THE ACIT, CIRCLE-4(1)(2),, AHMEDABAD vs. M/S. TORRENT POWER LTD.,, AHMEDABAD

आदेश/O R D E R

PER WASEEM AHMED, ACCOUNTANT MEMBER:

The captioned appeals and COs have been filed at the instance of the Revenue and the assessee against the separate orders of the Learned Commissioner of Income Tax (Appeals)-8, Ahmedabad, (in short “Ld.CIT(A)”) arising in the matter of assessment order passed under s. 143(3)of the Income Tax Act 1961 (here-in-after referred to as "the Act"). The assessee has filed the Cross Objection in the Revenue’s appeal bearing ITA No.14 & 2047/AHD/2018 for the Assessment Years 2012-2013 & 2013-14.

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10 ''that the Id. CIT(Appeals) erred in law and on facts in allowing deduction ii/s. 80G(Rs.6,38,77,000 @ 50% & Rs.25,00,000 @100%) and 80GGB (Fs.1,45.00,000/-) of the Income tax Act, 1961 even though there is no profit left out after deducting of 100% of profit of eligible unit. "

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one's negative point carbon credit. The amount received is not received for producing and/or selling any product, bi-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 v. Maheshwari Devi Jute Mills Ltd. [1965] 57 ITR 36 wherein held that transfer of surplus loom hours to other mill out of those allotted to the assesses 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 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.

It is observed that Hon'ble Hyderabad ITAT has elaborately considered issue of taxing income from sale of CERs and held that such income is not liable to tax as revenue receipt in terms of Section 2(24), 28, 45 and 56 of the Act. Further, said decision was upheld by Andhra Pradesh High Court in 365 ITR 82 which reads as under: "Section 28(i) of the Income-tax Act, 1961 - Business income - Chargeable as (Carbon credits) - Assessment year 2007-08 - Appellant-company was engaged in business of power generation through biomass power generation unit - It received carbon credits, namely, carbon Emission Reduction Certificates for its project activity of switching off fossil fuel from naptha and diesel to biomass - It transferred said cation credits and offered receipt from said transfer as capital receipt - However, Assessing Officer treated said receipt as business income and brought same to tax -Tribunal held that carbon credit not being an offshoot of business but an offshoot of environmental concern, amount received on their transfer had no element of profit or gain - Whether since carbon credit was not even linked with power generation, Tribunal was justified in its decision' Held, yes [Para 2] [In favour of appellant]"

It is also observed that identical issue came up for consideration before Hon'ble Ahmedabad ITAT in the case of Alembic Limited in ITA No. 1912/AHD/2012, dated 9th December, 2016 wherein Assessee itself has shown sale of CERs as business receipt but Hon'ble ITAT has accepted the claim of Appellant for treating such income as capital receipts. The relevant extract of the said judgment are as under:

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"19. Adverting to the additional ground No.1 in respect of income from realization of carbon credits, which is taxed as Revenue receipt. The Id. Counsel for the appellant, at the outset, contends that the Hon'ble Karnataka High Court in the case of CIT vs. SubhashKabini Power Corporation Ltd, [2016] 69 taxmann.com 394 (Karnataka) dealt with the issue at length and relied on various judicial pronouncements, holding income received from realizationof carbon credits as capital in nature. The Hon'ble Karnataka High Court in paragraph 6 of its order (supra) has dealt with the issue at length and squarely held that the carbon credits are generated out of environmental concerns which does not have any character of trading activity; therefore, any receipt from an activity which is not a trading activity is capital in nature by following observation:-

19.1 The Hon'ble High Court further relied on the judgment of Hon'ble Andhra Pradesh High Court in the case of CIT vs. My Home Power Ltd[2014] 46 taxmsnn.com 314/365ITR 82 and the judgment of Hon'ble Karnataka High Court in the case of CIT vs. D.G. Gopala Gowda, [2013] 354 ITR 501, which have taken the same view on realization of carbon credits as capital receipt There is no contrary judgment and the two Hon'ble High Courts, i.e. Andhra Pradesh High Court and Karnataka High Court, having taken a concurrent view on this matter, are to be followed in judicial discipline.

