN THE PROFIT & LOSS ACCOUNT AND FILED THE RETURN OF INCOME AND ACCORDINGLY PAID THE TAXES U/S 115JB OF I.T.ACT. THE AO INCLUDED THE CARBON CREDITS UNDER THE NORMAL PROVISIONS OF I.T.ACT AND ACCORD INGLY MADE THE ADDITION WHICH WAS DELETED BY THE LD.CIT (A) HOLDING THAT THE CARBON CREDITS ARE CAPITAL RECEIPTS. IN THE REVENUES APPEAL IN THIS ORDER WE HAVE UPHELD THE ORDER OF THE LD.CIT(A). T HE ASSESSEE COMPANY ADMITTED THE SAME IN PROFIT & LOSS ACCO UNT AND PAID THE MINIMUM ALTERNATE TAX U/S 115JB. HOWEVER AF TER THE JUDGEMENT OF HONBLE AP HIGH COURT THE ASSESSEE REALIZED THAT THE CARBON CREDITS ARE CAPITAL RECEIPTS WHICH ARE TO BE EXCLUDED FOR THE PURPOSE OF BOOK PROFITS U/S 115JB OF I.T.ACT. H ENCE THE ASSESSEE RAISED THE GROUND WITH REGARD TO EXCLUSION OF CARBON CREDITS FOR THE PURPOSE OF COMPUTATION OF PROFIT U/S 115JB OF I.T.ACT 13 ITA NO.651/VIZ/2014 M/S VARAM POWER PROJECTS PVT. LTD. SRIKAKULAM FIRST TIME BEFORE THE TRIBUNAL. THE ASSESSEE EXPLAINED THAT THIS GROUND WAS NOT TAKEN BEFORE THE LD. CIT(A) AS THE ASSESSEE PLACED ARGUMENTS MAINLY ON REOPENING AND THE DEDUCTION U/S 801A(4). AT THE TI ME OF THE THE APPEAL BEFORE THE LD. CIT(A) THE BENEFIT OF HON'BLE AP HIGH COURT WAS NOT AVAILABLE TO THE ASSESSEE AND AS SUCH THE GROUNDS WERE RAISED ON THE PREMISE TH AT THE SALE OF CARBON CREDITS IS A REVENUE RECEIPT. HOWEVER THE LEARNED CIT(A) HELD THAT THE SALE PROCEEDS OF CARBON CREDITS IS A CAPITAL RECEIPT AND DIRECTED THE ASSESSING OFFICER TO EXCLUDE THE SAME FROM THE COMPUTATION OF TOTAL INCOME UNDER THE REGULAR PROVISIONS OF THE ACT. AS A NATURAL FALL OUT OF THE RELIEF GRANTED BY THE LEARNED CIT(A) THE SALE PROCEEDS OF CARBON CREDITS NEED TO BE EXCLUDED FROM THE COMPUTATION OF EVEN FOR BOOK PROFITS U/S 115JB OF THE ACT. HOWEVER SUCH A DIRECTION WAS NOT GIVEN B Y THE LEARNED CIT(A). THERE CANNOT BE TWO DIFFERENT TREATMENTS FOR THE SAME RECEIPT FOR THE SAME ASSESSMENT YEAR ONE FOR COMPUTATION OF BOOK PROFIT AND THE OTHER FOR COMPUTATION OF TOTAL INCOME UNDER THE REGULAR PROVISIONS. IF A RECEIPT IS A REVENUE RECEI PT IT WOULD BE SO FOR BOTH THE PURPOSES AND VICE VERSA. AS SUCH THE ORDER OF THE LD.CIT(A) I N NOT HOLDING THE CAPITAL RECEIPT IN THE FORM OF SALE OF CARBON CREDIT IS TO BE EXCLUDED FROM THE COMPUTATION OF BOOK PROFIT IS ERRONEOUS. LD.AR SUBMITTED THAT F OR THIS REASON THIS GROUND OF APPEAL HAS ARISEN FROM THE ORDER OF THE LD.CIT(A) AND IS THEREFORE INCLUDED IN THE GROUNDS OF APPEAL FILED BEFORE THE HONBLE ITAT AS 14 ITA NO.651/VIZ/2014 M/S VARAM POWER PROJECTS PVT. LTD. SRIKAKULAM FORMING PART OF FORM NO.36. 16. ON THE OTHER HAND LD.DR OPPOSED THE ADMISSION OF ADDITIONAL GROUND. 17. WE HAVE HEARD BOTH THE PARTIES. AS PER THE HONBLE AP HIGH COURTS DECISION THE CARBON CREDITS ARE CAPITAL RECEIPTS AND AT THE TIME OF FILING THE RETURN THE BENEFIT OF THE DECISION OF HONBLE AP HIGH COURT WAS NOT AVAILABLE TO THE ASSESSEE HENCE THE ASSESSEE ADMITTED THE SAME AS INCOME FOR BOOK PROFITS U/S 115JB . AFTER THE JUDGEMENT OF HONBLE A.P. HIGH COURT THE ISSUE IS SETTLED THAT THE CARBON CREDITS ARE HELD TO BE CAPITAL RECEI P TS AND NOT EXIGIBLE TO TAX. THOUGH THE LD. CIT(A) HELD THA T THE CARBON CREDITS ARE CAPITAL RECEIPTS HE HAS NOT GIVEN ANY DIRECTION TO EXCLUDE THE SAME FOR THE PURPOSE OF BOOK PROFITS. HENCE TAKING THE SUPPORT FROM THE DECISION OF HONBLE APEX COURT IN THE CASE OF CIT VS. NTPC LTD. [229 ITR 383] THE GROUND RAI SED BY THE LD.AR WITH REGARD TO SALE OF CARBON CREDITS FOR THE PURPOSE OF SECTION 115JB IS ADMITTED. 15 ITA NO.651/VIZ/2014 M/S VARAM POWER PROJECTS PVT. LTD. SRIKAKULAM 18. DURING THE APPEAL HEARING LD.AR ARGUED THAT THE CARBON CREDITS ARE CAPITAL RECEIPT S AND THE ISSUE IS ALREADY ADDRESSED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE LAW CITED SUPRA. THE PROFIT & LOSS ACCOUNT IS PREPARED BY CREDITING THE REVENUE RECEIPTS AND DEBITING THE REVENUE EXPENDITURE. CARBON CREDITS NOT BEING THE REVENUE RECEIPT THE SAME CANNOT BE INCLUDED IN PROFIT & LOSS ACCOUNT. THE ISSUE WITH REGARD TO THE CARBON CREDITS IS CAPITAL RECEIPT WAS ACCEPTED BY THE LD.CIT(A) AND DIRECTED TO EXCLUDE FOR COMPUTATION OF INCOME AND THE SAME RECEIPT FOR COMPUTATION OF BOOK PROFIT CANNOT BE GIVEN DIFFERENT TREATMENT AS SUCH THE CARBON CREDITS REQUIRED TO BE EXCLUDED FROM THE COMPUTATION OF BOOK PROFIT ALSO. THE LD.AR ARGUED THAT THE ORDER OF THE LD.CIT(A) IN NOT GIVING DIRECTION TO EXCLUDE THE SALE OF CARBON CREDITS FROM THE COMPUTATION OF BOOKS PROFITS U/S 115JB IS ERRONEOUS HE NCE REQUESTED T O EXCLUDE THE CARBON CREDITS FROM THE COMPUTATION OF INCOME U/S 115JB. 19. ON THE OTHER HAND LD.DR ARGUED THAT THE PROFIT & LOSS ACCOUNT COMPILED AND PREPARED BY THE ASSESSEE AND ADMITTED THE CARBON CREDITS AS REVENUE RECEIPTS. THEREFORE THERE IS NO R EASON TO DISTURB THE COMPUTATION MADE BY THE ASSESSEE FOR THE PURPOSE OF PROFITS 16 ITA NO.651/VIZ/2014 M/S VARAM POWER PROJECTS PVT. LTD. SRIKAKULAM ADMITTED U/S 115JB OF I.T.ACT. ACCORDINGLY REQUESTED TO UPHOLD THE ORDER OF THE AO. 20. