PRINCIPAL COMMISSIONER OF INCOME TAX-1 vs. SMT.CHANDRAN BHAVANI

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TCA/214/2020HC Madras15 October 2024Bench: Honourable Mr Justice R. SURESH KUMAR4 pages
AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the appeals filed by the Revenue. The dismissal was based on the ground that the matters were covered under the 'Low Tax Effect' as per the recent Circular No. 9/2024 dated 17.09.2024. The Court explicitly stated that the substantial questions of law arising in these appeals were kept open to be decided at a later point in time. Therefore, no findings were made on the merits of the issues raised concerning the application of Rule 8D, Section 14A, or the classification of carbon credit income. The operative direction was to dismiss the appeals without any order as to costs.

What were the facts?

These two Tax Case Appeals (T.C.A.Nos.214 & 215 of 2020) were filed by the Principal Commissioner of Income Tax, Coimbatore, against orders of the Income Tax Appellate Tribunal (ITAT), Madras 'C' Bench and 'D' Bench. T.C.A.No.214 of 2020 challenges the ITAT's order dated 19.11.2019 in I.T.A.No.3382/CHNY/2018, and T.C.A.No.215 of 2020 challenges the ITAT's order dated 05.12.2019 in I.T.A.No.1126/CHNY/2011. The appeals were admitted on 14.08.2020. The Revenue's appeals are based on substantial questions of law concerning the application of amended Rule 8D read with Section 14A of the Income Tax Act, 1961, for Assessment Year 2012-13, and the classification of income from the sale of carbon credits.

What were the issues?

1. Whether on the facts and circumstances of the case, the ITAT is correct in applying the amended provision made w.e.f. 02.06.2016 under Rule 8D r.w. Section 14A of the IT Act to the assessee's case, which relates to Asst. Year 2012-13 and the original assessment was completed on 30.01.2015? 2. Whether on the facts and circumstances of the case, the ITAT is correct in restricting the disallowance only to the expenditure towards bank charges whereas the amended proviso under Rule 8D r.w Sec 14A of the IT Act made w.e.f. 02.06.2016 clearly states that 'the amount referred to in clause (i) and clause (ii) shall not exceed the total expenditure claimed by the assessee' and no restriction on category of expenditure has been imposed? 3. Whether on the facts and circumstances of the case, the ITAT is correct in law in holding the income from the sale of carbon credits as capital receipts, when the same is earned in the regular course of business? 4. Whether on the facts and circumstances of the case, the Appellate Tribunal is correct in law in holding that the sale of carbon credit is capital receipt, when the Finance Act, 2017, has clarified that the sale of carbon credit is business income chargeable to tax at 10% under Section 115 BBG of the Income Tax Act? Contentions of the Revenue (Appellant): The Revenue argued that the ITAT erred in applying the amended provisions of Rule 8D to an assessment year prior to the amendment's effective date and in restricting disallowances. The Revenue also contended that income from carbon credits should be treated as business income, not capital receipts, especially in light of the Finance Act, 2017. Contentions of the Assessee (Respondent): The judgment does not record specific contentions of the assessee.

Which sections of the Income-tax Act were involved?

Section 14A,Section 115 BBG

AI-generated summary — verify with the full judgment below

T.C.A.Nos.214 & 215 of 2020 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 15.10.2024 CORAM : THE HONOURABLE MR.JUSTICE R. SURESH KUMAR AND THE HONOURABLE MR.JUSTICE C. SARAVANAN T.C.A.Nos.214 & 215 of 2020 Principal Commissioner of Income Tax 63, Race Course Road Appellant in Coimbatore 641 018. .. both T.C.As Vs. Respondent in Chandran Bhavani .. T.C.A.No.214 of 2020 M/s.Rajshree Sugars and Chemicals Ltd. “The Uffizi” No.338, Avanashi Road Peelamedu, Coimbatore 641. Respondent in PAN: AAB CR 4179D. .. T.C.A.No.215 of 2020 Prayer in T.C.A.No.214 of 2020: Appeal filed under Section 260-A of the Income Tax Act, 1961, against the order of Income Tax Appellate Tribunal Madras “C” Bench dated 19.11.2019 passed in I.T.A.No.3382/CHNY/2018; and Prayer in T.C.A.No.215 of 2020: Appeal filed under Section 260-A of the Income Tax Act, 1961, against the order of Income Tax Appellate Tribunal Madras “D” Bench dated 05.12.2019 passed in I.T.A.No.1126/CHNY/2011. For the Appellant : Mr.Karthik Ranganathan in both T.C.As Senior Standing Counsel For the Respondent in T.C.A.No.214 of 2020: Mr.G.Baskar For the Respondent in T.C.A.No.215 of 2020: Mr.R.Venkatanarayanan for M/s.Subbaraya Iyer Padmanabhan Page 1 of 4 https://www.mhc.tn.gov.in/judis T.C.A.Nos.214 & 215 of 2020 COMMON JUDGMENT (Order of the Court was made by R.SURESH KUMAR, J.) The present tax case appeals were admitted on 14.08.2020 by this Court on the following substantial questions of law:- T.C.A.No.214 of 2020: "1. Whether on the facts and circumstances of the case, the ITAT is correct in applying the amended provision made w.e.f 02.06.2016 under Rule 8D r.w. Section 14A of the IT Act to the assessee's case, which relates to Asst. Year 2012-13 and the original assessment was completed on 30.01.2015? 2. Whether on the facts and circumstances of the case, the ITAT is correct in restricting the disallowance only to the expenditure towards bank charges whereas the amended proviso under Rule 8D r.w Sec 14A of the IT Act made w.e.f. 02.06.2016 clearly states that”the amount referred to in clause (i) and clause (ii) shall not exceed the total expenditure claimed by the assessee” and no restriction on category of expenditure has been imposed? T.C.A.No.215 of 2020: 1. Whether on the facts and circumstances of the case, the ITAT is correct in law in holding the Page 2 of 4 https://www.mhc.tn.gov.in/judis T.C.A.Nos.214 & 215 of 2020 income from the sale of carbon credits as capital receipts, when the same is earned in the regular course of business? 2. Whether on the facts and circumstances of the case, the Appellate Tribunal is correct in law in holding that the sale of carbon credit is capital receipt, when the Finance Act, 2017, has clarified that the sale of carbon credit is business income chargeable to tax at 10% under Section 115 BBG of the Income Tax Act?" 2. It is submitted by the learned Senior Standing Counsel appearing for the appellant Revenue that these matters are covered under the Low Tax Effect as per the recent Circular dated 17.09.2024, in Circular No.9/2024. 3. Hence, these appeals stand dismissed, as covered under the low tax effect and the substantial questions of law arising in these appeals are kept open to be decided at the later point of time. There shall be no order as to costs. (R.S.K., J.) (C.S.N, J) 15.10.2024 Neutral Citation:Yes/No Page 3 of 4 https://www.mhc.tn.gov.in/judis T.C.A.Nos.214 & 215 of 2020 drm R. SURESH KUMAR, J. AND C. SARAVANAN

, J.

(drm) T.C.A.Nos.214 & 215 of 2020 15.10.2024 Page 4 of 4 https://www.mhc.tn.gov.in/judis

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