19.2 The Id. Departmental Representative, on the other hand, contends that the realization from carbon credits has been treated by the appellant itself as revenue income and offered to tax and in fact in actualities they are revenue receipt, However, no adverse judgment on this has been cited.

It is added that the above finding given by the Hon'ble Tribunal later on was confirmed by the Hon'ble Gujarat High Court in Tax Appeal No. 553 of 2017 dated 28/08/2017 wherein it was held as under: "6. The last surviving question pertains to the treatment that the appellant's income from trading of carbon credits should be given. The Tribunal held that receipts should be in the nature of capital receipts and therefore, would not invite tax. This issue has been examined by two High Courts. The Kamataka High Court in case of CIT v. SubhashKabini Power Corporation Ltd. reported in (2016) 385 ITR 592 (Karn) and Andhra Pradesh High Court in case of Commissioner of Income tax v. My Home Power Limited reported in (2014) 365 ITR 82 (AP) have held that receipts of carbon credit are in nature of revenue receipts. Following the decision of said two High Courts, this question is also not considered." In view of observations made hereinabove, and relying upon decisions referred supra, income from sale of CERs is held as capital receipt hence issue as to whether Appellant is entitled for deduction under Section 80-IA or not has become infructuous and academic hence not adjudicated while deciding present appeal. This ground of appeal is thus allowed.

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10.1 The Hon’ble Andhra Pradesh High Court in case of CIT vs. My Home Power Ltd reported in 46 taxmann.com 314 in identical fact and circumstances has held as under: 3. 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 generated in the course of 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.

10.2 Likewise, this Tribunal in case of Gujarat Fluorochemicals Ltd vs. DCIT reported in 97 taxmann.com 10 after considering several judicial Pronouncement including the observation of Hon’ble Jurisdictional High Court in case of Alembic Ltd in Tax Appeal No. 553 of 2017 has held that the receipt on account of sale of Carbon credit are to be treated as capital receipts which is not chargeable to tax. The relevant finding of the Tribunal is extracted as under: 41. Thus, taking into consideration resolution of litigation on this issue by the Legislature itself, which had made provision for taxation of such receipts at the rate of 10% from the assessment year 2018- 19 as well as authoritative pronouncements of Hon'ble jurisdictional High Court, we are of the view that receipts received by the assessee on sale of carbon credit are to be treated as capital receipts and not liable to tax.

10.3 In view of the above and after considering the facts in totality, we do not find any infirmity in the order of the learned CIT-A. Hence we uphold the same and direct the AO to

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delete the addition made by the AO. Hence, the ground of appeal of the revenue is hereby dismissed.

12.1 Nevertheless, the assessee has claimed deduction under section 80IA of the Act by treating them as profit derived from the business of distribution of power. However, the AO disputed the deduction with respect to such items of income. However, in appellate proceeding the learned CIT(A) held the above items of income as eligible for deduction under section 80IA of the Act. Thus the Revenue is in appeal before us. For the sake of convenience, we proceed to adjudicate each item of income shown by the assessee and claimed deduction under section 80IA of the Act in the manner as detailed below:

Delayed payment charges from customers

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80.1 From the preceding discussion we note that the judgment was rendered in connection with the interest income which is eligible for deduction under section 80-I of the Act but the principles laid down therein can also be adopted to the provisions of section 80-IA of the Act in the given facts and circumstances. In view of the above we do not find any infirmity in the order of learned CIT (A). Hence the issue raised by the revenue is dismissed.