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED ON RECORD. IN THIS CA SE THE ASSESSING OFFICER HAS NOT MADE ANY ADJUSTMENT AND THE ASSESSEE HAD ADMITTED THE CAR BON CREDITS AS INCOME IN THE PROFIT AND LOSS ACCOUNT. SUBSEQUENTLY THE ASSESSEE REALIZED THAT THE CARB ON CREDITS ARE CAPITAL RECEIPTS H ENCE DURING THE PENDENCY OF THE APPEAL THE ASSESSEE RAISED THE GROUNDS FOR EXCLUSION OF CARBON CREDITS. AS PER THE PROVISIONS OF INCOME TAX AND THE PRINCIPLES OF ACCOUNTING ALL THE REVENUE RECEIPTS AND REVENUE EXPENDITURE FORM PART OF TRADING IN PROFIT & LOSS ACCOUNT. THE CAPI TAL RECEIPTS ARE NOT THE INCOME OF THE ASSESSEE. WHILE COMPUTING THE INCOME U/S 115JB OF I.T.ACT ALL THE CAPITAL RECEIPTS REQUIRED TO BE EXCLUDED FROM THE COMPUTATION OF INCOME FOR THE PURPOSE OF 115JB OF I.T.ACT. THE ISSUE WHETHER CAPITAL RECEIPTS CAN B E EXCLUDED FROM TH E COMPUTATION OF BOOK PROFIT IF THE ASSESSE HAD INCLUDED THE SAME AS PART OF BOOK PROFIT WHETHER THE EXCLUSION IS POSSIBLE OR NOT WAS CONSIDERED IN DETAIL BY THE COORDINATE BENCH OF ITAT KOLKATA IN DCIT VS. BINANI INDUSTRIES [137 DTR 1 85] (KOL)(TRIB) AND DECIDED THE ISSUE 17 ITA NO.651/VIZ/2014 M/S VARAM POWER PROJECTS PVT. LTD. SRIKAKULAM IN FAVOUR OF THE ASSESSE. FOR READY REFERENCE WE EXTRACT THE RELEVANT PARAGRAPHS OF THE ORDER OF THE TRIBUNAL AS UNDER : 2.1. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSESSEE FILED ITS ORIGINAL RETURN OF INCOME O N 30.9.2009 DISCLOSING TOTAL INCOME AT RS NIL UNDER NORMAL PROVISIONS OF THE ACT AND DECLARING BOOK PROFITS U/S 115JB OF THE ACT AT RS. 21 24 72 340/ - . LATER THE ASSESSEE FILED REVISED RETURN OF INCOME ON 31.3.2011 DISCLOSING TOTAL INCOME AT RS. NIL UNDER NORMAL PROVISIONS OF THE ACT AND DECLARING BOOK PROFITS U/S 115JB OF THE ACT AT RS. 33 90 47 340/ - . IN THE SAID REVISED COMPUTATION OF BOOK PROFITS U/S 115JB OF THE ACT AN EXTRAORDINARY ITEM OF RECEIPT TO THE TUNE OF RS. 12 65 75 000/ - REPRESENTING FORFEI TURE OF SHARE WARRANTS WAS INCLUDED BY THE ASSESSEE. THE ASSESSEE ALSO SOUGHT TO DISALLOW A SUM OF RS. 1 37 12 550/ - TOWARDS SECTION 14A VOLUNTARILY UNDER THE NORMAL PROVISIONS OF THE ACT IN THE REVISED RETURN FILED BY IT ON 31.3.2011. 4.2 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD INCLUDING THE DETAILED PAPER BOOK CONTAINING THE AUDITED FINANCIAL STATEMENTS TOGETHER WITH NOTES ON ACCOUNTS THEREON FOR THE YEAR ENDED 31.3.2009 COPY OF RETURN ACKNOWLEDGEMENTS (BOTH O RIGINAL AND REVISED RETURNS) AMONG OTHERS. AT THE OUTSET WE FIND FROM NOTE NO. 6 TO SCHEDULE 11 OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31.3.2009 THE ASSESSEE HAD STATED AS BELOW: 6. AS PER RESOLUTION PASSED BY THE MEMBERS AT THE EXTRA ORDINARY GENERAL MEETING HELD ON 15TH FEBRUARY 2008 THE COMPANY HAD ALLOTTED 50 00 000 WARRANTS ON 18 TH MARCH 2008 TO M/S K.B.VYAPAR PVT LTD . A PROMOTER GROUP COMPANY CONVERTIBLE INTO EQUAL NUMBER OF EQUITY SHARES WITHIN 18 MONTHS AT A PRICE OF RS. 253.15 PE R SHARE AS PER SEBI GUIDELINES. THE COMPANY HAD RECEIVED 10% AS UPFRONT DEPOSIT AMOUNTING TO RS. 1265.75 LAKHS WHICH WAS SHOWN AS 'SHARE CAPITAL SUSPENSE' (REFER SCHEDULE 1A). VIDE LETTER DATED 28TH JANUARY 2009 M/S K.B.VYAPAR PRIVATE LIMITED HAD EXPRESS ED ITS UNWILLINGNESS TO ACQUIRE THE EQUITY SHARES AGAINST WHICH IT HAD DEPOSITED RS. 1265.75 LAKHS AS UPFRONT DEPOSIT AND HAD REQUESTED THE COMPANY TO TREAT THE SAID CONVERTIBLE WARRANTS AS CANCELLED IN ACCORDANCE WITH THE SEBI (DIP) GUIDELINES 2000. ACCO RDINGLY THE FORFEITED WARRANTS WERE CANCELLED AND THE AMOUNT OF UPFRONT DEPOSIT OF RS. 1265.75 LAKHS HAS BEEN FORFEITED AND CREDITED TO PROFIT AND LOSS ACCOUNT AS AN EXTRAORDINARY INCOME. 4.3 . IT IS NOT IN DISPUTE BEFORE US THAT THE SUBJECT MENTIONED REC EIPT OF RS. 12 65 75 000/ - REPRESENTING FORFEITURE OF SHARE WARRANTS IS ONLY A CAPITAL RECEIPT BY ITS NATURE NOT CHARGEABLE TO TAX. HOWEVER THE SAME HAS BEEN DULY CREDITED IN THE PROFIT AND LOSS ACCOUNT AS AN EXTRAORDINARY ITEM AND THE SAID 18 ITA NO.651/VIZ/2014 M/S VARAM POWER PROJECTS PVT. LTD. SRIKAKULAM PROFITS AFTER SUCH EXTRAORDINARY ITEMS HAS BEEN APPROVED BY THE SHAREHOLDERS IN THE ANNUAL GENERAL MEETING OF THE ASSESSEE COMPANY. 4.3.1 . THE LEARNED AR SUBMITTED BEFORE US THAT THE BASIC INTENTION BEHIND INTRODUCTION OF THE PROVISIONS OF SECTION 115J OF THE ACT HAS B EEN EXPLAINED BY THE HON'BLE KERALA HIGH COURT. THE CONSTITUTIONAL VALIDITY OF THE PROVISIONS OF SECTION 115J OF THE ACT WAS TESTED BY THE HON'BLE KERALA HIGH COURT IN THE CASE OF KARIMTHARUVI TEA ESTATES LTD. V. DY. CIT [2001] 247 ITR 22/[2000] 113 TAXMAN 514 WHEREIN IT WAS HELD THAT : - THE OBJECT OF THE INSERTION OF SECTION 115J OF THE INCOME TAX ACT 1961 WAS TO ENSURE LEVY OF MINIMUM TAX ON WHAT ARE KNOWN AS 'PROSP EROUS ZERO TAX COMPANIES'. UNDER THE SCHEME OF THE SECTION WHERE THE TOTAL INCOME OF COMPANIES AS COMPUTED UNDER THE PROVISIONS OF THE INCOME TAX ACT IN RESPECT OF THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR IS LESS THAN 30 PERCENT OF THEIR BOOK PR OFITS THE TOTAL INCOME OF SUCH COMPANIES CHARGEABLE TO INCOME TAX FOR THE RELEVANT PREVIOUS YEAR IS TREATED AS INCOME EQUAL TO 30 PERCENT OF SUCH BOOK PROFITS AND IS TAXED ACCORDINGLY. IT ALSO PROVIDES FOR CERTAIN ADJUSTMENTS BY WAY OF ADDING AMOUNTS AND GRANTING DEDUCTIONS FOR COMPUTING THE CHARGEABLE INCOME UNDER SECTION 115J(1). SUB - SECTION (2) PROVIDES THAT DETERMINATION OF THE AMOUNTS IN RELATION TO THE RELEVANT PREVIOUS YEAR TO BE CARRIED FORWARD TO THE SUBSEQUENT YEAR OR YEARS WILL HAVE TO BE MADE U NAFFECTED BY THE PROVISIONS IN SUB - SECTION(1) OF SECTION 115J. THE VERY OBJECT OF THE PROVISIONS OF SECTION 115J IS TO TAX SUCH COMPANIES WHICH ARE MAKING HUGE PROFITS AND ALSO DECLARING SUBSTANTIAL DIVIDENDS BUT ARE MANAGING THEIR AFFAIRS IN SUCH A WAY A S TO AVOID PAYMENT OF INCOME TAX AS A RESULT OF VARIOUS TAX CONCESSIONS