13.1 Before us, no material has been placed on record by the Revenue to demonstrate that the decision of Tribunal as discussed above has been set aside / stayed or overruled by the Higher Judicial Authorities. Before us, Revenue has not placed any material on record to point out any distinguishing feature in the facts of the case for the year under consideration and that of earlier year nor has placed any contrary binding decision in its support. Thus, respectfully following the order this tribunal in the own case of assessee, we uphold the finding of the learned CIT(A). Thus, we hold that the assessee is eligible for

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deduction under section 80-IA of the Act with respect to delayed payment charges from customers.

Interest from customer

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59.1 From the preceding discussion we note that the judgment was rendered in connection with the provisions of section 80I of the Act but the principles laid down therein can also be adopted to the provisions of section 80-IA of the Act. In view of the above, we do not find any infirmity in the order of learned CIT (A). Hence the issue raised by the Revenue is dismissed.

14.1 Before us, no material has been placed on record by the Revenue to demonstrate that the decision of Tribunal as discussed above has been set aside / stayed or overruled by the Higher Judicial Authorities. Before us, Revenue has not placed any material on record to point out any distinguishing feature in the facts of the case for the year under consideration and that of earlier year nor has placed any contrary binding decision in its support. Thus, respectfully following the order this tribunal in the own case of assessee, we uphold the finding of the learned CIT(A). Thus, we hold that the assessee is eligible for deduction under section 80-IA of the Act with respect to interest from customer.

Shifting Services

15.1 At the outset, we note that identical issue came before this tribunal in own case of the assessee for AY 2011-12 in ITA No. 3178/Ahd/2016 where the issue has been decided in favour of the assessee and against the Revenue vide order dated 09-12-2021. The relevant finding of the Bench is extracted as under:. 215. Before parting, Income from shifting services of the meters given to the customers, have direct proximity with the business of the assessee. Therefore, we do not find any infirmity in the order of learned CIT (A). At the time of hearing, the learned AR has not brought anything on record contrary to the finding of the learned CIT (A). Hence we decline to interfere in the order of the learned CIT (A). Thus the ground of appeal of the revenue is hereby dismissed.

15.1 Before us, no material has been placed on record by the Revenue to demonstrate that the decision of Tribunal as discussed above has been set aside / stayed or overruled by the Higher Judicial Authorities. Before us, Revenue has not placed any material on record to point out any distinguishing feature in the facts of the case for the year under consideration and that of earlier year nor has placed any contrary binding decision in its support. Thus, respectfully following the order this tribunal in the own case of assessee, we uphold the finding of the learned CIT(A). Thus, we hold that the assessee is eligible for deduction under section 80-IA of the Act with respect to Shifting Services.

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Liquidation damage/ Rebate

16.1 However, the AO disagreed with the submission of the assessee and held that amount of compensation received from supplier and rebate availed on account of prompt payment to PGCIL does not have any nexus with the activity of the power distribution or generation. The above receipt is in the nature of income being compensation and incentive and therefore, the same is outside the preview of income from the activity of distribution or generation of power. Hence, the assessee is not eligible for deduction under section 80-IA of the Act on such receipts of Rs. 2,12,47,267/- only.

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section 80-IA(1) was not required for computation of deduction in case of undertaking engaged in providing telecommunication services, since words 'derived from' did not occur in sub-section (2A) of section 80-IA - It accordingly allowed appellant's claim for deduction under section 80-IA - Whether Tribunal was justified In its view - Held, yes [Paras 6 and 14] [In favour of appellant] Similar view is taken by Hon'ble MP High Court in case of CIT v Prakash Oils Ltd dated 08.03.2011 [58 DTR 279] in case of liquidated damages income. Hon'ble Gujarat High Court in the case of CIT vs Metrochem Industries Ltd. [[2017] 79 taxmann.com 440 has also allowed deduction u/s 80IA on Kasar and discount which is similar in nature of rebate as discussed herein above. Relying upon decisions referred supra, the AO is directed to allow deduction u/s SOIA on liquidated damages/rebate.

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has a live link with the activity of the assessee. Accordingly, we hold that the assessee is eligible for deduction on such liquidated damages.

21.1 Moving forward, the rebate fetched by the assessee on account of quick payment made to PGCIL has direct link with the activity of the assessee being distribution of power. Similarly, the amount of rebate received by the assessee has been presented in the financial statement in a different format. As such, the assessee instead of showing the rebate income as a separate items income, it could have adjusted such rebate against the payment made to PGCIL. In such an event, there would not have been any question for disclosing any income under the captioned head and consequently disallowing the deduction claimed by the assessee under the provisions of section 80 IA of the Act. Accordingly, we hold that the assessee is eligible for deduction on such rebate.

Sale of Scrap

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Sadhu Forging Ltd. [2011] 336 ITR 444/200 Taxman 1/11 taxmann.com 322 (Delhi), Tribunal was justified in holding that assesses, engaged in manufacturing card boxes, was entitled to deduction under section 80-iB in respect of income arising from sale of scrap - Held, yes [Para 6][ln favour of assessee" Relying upon the binding decision of the Hon'ble Court, supra, AO is directed to allow deduction under Section 80-IA on sale of scrap.

25.1 On the other hand, the learned AR contended that the assessee instead of adjusting the impugned income against the expenses has classified income from other sources in the financial statement. As such, there is no income to the assessee from the sale of scrap/consumable materials in real sense except it is reducing the cost incurred by the assessee in the course of its business i.e. power generation and distribution. Therefore, the same should be eligible for deduction under section 80 IA of the Act.

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scrap against the block of assets does not arise. The learned DR at the time of hearing has not controverted the finding of the learned CIT-A.

26.1 When the consumable stores are purchased by the assessee, they are directly debited in the profit and loss account and the balance if remaining at the end of the year is shown as closing stock in the profit and loss account after making the adjustment of the consumption which is debited in the profit and loss account. Thus in effect only the amount of material consumed is claimed as deduction against the income of the assessee. If obsolete stores have been sold out in the year under consideration the same will be shown as income in the profit and loss account at the sale price and simultaneously the corresponding material cost of the consumables will be debited in the profit and loss account. Thus in effect the losses that the assessee has incurred on account of obsolescence of consumable materials is reduced by the amount of sale’s realization. It is a matter manner of presentation in the books of accounts about the sale of consumable materials. If the assessee instead of showing the sale of the consumable materials as income and adjusting the same against the cost of the consumables sold by it there will not be any income in the books of accounts of the assessee and accordingly the question of disallowances of deduction under the section 80IA of the Act will not arise. Thus, merely the assessee has presented the sale of consumable stores in a particular manner, the assessee cannot be debarred from claiming the deduction under the provisions of section 80IA of the Act. It is also pertinent to note that the income from the sale of consumable stores used in the eligible unit has direct link with the generation and distribution of power, therefore on this score as well, the assessee cannot be denied the benefit of the deduction under section 80IA of the Act. Accordingly, we uphold the order of the learned CIT-A, and direct the AO to delete the addition made by him. Hence the grounds of appeal of the revenue is dismissed.

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Particulars Abd-Distri Bhiwandi Surat DUGEN SUGEN Total Political 14500000 14500000 Donation 80GGB Other Donation 2500000 2500000 80G-100% Other Donation 23800000 10077500 10000000 20000000 63877500 80G-50% Total 40800000 10077500 10000000 20000000

28.1 The assessee has disallowed the same while computing the deduction under section 80-IA of the Act, however claimed deduction of the same separately from its Gross Total Income under the provisions of section 80G/80GGB of the Act.

28.2 The AO was of the view that such donation shown in the profit and loss account of the eligible undertaking cannot be claimed as deduction under the provisions of section 80G /80GGB of the Act from the gross total income of the assessee. It is for the reason that the entire amount of profit with respect to such eligible undertaking has already been allowed as deduction under the provisions of section 80-IA of the Act. Accordingly, the AO issued a show cause notice to the assessee proposing to disallow the deduction claimed under section 80G/GGB of the Act.