AND INCENTIVES AND FOR THAT PURPOSE THE TAXABLE INCOME IS DETERMINED UNDER SUB - SECTION (1) OF SECTION 115J. AN ASSESSEE IS ENABLED TO CLAIM CARRY FORWARD AND SET OFF OF LOSSES UNAB SORBED ALLOWANCE IN VIEW OF THE SPECIFIC PROVISIONS OF THE INCOME TAX ACT ENABLING AN ASSESSEE TO CLAIM THEM. BUT BECAUSE OF THIS PROVISION A COMPANY WILL HAVE TO PAY TAX ON AT LEAST 30 PERCENT OF ITS BOOK PROFIT. THEREFORE WHAT IS TAXED IS NOT FICTIONAL OR HYPOTHETICAL INCOME. UNDER LAW THOUGHT IT IS PERMISSIBLE TO BRING TO TAX HYPOTHETICAL INCOME WHAT IS REALLY DONE UNDER SECTION 115J IS NOT EXACTLY BRINGING TO TAX HYPOTHETICAL INCOME. WHAT IS REALLY DONE IS TO LIMIT OR RESTRICT OR CURTAIL DEDUCTION C ARRY FORWARD AND SET OFF OF LOSSES UNABSORBED DEPRECIATION UNABSORBED ALLOWANCE ETC. ETC. ORDINARILY THESE DEDUCTIONS ARE PERMISSIBLE IN VIEW OF THE PROVISIONS INTRODUCED IN THE STATUTE BY PARLIAMENT AND PARLIAMENT IS EQUALLY COMPETENT TO TAKE AWAY OR RESTRICT OR LIMIT SUCH ALLOWANCES FOR A DEFINITE PURPOSE. VARIOUS CONCESSIONS AND ALLOWANCES ARE GIVEN AS PER VARIOUS PROVISIONS ENABLING THE COMPANIES TO ARRANGE THEIR TAX AFFAIRS IN SUCH A WAY AS TO BECOME 'ZERO TAX ' COMPANIES AND THE LEGISLATURE BY TH IS SECTION RESTRICTED OR CURTAILED OR LIMITED SUCH CONCESSIONS TO THE EXTENT AS PROVIDED IN SECTION 115J SO THAT THEY CAN PAY SOME TAX. THIS IS NOT UNREASONABLE SO AS TO MAKE IT VIOLATIVE OF ARTICLE 14 OR 19 OF THE CONSTITUTION OF INDIA. WHAT IS DONE BY TH E LEGISLATURE IS TO LIMIT THE ALLOWANCES AND NOTHING ELSE. 19 ITA NO.651/VIZ/2014 M/S VARAM POWER PROJECTS PVT. LTD. SRIKAKULAM THE LEARNED AR SUBMITTED THAT THE ABOVE PRINCIPLE WOULD APPLY WITH EQUAL FORCE FOR COMPANIES FALLING UNDER THE AMBIT OF PROVISIONS OF SECTION 115JA / 115JB OF THE ACT AS THE CASE MAY BE. 4.3.2 . IT WAS FURTHER CONTENDED BY HIM THAT THE RULE OF PURPOSIVE CONSTRUCTION TO BE FOLLOWED. HE POINTED OUT THAT THE FACTS IN THE INSTANT CASE WAS THAT THE ASSESSEE ISSUED SHARE WARRANTS FOR WHICH PAYMENTS WERE RECEIVED BY IT IN SEVERAL PHASES. THE APPLICANT REFU SED TO PAY THE INSTALMENTS AS AGREED UPON AND ACCORDINGLY THE ASSESSEE COMPANY CHOSE TO FORFEIT THE AMOUNTS ALREADY PAID BY HIM. THE ASSESSEE HAD CREDITED THE SAME IN ITS PROFIT AND LOSS ACCOUNT AS AN EXTRAORDINARY ITEM AND DERIVED THE CURRENT YEAR PROFITS UNDER THE COMPANIES ACT. THE ASSESSEE SOUGHT TO REDUCE THE SAME FROM THE COMPUTATION OF BOOK PROFITS U/S 115JB OF THE ACT AS THE SAME IS NOT THE REAL PROFIT OF THE ASSESSEE. ACCORDING TO HIM WHAT IS TO BE SEEN IS THAT WHETHER THE FORFEITURE OF SHARE WARR ANTS AMOUNTING TO RS. 12 65 75 000/ - WOULD ENTER THE STREAM OF INCOME DEFINITION WHICH IS AN INCLUSIVE DEFINITION U/S 2(24) OF THE ACT. ACCORDING TO HIM WHEN IT IS NOT DISPUTED THAT FORFEITURE OF SHARE WARRANTS IS A CAPITAL RECEIPT AND CANNOT BE SUBJECTED TO TAX AND THERE IS NO PROVISION TO TAX THE SAME UNDER THE PROVISIONS OF THE ACT IT WOULD BE JUST AND FAIR TO HOLD THAT WHAT IS NOT INCOME AS PER THE DEFINITION OF THE WORD INCOME IN THE ACT CANNOT BE BROUGHT TO TAX UNDER ANY OTHER PROVISION OF THE ACT. I N THIS REGARD HE DREW OUR ATTENTION FROM THE DECISION OF CO - ORDINATE BENCH OF DELHI TRIBUNAL IN THE CASE OF VASUNDHARA LPG (P.) LTD. V. ITO [2005] 146 TAXMAN 23 (MAG.) (DELHI) DATED 8.4.2004 WHEREIN IT WAS HELD THAT : IT IS AN ELEMENTARY PRINCIPLE OF INTERPRETATION OF STATUTES THAT STATUTE SHOULD BE GIVEN WHAT HAS COME TO BE KNOWN AS PURPOSIVE CONSTRUCTION I.E. THE COURT SHOULD IDENTIFY THE MISCHIEF WHICH EXISTED BEFO RE PASSING OF THE STATUTE AND THEN PROCEEDED TO INTERPRET THE STATUTE SO AS TO SUPPRESS THE MISCHIEF AND ADVANCE THE REMEDY. THERE IS NO DOUBTING THE VIEW THAT SUBTLE INVENTIONS AND DEVICES RESORTED TO BY ANY PERSON FOR CONTINUANCE OF THE MISCHIEF SHOULD B E SUPPRESSED. HOWEVER THE PROPOSITION CANNOT BE EXTENDED BEYOND THE INTENDED PURPOSE AND OBJECT OF THE LAW MAKERS AND CAUSE HARDSHIP SERIOUS INCONVENIENCE INJUSTICE AND ABSURDITY. REFERENCE WAS ALSO MADE TO THE DECISION OF THE HON'BLE CALCUTTA HIGH COUR T IN THE CASE OF SAIL DSP VR EMPLOYEES ASSOCIATION 1998 V. UNION OF INDIA [2003] 262 ITR 638/128 TAXMAN 704 WHEREIN THE HON'BLE CALCUTTA HIGH COURT AFTER PLACING RELIA NCE ON THE TWO APEX COURT DECISIONS IN CENTRAL BOARD OF DIRECT TAXES V. ADITYA V. BIRLA [1988] 170 ITR 137/36 TAXMAN 9 (SC) AND K.P. VARGHESE V. ITO [1981] 131 ITR 597 (SC) HAD HELD THAT : - IF A PLAIN LITERAL INTERPRETATION OF STATUTORY PROVISION PRODUCES A MANIFESTLY ABSURD AND UNJUST RESULT WHICH THE LEGISLATURE COULD NOT HAVE INTE NDED THE COURT IS SUPPOSED TO MODIFY THE LANGUAGE USED BY THE LEGISLATURE EVEN TO DO SOME VIOLENCE TO IT SO AS TO ACHIEVE THE OBVIOUS INTENTION OF THE LEGISLATURE AND PRODUCE A RATIONAL CONSTRUCTION. AN EXPRESSION USED IN THE STATUTE IS NOT ALWAYS TO BE INTERPRETED LITERALLY OR GRAMMATICALLY. SOMETIMES IT HAS TO BE INTERPRETED 20 ITA NO.651/VIZ/2014 M/S VARAM POWER PROJECTS PVT. LTD. SRIKAKULAM HAVING REGARD TO THE CONTEXT IN WHICH THE EXPRESSION IS USED AND HAVING REGARD TO THE OBJECT AND PURPOSE FOR WHICH THE SAME IS ENACTED. ACCORDING TO HIM THEREFORE THE INTENTION OF S ECTION 115J AND THE MEMORANDUM EXPLAINING THE PROVISIONS OF THE ACT AND GIVING PURPOSIVE CONSTRUCTION TO THE SAME IT COULD BE SAFELY CONCLUDED THAT THE LEGISLATURE NEVER INTENDED TO BRING TO TAX SUCH RECEIPT WHICH OTHERWISE IS NOT TAXABLE UNDER THE PROVIS IONS OF THE ACT. IT ONLY INTENDED TO BRING TO TAX ZERO TAX COMPANIES PAY SOME TAX DUE TO AVAILING OF VARIOUS CONCESSIONS AND INCENTIVES WHICH ARE PROVIDED IN THE STATUTE. HENCE THE RULE OF PURPOSIVE CONSTRUCTION SHOULD BE GIVEN TO THE INTENTION BEHIND INTR ODUCTION OF PROVISIONS OF SECTION 115J / 115JA / 115JB OF THE ACT SO THAT IT DOESN'T GETS DEFEATED. 4.4. IT WAS SUBMITTED THAT THE SUBJECT MENTIONED RECEIPT COMPRISING OF FORFEITURE OF SHARE WARRANTS AMOUNTING TO RS. 12 65 75 000/ - IS NOT CHARGEABLE TO TAX AS IT IS UNDISPUTABLY A CAPITAL RECEIPT THE SAME WOULD NOT BE LIABLE TO BE TAXED U/S 115JB OF THE ACT MERELY BECAUSE IT IS CREDITED IN THE PROFIT AND LOSS ACCOUNT BY THE ASSESSEE. IN THIS REGARD HE POINTED OUT THE TWO DIFFERENT NATURE OF RECEIPTS THAT M IGHT ARISE TO AN ASSESSEE. ACCORDING TO HIM THERE IS A BASIC DICHOTOMY BETWEEN RECEIPTS WHICH ARE NOT TAXABLE AT ALL AND RECEIPTS WHICH ARE TAXABLE BUT SUBJECT TO EXEMPTION/DEDUCTION ON FULFILLING CERTAIN CONDITIONS. THE RECEIPT STATED IN THE FORMER CASE W OULD NEVER ENTER THE STREAM OF TAXATION EVEN UNDER THE BOOK PROFITS U/S 115J/115JA/115JB OF THE ACT GOING BY THE INTENTION OF THE SAID PROVISIONS. HOWEVER THE RECEIPT STATED IN THE LATTER CASE WOULD DEFINITELY BE LIABLE TO BE TAXED U/S 115JB OF THE ACT AS PER THE INTENTION OF THE SAID PROVISION. ACCORDING TO HIM APPLYING THIS PRINCIPLE IT COULD BE SAFELY CONCLUDED THAT THE SUBJECT MENTIONED RECEIPT OF FORFEITURE OF SHARE WARRANTS WHICH IS ADMITTEDLY NOT INCOME WOULD FALL IN THE FORMER CATEGORY AND ACC ORDINGLY NOT LIABLE TO BE TAXED U/S 115JB OF THE ACT. HE ALSO MADE REFERENCE TO THE PROVISIONS OF SECTION 115JB (5) OF THE ACT WHICH IS REPRODUCED HEREIN BELOW: 115JB(5) - SAVE AS OTHERWISE PROVIDED IN THIS SECTION ALL OTHER PROVISIONS OF THIS ACT SHALL APPLY TO EVERY ASSESSEE BEING A COMPANY MENTIONED IN THIS SECTION. APPLYING THE AFORESAID PROVISION TO THE FACTS OF THE INSTANT CASE ACCORDING TO HIM IT COULD BE SAFELY CONCLUDED THAT WHEN THE FORFEITURE OF SHARE WARRANTS IS NOT TAXABLE UNDER ANY OTHE R PROVISIONS OF THIS ACT THEN THE SAME WOULD NOT BE TAXABLE UNDER BOOK PROFITS U/S 115JB OF THE ACT. 4.4.1 THE LEARNED AR ALSO REFERRED TO THE DECISION OF THE SPECIAL BENCH OF CALCUTTA TRIBUNAL IN THE CASE OF SUTLEJ COTTON MILLS LTD V . ASSTT. CIT [1993] 45 ITD 22 WHEREIN IT WAS HELD THAT A PARTICULAR RECEIPT WHICH IS ADMITTEDLY NOT AN INCOME CANNOT BE BROUGHT TO TAX UNDER THE DEEMING PROVISIONS OF SECTION 115J OF THE A CT AS IT DEFIES THE BASIC INTENTION BEHIND INTRODUCTION OF PROVISIONS OF SECTION 115J OF THE ACT. FURTHER IT WAS HELD THAT THE RULE OF PURPOSIVE CONSTRUCTION SHOULD BE INVOKED TO DECIDE THE APPLICABILITY OF MAT PROVISIONS. 4.5. HE THEN ADE A REFERENCE TO T HE DECISION OF THE SPECIAL BENCH OF HYDERABAD TRIBUNAL IN THE CASE OF RAIN COMMODITIES LTD V. DY. CIT [2010] 40 SOT 265 21 ITA NO.651/VIZ/2014 M/S VARAM POWER PROJECTS PVT. LTD. SRIKAKULAM WHEREIN IT WAS HELD THE CAPITAL GAIN WHICH IS E XEMPT U/S 47(IV) OF THE ACT WHICH IS CREDITED TO THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE CANNOT BE REDUCED FOR COMPUTATION OF BOOK PROFITS U/S 115JB OF THE ACT AS IT IS NOT COVERED BY ANY OF THE CLAUSES (I) TO (VII) OF THE EXPLANATION TO SECTION 115JB OF THE ACT. ACCORDINGLY IT HELD THAT MAT IS APPLICABLE FOR RECEIPT OF CAPITAL GAINS EVENTHOUGH THE SAME IS EXEMPT U/S 47(IV) OF THE ACT. IT WAS SUBMITTED BY HIM THAT THE DECISION OF RAIN COMMODITIES LTD HAS TO BE UNDERSTOOD IN THE PROPER PERSPECTIVE. IT WA S SUBMITTED BY HIM THAT THE RAIN COMMODITIES (SUPRA) DID NOT SAY THAT THE RECEIPT (A NON - TAXABLE RECEIPT SUCH AS CAPITAL RECEIPT) WHICH IS PER SE NOT TAXABLE UNDER THE ACT WOULD ENTER THE STREAM OF TAXATION U/S 115JB OF THE ACT. IT ONLY SAID THAT THE CAPIT AL GAINS DERIVED BY THE ASSESSEE WERE SUBJECTED TO EXEMPTION U/S 47(IV) OF THE ACT WHICH WOULD BE LIABLE FOR TAXATION U/S 115JB OF THE ACT AND MORE SO IT IS CREDITED IN THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE. IT WAS SUBMITTED THAT HERE THE RULE OF HAR MONIOUS CONSTRUCTION WOULD ALSO COME INTO PLAY. FIRST OF ALL THE RECEIPT SHOULD PER SE BE TAXABLE UNDER THE ACT. IT DOES NOT MATTER IF THE SAME IS ELIGIBLE FOR DEDUCTION / EXEMPTION UNDER ANY OTHER PROVISIONS SUCH AS SECTION 47(IV) OF THE ACT. IN SUCH A S CENARIO THE CAPITAL GAINS WHICH IS EXEMPT WOULD BE LIABLE FOR MAT. THIS GOES IN CONSONANCE WITH THE TRUE INTENTION BEHIND INTRODUCTION OF PROVISIONS OF SECTION 115J OF THE ACT AS ENUMERATED SUPRA. ACCORDING TO HIM THEREFORE THIS DECISION DOES NOT IN ANY WAY EVEN REMOTELY CONTEMPLATE TO BRING TO TAX ANY RECEIPT WHICH IS NOT CHARGEABLE AT ALL TO TAX UNDER THE PROVISIONS OF THE ACT. HENCE A THIN LINE OF DIFFERENCE NEEDS TO BE DRAWN BETWEEN A RECEIPT WHICH IS NOT TAXABLE FROM ITS INCEPTION AND THAT WHICH IS NOT TAXABLE PURSUANT TO CLAIM OF DEDUCTION/EXEMPTION. AS STATED EARLIER THE FORMER CASE WOULD BE OUTSIDE THE AMBIT OF BOOK PROFITS TAX U/S 115JB OF THE ACT WHILE THE LATTER WOULD DEFINITELY BE TAXED UNDER MAT. HENCE ACCORDING TO HIM THE DECISION OF RAIN C OMMODITIES (SUPRA) DOES NOT STAND IN THE WAY OF ASSESSEE SEEKING TO KEEP THE SUBJECT MENTIONED RECEIPT OF FORFEITURE OF SHARE WARRANTS OUTSIDE THE AMBIT OF BOOK PROFITS TAX U/S 115JB OF THE ACT. 4.6. WE HAVE GIVEN A VERY CAREFUL CONSIDERATION TO TH RIVAL S UBMISSIONS. WE FIND THE FOLLOWING DECISIONS IN SUPPORT OF OUR PROPOSITION THAT A CAPITAL RECEIPT WHICH IS NOT CHARGEABLE TO TAX UNDER ANY PROVISIONS OF THE ACT WOULD NOT BE LIABLE FOR BOOK PROFITS TAX U/S 115JB OF THE ACT WHICH WAS RENDERED AFTER CONSIDERI NG THE DECISIONS OF HYDERABAD SPECIAL BENCH IN RAIN COMMODITIES (SUPRA) AND THE DECISION OF HON'BLE APEX COURT IN APOLLO TYRES ( SUPRA ) : ( A ) DECISION OF LUCKNOW TRIBUNAL IN THE CASE OF ACIT V . L.H.SUGAR FACTORY LTD. [IT APPEAL NOS. 417 418 & 339/LKW/2013 DATED 9.2.2016] WHEREIN IT WAS HELD THAT : 49. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THIS ASPECT HAS BEEN ALREADY DECIDED BY US AS TO WHETHER RECEIPT ON ACCOUNT OF TRANSFER OF CARBON CREDIT IS A CAPITAL RECEIPT NOT LIABLE TO TAX OR NOT. NOW IN THE LIGHT OF THIS FACTUAL POSITION WE EXAMINE THE APPLICABILITY OF THIS TRIBUNAL'S ORDER RENDERED IN THE CASE OF ACIT VS M/S SHREE CEMENT LTD FOR ASSESSMENT YEAR 2004 - 05 TO 2006 - 07. THE RELEVANT PARAS OF THIS TRIBUNAL'S ORDER ARE PARA 13 TO 13.11 OF THIS 22 ITA NO.651/VIZ/2014 M/S VARAM POWER PROJECTS PVT. LTD. SRIKAKULAM TRIBUNAL'S ORDER AND THE SAME ARE REPRODUCED HEREIN BELOW FOR THE SAKE OF READY REFERENCE : - '13. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CONSIDERED THEM CAREFULLY. WE HAVE ALSO PERUSED THE ORDERS OF AUTHORITIES BELOW AS WELL AS OTHER MATERIAL ON W HICH OUR ATTENTION HAS BEEN DRAWN. WE HAVE TAKEN INTO CONSIDERATION THE RATIO DECIDENDI OF ALL THE DECISIONS RELIED UPON BY THE RIVAL PARTIES. 13.1. AT THE OUTSET THE ISSUE IN HAND IS COVERED IN FAVOUR OF THE ASSESSEE IN ITS OWN CASE FOR A.Y. 2003 - 04 VIDE ORDER DATED 23 - 12 - 2009 IN ITA NO. 942/JP/08. THE ABOVE DECISION OF TRIBUNAL HAS BEEN APPEALED BEFORE THE HON'BLE JURISDICTIONAL RAJASTHAN HIGH COURT AND HON'BLE JURISDICTIONAL HIGH COURT VIDE ORDER DATED 01 - 10 - 2010 HAS ADMITTED ONLY ONE GROUND WHICH IS REPRODUCED BELOW: 'WHETHER ON THE FACTS & CIRCUMSTANCES OF THE CASE THE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT THE SALES TAX SUBSIDY RECEIVED BY THE ASSESSEE OF RS. 18 48 85 506 IN THE FORM OF SALES TAX EXEMPTION WAS A CAPITAL RECEIPT & NOT A REVENUE RECE IPT IGNORING THE BASIC PURPOSE FOR WHICH THE SAME WAS GIVEN WHICH ITSELF PROVIDES THAT THE SUBSIDY WAS GIVEN TO THE ASSESSEE TO ENHANCE THE PRODUCTION EMPLOYMENT & SALES IN THE STATE OF RAJASTHAN WHICH ARE ALL POST OPERATIONAL ACTVITIES.' FROM THE ABOVE IT COULD BE CLEARLY SEEN THAT HON'BLE HIGH COURT ADMITTED ONLY THE GROUND AS TO WHETHER THE IMPUGNED SUBSIDY WAS A CAPITAL RECEIPT OR A REVENUE RECEIPT. HON'BLE HIGH COURT HAS NOT ADMITTED THE GROUND OF THE REVENUE AGAINST RELIEF GRANTED BY TRIBUNAL UNDER SECTION 115JB OF THE ACT ON ABOVE CAPITAL RECEIPT. THEREFORE RESPECTFULLY FOLLOWING THE DECISION OF JURISDICTIONAL HIGH COURT AND THE TRIBUNAL IN ASSESSEE'S OWN CASE FOR AY 2003 - 04 WE SEE NO REASONS TO TAKE ANY OTHER VIEW ON THE MATTER DIFFERENT FROM THE CONCLUSIONS ARRIVED AT BY THIS BENCH IN FAVOUR OF THE ASSESSEE AS FAR AS EXCLUSION FROM BOOK PROFIT UNDER SECTION 115JB IS CONCERNED THAT NOW STANDS AFFIRMED BY THE HON'BLE RAJASTHAN HIGH COURT AND WE ARE IN RESPECTFUL AGREEMENT WITH THE SAME. 13.2. OUR ABOVE VIEW ALSO FINDS SUPPORT FROM THE DECISION OF HON'BLE APEX COURT IN THE CASE OF PADMARAJE R. KADAMBANDE V. CIT [1992] 195 ITR 877 (SC) WHEREIN IT HAS BEEN HELD B Y THE APEX COURT THAT CAPITAL RECEIPTS ARE NOT INCOME WITHIN THE DEFINITION OF SECTION 2(24)OF THE ACT AND HENCE ARE NOT AT ALL CHARGEABLE UNDER THE I.T.ACT. A RECEIPT WHICH IS NEITHER 'PROFIT' NOR 'INCOME' AND WHICH DOES NOT HAVE ANY ELEMENT THEREOF EMBED DED THEREIN CANNOT BE PART OF 'PROFIT' AS PER PROFIT & LOSS ACCOUNT PREPARED IN TERMS OF PART II OF SCHEDULE VI TO COMPANIES ACT. 13.3 AS FAR AS THE DECISIONS RELIED UPON BY THE LD D/R ARE CONCERNED WE ARE UNABLE TO FOLLOW THE SAME IN THE PRESENT CASE A S THE FACTS OF THE SAID DECISIONS ARE CLEARLY DIFFERENT FROM THE FACTS IN THE PRESENT CASE. IT IS A SETTLED PRINCIPLE OF LAW AS LAID DOWN BY THE HON'BLE APEX COURT IN THE CASE OF PADMASUNDRA RAO (DECD) V. STATE OF TAMIL NADU [2002] 255 ITR 147 THAT COURTS SHOULD NOT PLACE 23 ITA NO.651/VIZ/2014 M/S VARAM POWER PROJECTS PVT. LTD. SRIKAKULAM RELIANCE ON THE DECISIONS WITHOUT DISCUSSING AS TO HOW THE FACTUAL SITUATION FITS IN WITH THE FACT SITUATION OF THE DECISION ON WHICH RELIANCE IS PLACED. 13.4 FROM PERUSAL OF THE DECISIONS OF RAIN COMMODITIES ( SUPRA ) AND GROWTH AVENUES ( SU PRA ) WE NOTICE THAT BOTH THE DECISION DEALT WITH THE ISSUE OF TAXABILITY OF CAPITAL GAINS IN COMPUTING BOOK PROFIT U/S 115JB OF THE ACT. THESE CAPITAL GAINS WERE OTHERWISE INCOME U/S 2(24) OF THE ACT AND EXCLUSION WAS CLAIMED IN COMPUTING BOOK PROFIT U/S 115JB ON THE GROUND THAT THE SAID CAPITAL GAINS WAS EXEMPT EITHER U/S 47(IV) OR U/S 54EC OF THE ACT WHICH THE TRIBUNAL DID NOT AGREE. IN THE PRESENT CASE HOWEVER WE ARE DEALING NOT WITH CAPITAL GAINS BUT WITH PURE CAPITAL RECEIPT WHICH DOES NOT EVEN HA VE ANY 'INCOME' 'PROFITS OR GAINS' EMBEDDED THEREIN. THE IMPUGNED INCENTIVE GRANTED TO THE ASSESSEE IS PURE AND SIMPLE CAPITAL RECEIPT IN TERMS OF OUR DECISION ON GROUND NO. 1 AT PARA 10 HEREINABOVE WHICH IN TURN IS SUPPORTED BY THE PRINCIPLES LAID DOW N BY THE APEX COURT VARIOUS HIGH COURTS & SPECIAL BENCH OF THE TRIBUNAL. THAT BEING THE CASE IT DOES NOT HAVE ANY INCOME OR PROFIT ELEMENT EMBEDDED IN IT SINCE THE INCENTIVE WAS GRANTED TO ENCOURAGE INDUSTRIAL GROWTH OF INDUSTRIALLY NON DEVELOPED AREA. NO ONE CAN MAKE PROFIT OUT OF THE SUBSIDY OR INCENTIVE GRANTED TO IT. HENCE