28.3 The assessee in response thereto submitted that the deduction under section 80G/80GGB of the Act is eligible/allowed from the Gross Total Income when the payment is made to certain organizations specified therein. On the contrary the deduction under section 80-IA of the Act is provided for the specified business activity carried on by the assessee. Thus, the deductions under section 80G/80GGB of the Act and 80-IA of the Act are mutually exclusive and independent to each other. The assessee while claiming the deduction under section 80-IA of the Act against the profit of the specified business can also claimed the deduction under section 80G/80GGB of the Act separately.

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28.4 However, the AO disregarded the contention of the assessee by observing that there remained no taxable profit after claiming the deduction under section 80-IA of the Act in the specified undertaking. Accordingly, the AO disallowed the deduction of � 1,45,00,000/- being political donation u/s 80GGB of the Act, and � 25,00,000/- being other donation under section 80G of the Act eligible for 100% deduction and � 6,38,77,500/- being other deduction under section 80G of the Act eligible for 50% deduction.

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114.1 Now coming to the case on hand the donations paid by the assessee against the eligible undertaking which is qualified for deduction under section 80G/80GGGB of the Act, the same cannot be considered as an expense/payment against the specific business/undertaking eligible for deduction under section 80-IA of the Act. It is for the reason that the donation under section 80G/80GGB of the Act does not relate to the activity of eligible undertaking. In other words, the payment under section 80G/80GGB of the Act is eligible for deduction on account of the payment made to the specific institution irrespective of the business whether it is eligible or non-eligible carried on by the assessee. 114.2 There is no dispute to the fact that the amount of donation was claimed by the assessee in the profit and loss account of the eligible undertaking which has been disallowed while computing the eligible profit. Certainly, the profit of the eligible undertaking will increase by the amount of disallowance made by the assessee on account of the donations paid to the institutions which is entitled for deduction under section 80G/80GGB of the Act. It has to be disallowed/added back while computing the eligible profit of the business referred therein under section 80-IA of the Act. It is for the reason that this donation does not relate to the business referred under section 80-IA of the Act which is eligible for deduction. But the same can be claimed as deduction by virtue of the provisions of section 80G/80GGB of the Act separately subject to the conditions specified therein. Hence, we do not find any infirmity in the order of learned CIT (A). Thus, the ground of appeal of the Revenue is dismissed.

32.1 Before us, no material has been placed on record by the Revenue to demonstrate that the decision of the Tribunal as discussed above has been set aside / stayed or overruled by the Higher Judicial Authorities. Before us, Revenue has not placed any material on record to point out any distinguishing feature in the facts of the case for the year under consideration and that of earlier year nor has placed any contrary binding decision in its support. Thus, respectfully following the order this Tribunal in the own case of assessee, we uphold the finding of the learned CIT(A). Thus, the ground of appeal raised by the Revenue is hereby dismissed.

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came at Rs. 6,78,94,834/- only. The AO after giving benefit of suo-moto disallowances made by the assessee for Rs. 1,34,29,521/- made a disallowance of Rs. 5,44,65,313/- under section 14A r.w.r. 8D of Income Tax Rules.

"7. We do not find any merit in this submission. The judgement of this court in Abhishck Industries Ltd {2006} 286 ITR 1 was on the issue of allowability of interest paid on loans given to sister concerns, without interest. It was held that deduction for interest was permissible when loan was taken for business purpose and not for diverting the same to sister concern without having nexus with the business. The observations made therein have to be read in that context. In the present case, admittedly the assessee did not make any claim for exemption. In such a situation section 14A could have no application."

Similar view is also given by Hon'ble Delhi High Court in the case of Cheminvest Limited V/s CIT61 taxmann.com 118. It is also observed that similar disallowance made by AO is deleted by CIT (Appeals) - 7 in case of Appellant for A.Y. 2011-12 vide her order dated 29th September, 2016.