IT IS NOT CHARGEABLE TO TAX UNDER THE INCOME TAX ACT AS HELD BY THE APEX COURT IN THE CASE OF PADMARAJE ( SUPRA ) AND IN THE LIGHT OF OUR FACT FINDING AS ABOVE CLEARLY NOT INCLUDIB LE IN P&L ACCOUNT PREPARED UNDER PART II & PART III OF SCHEDULE VI TO THE COMPANIES ACT. 13.5 THE GENESIS OF SEC 115J THEREAFTER SECTION 115JA AND NOW SECTION 115JB WAS TO ENSURE THAT THE ASSESSEE WHILE MAKING PROFIT FROM OPERATIONS SHOULD NOT ENJOY TAX FREE STATUS DUE TO VARIOUS DEDUCTIONS AVAILABLE UNDER THE INCOME TAX ACT. THERE WAS NEVER ANY INTENTION OF THE LEGISLATURE TO TAX WHAT IS NOT INCOME AT ALL. IN A RECENT DECISION THE HON'BLE APEX COURT IN THE CASE OF INDO RAMA SYNTHETICS (I) LTD. V. CIT [2011] 330 ITR 363 (SC) HAS HELD THAT THE OBJECT OF MAT PROVISIONS IS TO BRING OUT THE REAL PROFIT OF THE COMPANIES. THE THRUST IS TO FIND OUT THE REAL WORKING RESULTS O F THE COMPANY. INCLUSION OF RECEIPT IN THE COMPUTATION OF MAT WOULD DEFEAT TWO FUNDAMENTAL PRINCIPLES IT WOULD LEVY TAX ON RECEIPT WHICH IS NOT IN THE NATURE OF INCOME AT ALL AND SECONDLY IT WOULD NOT RESULT IN ARRIVING AT REAL WORKING RESULTS OF THE COMP ANY. THE REAL WORKING RESULT CAN BE ARRIVED AT ONLY AFTER EXCLUDING THIS RECEIPT WHICH HAS BEEN CREDITED TO P&L A/C AND NOT OTHERWISE. 13.6 FOR BETTER UNDERSTANDING OF THE ISSUE LET US ALSO EXTRACT DOWN RELEVANT PROVISION OF SEC. 115JB AS UNDER. 'EVERY AS SESSEE BEING A COMPANY SHALL FOR THE PURPOSE OF THIS SECTION PREPARE ITS PROFIT AND LOSS ACCOUNT FOR THE RELEVANT PREVIOUS YEAR IN ACCORDANCE WITH THE PROVISIONS OF PART II AND PART III OF SCHEDULE VI TO THE COMPANIES ACT 1956 (1 OF 1956)'. 13.7. ON CO NSIDERATION OF THE ABOVE IT IS APPARENT THAT FOR THE PURPOSE OF COMPUTING BOOK PROFIT U/S 115JB PROFIT AND LOSS A/C SHALL BE PREPARED AS PER PART II AND III OF SCHEDULE VI TO THE COMPANIES ACT. PART II OF SCHEDULE VI PRESCRIBES THE REQUIREMENTS AS TO PROF IT AND LOSS A/C. CLAUSE 2(A) OF PART II 24 ITA NO.651/VIZ/2014 M/S VARAM POWER PROJECTS PVT. LTD. SRIKAKULAM CLEARLY SPELLS THAT THE PROFIT AND LOSS A/C SHALL BE SO MADE OUT AS CLEARLY TO DISCLOSE THE RESULT OF THE WORKING OF THE COMPANY DURING THE PERIOD COVERED BY THE ACCOUNTS. HENCE IN OUR VIEW P&L ACCOUNTS DO NOT REFL ECT THE TRUE RESULT OF THE WORKING OF THE COMPANY FOR THE YEAR IT CANNOT BE SAID TO BE AS PER SCHEDULE VI PART II & III OF THE COMPANIES ACT AND IT WOULD NECESSITATE CORRECTIVE ADJUSTMENT IN THAT SITUATION SO AS TO COMPLY WITH SCHEDULE VI PART II & III . 13.8 WITH THE ABOVE DISCUSSIONS THE ONLY ISSUE LEFT TO BE CONSIDERED IS WHETHER EXCLUSION OF THE ABOVE CAPITAL RECEIPT IS IN LINE WITH THE PRINCIPLES AS LAID DOWN BY HON'BLE APEX COURT IN THE CASE OF APOLLO TYRES ( SUPRA ). IN THE CASE OF APOLLO TYRES ( SU PRA ) THE QUESTION BEFORE THE APEX COURT WAS WHETHER AN AO CAN WHILE ASSESSING A COMPANY FOR INCOME TAX U/S 115J OF THE IT ACT QUESTION THE CORRECTNESS OF THE P&L A/C PREPARED IN ACCORDANCE WITH REQUIREMENTS OF PART II AND III OF SCH. VI TO THE COMPANIES ACT. FROM THE QUESTION AS FRAMED BEFORE THE APEX COURT IT IS CLEAR THAT THE ISSUE BEFORE THE HON'BLE COURT WAS WITH REGARD TO POWER OF THE AO TO RECAST AUDITED ACCOUNTS PREPARED IN ACCORDANCE WITH PART II AND PART III OF SCH.VI TO THE COMPANIES ACT. THERE FORE FOR APPLICABILITY OF THE DECISION OF THE APEX COURT THE PREREQUISITE IS THAT THE ACCOUNTS ARE PREPARED IN ACCORDANCE WITH PART II AND PART III TO SCH.VI OF THE COMPANIES ACT. IF HOWEVER THE P&L ACCOUNTS ARE NOT IN ACCORDANCE WITH PART II AND III OF S CH. VI TO THE COMPANIES ACT THE SAID DECISION CANNOT BE APPLIED AND IN THAT SITUATION IT DOES NOT PROHIBIT THE NEEDFUL ADJUSTMENT. 13.9 OUR VIEW AS ABOVE IS SUPPORTED BY THE DECISION OF THE SPECIAL BENCH IN THE CASE OF RAIN COMMODITIES (SUPRA) WHICH INCI DENTALLY HAS BEEN RELIED UPON BY DR. ON EXAMINATION OF THE SAID ORDER WE FIND THAT AT PARA 17 (LAST SUB - PARA) & PARA 18 AFTER CONSIDERING THE DECISION OF SUPREME COURT IN APOLLO TYRES LTD. ( SUPRA ) SPECIAL BENCH HAVE HELD THAT IF PROFIT & LOSS ACCOUNT IS NOT IN ACCORDANCE WITH PART II & III OF SCHEDULE VI TO THE COMPANIES ACT IT IS PERMISSIBLE TO ALTER THE NET PROFIT SO AS TO MAKE IT IN ACCORDANCE WITH PART II & III OF SCHEDULE VI WHICH IS THE STARTING POINT FOR COMPUTATION OF 'BOOK PROFIT' IN TERMS OF SECTION 115JB. WE HAVE CONCLUDED IN PARA 13.4 ABOVE THAT INCLUSION OF SALES TAX SUBSIDY IN THE PROFIT AND LOSS IS NOT IN ACCORDANCE WITH SCHEDULE VI PART II & III. HENCE IT IMPLIES THAT NEEDFUL ADJUSTMENT TO EXCLUDE THE SAME IS NOT ONLY PERMISSIBLE BUT IS MANDATORY SO AS TO MAKE THE PROFIT & LOSS ACCOUNT COMPLIANT WITH THE BASIC REQUIREMENT OF SECTION 115JB. 13.10 OUR VIEW PER PARA 13.8 ABOVE IS ALSO SUPPORTED BY THE DECISION OF MUMBAI TRIBUNAL IN THE CASE OF BOMBAY DIAMOND (SUPRA) & THAT OF BANGALORE TRIBUNAL IN THE CASE OF SYNDICATE BANK ( SUPRA ) [BOTH ANALYSED IN PARA 12.1 ABOVE] WHERE ALSO TRIBUNAL AFTER CONSIDERING THE DECISION OF SUPREME COURT IN THE CASE OF APOLLO TYRES ( SUPRA ) AND EXPLAINING THE SAME HAVE PERMITTED ADJUSTMENT TO THE PROFIT AS PER P&L ACCOUNT SO AS TO COMPLY WITH SCHEDULE VI PART II & PART III OF THE COMPANIES ACT WHICH IS A PREREQUISITE FOR SECTION 115JB. 13.11 IN THE LIGHT OF THE AFORESAID THE ADDITIONAL GROUND FILED BY THE DEPARTMENT IS REJECTED AND WE HOLD THAT CAPITAL R ECEIPT IN THE FORM OF SALES TAX INCENTIVE NEEDS TO BE EXCLUDED FROM PROFIT AS PER P&L ACCOUNT FOR THE YEAR IN 25 ITA NO.651/VIZ/2014 M/S VARAM POWER PROJECTS PVT. LTD. SRIKAKULAM COMPUTING BOOK PROFIT U/S 115JB OF THE ACT. THIS GROUND OF THE DEPARTMENT IS THUS DISMISSED.' 