The AO also stated the CBDT circular as a basis lo apply Section 14A r.w. Rule 8D. In this reference it is to be noted that the circular cannot detract from the provisions of law. The law as interpreted by judicial authority is considered as law settled. In the decision of five members bench of

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Supreme Court in the case of CCE v/s Ratnam Melting & Wire Ind (SC) Civil Appeal No. 1469/2002, the observation is follows: "Circular and instructions issued by the Board are no doubt binding in law on the authorities under the respective statutes, but when the Supremo Court or o High Court declares the law on the question arising for consideration, it would not be appropriate for the Court to direct that the circular should be given effect to and not the view expressed in a decision of this Court or the High Court. So far as the clarification/circulars issued by the Central Government and .of the Stato Government are concerned they represent merely their understanding of the statutory provisions. They are not binding upon the Court. It is for the Court to declarewhat the particular provision of statute says and it is not for the Executive looked al from another angle, a circular which is contrary to the statutory has realty no existence in taw,"

The conclusion of the matter is that the law declared by Supreme Court is binding in terms of Article 141 of the Constitution. The Assessing Officer cannot simply brush aside the interpretation by Courts, in view of the aforesaid discussion, the disallowance made by the Assessing Officer invoking the provisions of Section 14A of the Act is not correct and hence, same is deleted. Accordingly, ground No. 6, 7 and 8 of the appeal are allowed.

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rule 8D of Income Tax Rule. 210.2 Now the question arises, whether the assessee can claim the benefit of the disallowance made by the assessee in the income tax return before the judicial forum. It is the trite law that the income tax has to be levied on the income which is determined under the provisions of the Act. The assessee for any reason has offered any income which was not chargeable to tax, the revenue is not expected to deny the benefit to the assessee for which it was entitled. 210.3 It is also pertinent to note that the assessee has filed the return of income for the year under consideration dated 29-9-2011 wherein the disallowance of � 1,57,95,815/- was made under the provisions of section 14A read with rule 8D. At that point of time, there was no clarity on the issue whether there will not be any disallowance under the provisions of section 14A read with rule 8D of Income Tax Rule if there was no exempted income. However this clarity was brought on a later date by the Hon’ble Gujarat High Court in the case of Corrtech Energy Ltd (Supra) vide order dated 24-3- 2014. The contents of the order has already been reproduced in the preceding paragraph. Thus, there remains no ambiguity that the assessee was not aware of the provisions of law at the time of filing the return of income. 210.4 Be that as may be, the assessee cannot be deprived from the benefits provided under the provisions of law more particularly in a situation where the proceedings of the assessee for the year under consideration were pending before the higher authorities on same issues. 210.5 In view of the above and after considering the facts in totality, we hold that the disallowance under section 14A read with rule 8D of Income Tax Rule was not warranted. Hence the ground of appeal of the assessee is allowed whereas ground of appeal of the Revenue is dismissed in view of above discussion.

39.1 Before us, no material has been placed on record by the Revenue to demonstrate that the decision of the Tribunal as discussed above has been set aside / stayed or overruled by the Higher Judicial Authorities. Before us, Revenue has not placed any material on record to point out any distinguishing feature in the facts of the case for the year under consideration and that of earlier year nor has placed any contrary binding decision in its support. Thus, respectfully following the order this Tribunal in the own case of assessee, we uphold the finding of the learned CIT(A). Thus, the ground of appeal raised by the Revenue is hereby dismissed.

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45.1 Before us, no material has been placed on record by the Revenue to demonstrate that the decision of Tribunal as discussed above has been set aside / stayed or overruled by the Higher Judicial Authorities. Before us, Revenue has not placed any material on record to point out any distinguishing feature in the facts of the case for the year under consideration and that of earlier year nor has placed any contrary binding decision in its support. Thus, respectfully following the order this tribunal in the own case of assessee, we uphold the finding of the learned CIT(A). Thus, the ground of appeal raised by the Revenue is hereby dismissed.