50. FROM THE ABOVE PARAS WE FIND THAT THE TRIBUNAL HAS DULY CONSIDERED THE JUDGEMENT OF THE HON'BLE APEX COURT RENDERED IN THE CASE OF APOLLO TYRES LTD. ( SUPRA ) AND THEREAFTER IT WAS NOTED BY THE TRIBUNAL IN THIS CASE THAT AS PER THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL RENDERED IN THE CASE OF RAIN C OMMODITIES LTD. V. DY. CIT 41 DTR 449 IF PROFIT AND LOSS ACCOUNT IS NOT IN ACCORDANCE WITH PART II & PART III OF SCHEDULE VI TO THE COMPANIES ACT 1956 BECAUSE IT IS PREREQUISITE FOR SECTION 115JB OF THE ACT. THE TRIBUNAL IN THIS CASE ALSO CONSIDERED TWO ANOTHER TRIBUNAL'S ORDERS RENDERED IN THE CASE OF DY. CIT V. BOMBAY DIAMOND CO. LTD. (33 DTR 59) AND SYNDICATE BANK V. ASSTT. CIT 7 SOT 51 BANGALORE WHERE IT WAS HEL D BY THE TRIBUNAL AFTER CONSIDERING THE DECISION OF HON'BLE APEX COURT RENDERED IN THE CASE OF APOLLO TYRES LTD. ( SUPRA ) AND AFTER EXPLAINING THE SAME THAT ADJUSTMENT OF PROFIT AND LOSS ACCOUNT IS POSSIBLE TO MAKE IT COMPLIANT WITH SCHEDULE VI PART II AND PART III OF THE COMPANIES ACT 1956 WHICH IS PREREQUISITE OF SECTION 115JB OF THE ACT. ON THIS BASIS THE TRIBUNAL IN THE CASE OF SHREE CEMENT LTD (SUPRA0 DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE AND IT WAS HELD THAT CAPITAL RECEIPT IN THE FORM OF SAL ES TAX SUBSIDY NEEDS TO BE EXCLUDED FROM PROFIT AS PER P&L ACCOUNT FOR THE PURPOSE OF COMPUTING BOOK PROFIT U/S 115JB OF THE ACT. BY RESPECTFULLY FOLLOWING THESE TRIBUNAL'S ORDERS WE HOLD THAT IN THE PRESENT CASE ALSO THE RECEIPT ON ACCOUNT OF TRANSFER O F CARBON CREDIT WHICH IS HELD TO BE A CAPITAL RECEIPT NEEDS TO BE EXCLUDED FROM PROFIT AS PER P&L ACCOUNT FOR THE PRESENT YEAR WHILE COMPUTING THE BOOK PROFIT U/S 115JB OF THE ACT. THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AND ACCORDINGLY GROUND NOS. 1 TO 5 ARE ALLOWED. THE ASSESSEE GETS RELIEF OF RS. 27 70 880/ - AND CONSEQUENT INTEREST BEING 10% OF THE AMOUNT RECEIVED BY THE ASSESSEE ON SALE OF CARBON CREDIT OF RS. 2 77 08 800/ - . ( B ) DECISION OF MUMBAI TRIBUNAL IN THE CASE OF SHIVALIK VENTURE (P) LTD V. DY. CIT [2015] 70 SOT 92/60 TAXMANN.COM 314 WHEREIN IT WAS HELD THAT : 23. WE SHALL NOW EXAMINE THE SECOND CONTENTION URGED BY THE ASSESSEE VIZ. SINCE THE PROFIT ARISING ON TRANSFER OF A CAPITAL ASSET BY A COMPANY TO ITS WHOLLY OWNED SUBSIDIARY COMPANY IS NOT TREATED AS INCOME' U/S 2(24) OF THE ACT AND SINCE IT DOES NOT ENTER INTO COMPUTATION PROVISION AT ALL UNDER THE NORMAL PROVISIONS OF THE ACT THE SAME SHOULD NOT BE CONSIDERED FOR THE PURPOSE OF COMPUTING BOOK PROFIT U/S 115JB OF THE ACT. 26. WE SHALL NOW EXAMINE THE SCHEME OF THE PROVISIONS OF SEC. 115JB OF THE ACT. IT IS PERTINENT TO NOTE THAT THE PROVISIONS OF SEC. 10 LISTS OUT VARIOUS TYPES OF INCOME WHIC H DO NOT FORM PART OF TOTAL INCOME. ALL THOSE ITEMS OF RECEIPTS SHALL OTHERWISE FALL UNDER THE DEFINITION OF THE TERM 'INCOME' AS DEFINED IN SEC. 2(24) OF THE ACT BUT THEY ARE NOT INCLUDED IN TOTAL INCOME IN VIEW OF THE PROVISIONS OF SEC. 10 OF THE ACT. S INCE THEY ARE CONSIDERED AS 'INCOMES NOT INCLUDED IN TOTAL INCOME' FOR SOME POLICY REASONS THE LEGISLATURE IN ITS WISDOM HAS DECIDED NOT TO SUBJECT THEM TO TAX U/S 115JB OF THE ACT ALSO EXCEPT OTHERWISE SPECIFICALLY PROVIDED FOR. CLAUSE (II) OF EXPLANA TION 1 TO SEC.115JB SPECIFICALLY PROVIDES THAT THE AMOUNT OF INCOME TO WHICH ANY OF THE PROVISIONS OF SECTION 10 (OTHER THAN 26 ITA NO.651/VIZ/2014 M/S VARAM POWER PROJECTS PVT. LTD. SRIKAKULAM THE PROVISIONS CONTAINED IN CLAUSE (38) THEREOF) IS TO BE REDUCED FROM THE NET PROFIT IF THEY ARE CREDITED TO THE PROFIT AND LOSS ACCOUNT. THE LOGIC OF THESE PROVISIONS IN OUR VIEW IS THAT AN ITEM OF RECEIPT WHICH FALLS UNDER THE DEFINITION OF 'INCOME' ARE EXCLUDED FOR THE PURPOSE OF COMPUTING 'BOOK PROFIT' SINCE THE SAID RECEIPTS ARE EXEMPTED U/S 10 OF THE ACT WHILE COMPUTING TO TAL INCOME. THUS IT IS SEEN THAT THE LEGISLATURE SEEKS TO MAINTAIN PARITY BETWEEN THE COMPUTATION OF 'TOTAL INCOME' AND 'BOOK PROFIT' IN RESPECT OF EXEMPTED CATEGORY OF INCOME. IF THE SAID LOGIC IS EXTENDED FURTHER AN ITEM OF RECEIPT WHICH DOES NOT FALL UNDER THE DEFINITION OF 'INCOME' AT ALL AND HENCE FALLS OUTSIDE THE PURVIEW OF THE COMPUTATION PROVISIONS OF INCOME TAX ACT CANNOT ALSO BE INCLUDED IN 'BOOK PROFIT' U/S 115JB OF THE ACT. HENCE WE FIND MERIT IN THE SUBMISSIONS MADE BY THE ASSESSEE ON THI S LEGAL POINT. 27. A CAREFUL PERUSAL OF THE DECISION RENDERED BY THE SPECIAL BENCH IN THE CASE OF RAIN COMMODITIES LTD. (SUPRA) WOULD SHOW THAT THE ABOVE SAID LEGAL CONTENTIONS WERE NOT CONSIDERED BY THE SPECIAL BENCH. WE NOTICE THAT THE SPECIAL BENCH CONS IDERED THE FOLLOWING DECISIONS: ( A ) MALAYALA MANORAMA CO. LTD. V. CIT [2008] 300 ITR 251/169 TAXMAN 471 (SC) ( B ) N.J. JOSE & CO. (P.) LTD. V. ASSTT. CIT [2010] 321 ITR 132/[2008] 174 TAXMAN 141 (KER.) ( C ) CIT V. VEEKAYLAL INVESTMENT CO.(P) LTD [2 001] 249 ITR 597/116 TAXMAN 104 (BOM.) IN ALL THESE CASES THE COURTS WERE DEALING WITH THE ISSUE OF INCLUSION OF CAPITAL GAINS IN THE COMPUTATION OF 'BOOK PROFITS' BUT SUCH CAPITAL GAINS WERE OTHERWISE CHARGEABLE TO CAPITAL GAIN TAX U/S 45 OF THE ACT U NDER THE NORMAL PROVISIONS OF THE ACT. HOWEVER HERE IS THE CASE THAT THE PROFITS AND GAINS ARISING ON TRANSFER OF CAPITAL IS NOT FALLING UNDER THE DEFINITION OF 'TRANSFER' AND HENCE UNDER THE DEFINITION OF 'CAPITAL GAINS CHARGEABLE U/S 45' AND CONSEQUENTL Y THE SAME DOES NOT FALL WITHIN THE PURVIEW OF THE DEFINITION OF 'INCOME' GIVEN U/S 2(24) OF THE ACT. FURTHER WE NOTICE THAT THE SPECIAL BENCH DID NOT HAVE OCCASION TO CONSIDER THE ARGUMENT URGED BEFORE US THAT THE PROFITS AND GAINS ARISING ON TRANSFER O F A CAPITAL ASSET BY A HOLDING COMPANY TO ITS WHOLLY OWNED INDIAN COMPANY DOES NOT FALL UNDER THE DEFINITION OF 'INCOME' AT ALL U/S 2(24) OF THE ACT AND HENCE THE SAME DOES NOT ENTER INTO THE COMPUTATION PROVISIONS OF THE ACT AT ALL. WE ARE IMPRESSED BY TH E ARGUMENTS ADVANCED IN THIS REGARD AND WE HAVE ALSO EXTENSIVELY DEALT WITH THE RELEVANT PROVISIONS AND ALSO ABOUT THE SCHEME OF THE PROVISIONS OF SEC. 115JB OF THE ACT. WE ARE OF THE VIEW THAT THE SAID CONTENTIONS DISTINGUISH THE DECISION RENDERED BY THE SPECIAL BENCH IN THE CASE OF RAIN COMMODITIES LTD . ( SUPRA ). ON MERITS ALSO WE HAVE EARLIER SEEN THAT THE ASSESSEE HEREIN HAS ATTACHED A NOTE IN THE NOTES FORMING PART OF ACCOUNTS AND IN THE CASE BEFORE THE SPECIAL BENCH NO SUCH NOTES HAS BEEN INSERTED W HICH FACT WAS SPECIFICALLY NOTED BY THE SPECIAL BENCH. HENCE ON THIS FACTUAL ASPECT ALSO THE DECISION RENDERED BY THE SPECIAL BENCH IS DISTINGUISHABLE. 27 ITA NO.651/VIZ/2014 M/S VARAM POWER PROJECTS PVT. LTD. SRIKAKULAM 28. IN VIEW OF THE FOREGOING DISCUSSIONS WE FIND MERIT IN THE CONTENTIONS OF THE ASSESSEE THAT THE PRO FIT ARISING ON TRANSFER OF CAPITAL ASSET TO ITS WHOLLY OWNED INDIAN SUBSIDIARY COMPANY IS LIABLE TO BE EXCLUDED FROM THE NET PROFIT. I.E. THE NET PROFIT DISCLOSED IN THE PROFIT AND LOSS ACCOUNT SHOULD BE REDUCED BY THE AMOUNT OF PROFIT ARISING ON TRANSFE R OF CAPITAL ASSET AND THE AMOUNT SO ARRIVED AT SHALL BE TAKEN AS 'NET PROFIT AS SHOWN IN THE PROFIT AND LOSS ACCOUNT' FOR THE PURPOSE OF COMPUTATION OF BOOK PROFIT UNDER EXPLANATION 1 TO SEC. 115JB OF THE ACT. ALTERNATIVELY SINCE THE SAID PROFIT DOES NOT FALL UNDER THE DEFINITION OF 'INCOME' AT ALL AND SINCE IT DOES NOT ENTER INTO THE COMPUTATION PROVISIONS AT ALL THERE IS NO QUESTION OF INCLUDING THE SAME IN THE BOOK PROFIT AS PER THE SCHEME OF THE PROVISIONS OF SEC. 115JB OF THE ACT. ACCORDINGLY WE SE T ASIDE THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE AND DIRECT THE AO TO EXCLUDE THE ABOVE SAID PROFIT FROM THE COMPUTATION OF 'BOOK PROFIT' FOR THE REASONS DISCUSSED ABOVE. IN THE INSTANT CASE THE ASSESSEE ALSO HAS DULY DISCLOSED THE FACT OF FORFEITURE O F SHARE WARRANTS AMOUNTING TO RS. 12 65 75 000/ - IN ITS NOTES ON ACCOUNTS VIDE NOTE NO. 6 TO SCHEDULE 11 OF FINANCIAL STATEMENTS FOR THE YEAR ENDED 31.3.2009. HENCE RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF THE MUMBAI TRIBUNAL THE PROFIT AND LOSS A CCOUNT PREPARED IN ACCORDANCE WITH PART II AND III OF SCHEDULE VI OF COMPANIES ACT 1956 INCLUDES NOTES ON ACCOUNTS THEREON AND ACCORDINGLY IN ORDER TO DETERMINE THE REAL PROFIT OF THE ASSESSEE AS LAID DOWN BY THE HON'BLE APEX COURT IN THE CASE OF INDO RAM A SYNTHETICS (I) LTD. V. CIT [2011] 330 ITR 363/196 TAXMAN 539/9 TAXMANN.COM 25 ADJUSTMENT NEED TO BE MADE TO THE DISCLOSURES MADE IN THE NOTES ON ACCOUNTS FORMING PAR T OF THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE AND THE PROFITS ARRIVED AFTER SUCH ADJUSTMENT SHOULD BE CONSIDERED FOR THE PURPOSE OF COMPUTATION OF BOOK PROFITS U/S 115JB OF THE ACT AND THEREAFTER THE LEARNED AO HAS TO MAKE ADJUSTMENTS FOR ADDITIONS/DE LETIONS CONTEMPLATED IN EXPLANATION TO SECTION 115JB OF THE ACT. FACTS OF THE ASSESSEES CASE ARE SQUARELY COVERED BY THE DECISION OF COORDINATE BENCH OF KOLKATA CITED SUPRA. THE CARBON CREDIT IS CREDITED TO THE PROFIT & LOSS ACCOUNT HELD TO BE CAPITAL RECEIPTS AND NOT EXIGIBLE TO TAX AS HELD BY HONBLE JURISDICTIONAL HIGH COURT. HENCE R ESPECTFULLY FOLLOWING THE VIEW TA KEN BY THE COORDINATE BENCH WE DIRECT THE AO TO EXCLUDE THE SALE OF CARBON CREDITS FOR THE PURPOSE OF COMPUT ATION OF BOOK PROFITS U/S 1 15JB OF IT ACT. APPEAL 28 ITA NO.651/VIZ/2014 M/S VARAM POWER PROJECTS PVT. LTD. SRIKAKULAM OF THE ASSESSEE ON THIS GROUND IS ALLOWED. 21. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. CROSS OBJECTIONS 22. THE ASSESSEE RAISED CROSS OBJECTIONS SUPPORTING THE ORDER OF THE LD.CIT(A) IN RESPECT OF THE CARBON CREDI TS AND CHALLENGED THE REOPENING OF THE ASSESSMENT. BOTH THE ISSUES ARE ADJUDICATED IN THE RESPECTIVE APPEAL S OF THE ASSESSEE AS WELL AS THE REVENUE. WHILE CONFIRMING THE ORDER OF THE CIT(A) WITH REGAR D TO THE CARBON CREDITS WE UPHE LD THE VALIDITY OF REO PENING OF ASSESSMENT . THUS THE CROSS OBJECTIONS OF THE ASSESSEE ARE PARTLY ALLOWED. 23. IN THE RESULT APPEAL OF THE ASSESSEE AND CROSS OBJECTIONS FILED BY T HE ASSESSEE ARE PARTLY ALLOWED AND APPEAL OF THE REVENUE IS DISMISSED. 29 ITA NO.651/VIZ/2014 M/S VARAM POWER PROJECTS PVT. LTD. SRIKAKULAM T HE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 29 TH NOV 17 . SD/ - SD/ - ( . ) ( . . ) (V. DURGA RAO) ( D.S. SUNDER SINGH ) /JUDICIAL MEMBER /ACCOUNTANT MEMBER /VISAKHAPATNAM: /DATED : 29 .11.2017 L.RAMA SPS / COPY O F THE ORDER FORWARDED TO : - 1. / THE APPELLANT M/S. VARAM POWER PROJECTS PVT. LTD. D.NO.8 - 4 - 120/3 RAJA COMPLEX SRIKAKULAM 2 . / THE RESPONDENT THE ACIT CIRCLE - 4(1) VISAKHAPATNAM 3 . / THE CIT - 2 VISAKHAPATNAM 4 . ( ) / THE CIT (A) VISAKHAPATNAM 5 . / DR ITAT VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT VISAKHAPATNAM