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amount of Rs. 6,78,94,834/- being disallowances under section 14A read with rule 8D of the Income Tax Rules.

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“In view of above discussion, the computation under clause (f) of Explanation 1 to section 115JB(2), is to be made without resorting to the computation as contemplated under section 14A, read with rule 8D of the Income-tax Rules, 1962.” 124.2 The ratio laid down by the Hon’ble Tribunal is squarely applicable to the facts of the case on hand. Thus it can be concluded that the disallowance made under section 14A r.w.r. 8D cannot be resorted while determining the expenses as mentioned under clause (f) to explanation 1 to section 115JB of the Act. 124.3 However, it is pertinent to note that the disallowance needs to be made with respect to the exempted income in terms of the provisions of clause (f) to section 115JB of the Act while determining the book profit. In holding so, we draw support from the judgment of Hon’ble Calcutta High Court in the case of CIT Vs. Jayshree Tea Industries Ltd. in GO No.1501 of 2014 (ITAT No.47 of 2014) dated 19.11.14 wherein it was held that the disallowance regarding the exempted income needs to be made as per the clause (f) to Explanation-1 of Sec. 115JB of the Act independently. The relevant extract of the judgment is reproduced below:- “We find computation of the amount of expenditure relatable to exempted income of the assessee must be made since the assessee has not claimed such expenditure to be Nil. Such computation must be made by applying clause (f) of Explanation 1 under section 115JB of the Act. We remand the matter for such computation to be made by the learned Tribunal. We accept the submission of Mr. Khaitan, learned Senior Advocate that the provision of section 115JB in the matter of computation is a complete code in itself and resort need not and cannot be made to section 14A of the Act.”

124.4 Given above, we hold that the disallowances made under the provisions of Sec. 14A r.w.r. 8D of the IT Rules, cannot be applied to the provision of Sec. 115JB of the Act as per the direction of the Hon'ble Calcutta High Court in the case of CIT Vs. Jayshree Tea Industries Ltd. (Supra). 124.5 Now the question arises to determine the disallowance as per the clause (f) to Explanation-1 of Sec. 115JB of the Act independently. In this regard, we note that there is no mechanism/ manner given under the clause (f) to Explanation-1 of Sec. 115JB of the Act to workout/ determine the expenses with respect to the exempted income. Therefore in the given facts & circumstances, we feel that adhoc disallowance will serve the justice to the Revenue and assessee to avoid the multiplicity of the proceedings and unnecessary litigation. Thus we direct the AO to make the disallowance of 1% of the exempted income as discussed above under clause (f) to Explanation-1 of Sec. 115JB of the Act. We also feel to bring this fact on record that we have restored other cases involving identical issues to the file of AO for making the disallowance as per the clause (f) to Explanation-1 of Sec. 115JB of the Act independently. But now we note that there is no mechanism provided under the clause (f) to Explanation-1 of Sec. 115JB of the Act to make the disallowance independently. Therefore our action for restoring back the issue to the file of AO would unnecessarily cause further litigation. Thus we limit the disallowance on an ad-hoc basis @ 1 % of the exempted income as per the clause (f) to Explanation-1 of Sec. 115JB of the Act. Thus the ground of appeal of the Revenue is partly allowed.

51.1 Before us, no material has been placed on record by the learned AR or DR to demonstrate that the decision of Tribunal as discussed above has been set aside / stayed or overruled by the Higher Judicial Authorities. Before us, learned AR or DR has not placed any material on record to point out any distinguishing feature in the facts of the case for the year under consideration and that of earlier year nor has placed any contrary binding decision in its support. Thus, respectfully following the order this tribunal in the own case of assessee, we set-aside the finding of the learned CIT(A) and direct the AO make adhoc disallowances @ 1% of exempted income. However, in the given facts and circumstances,

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we find that there was no exempt income in the year under consideration, therefore there cannot be any disallowance while computing the book profit under section 115JB of the Act. Thus, the ground of appeal raised by the Revenue is hereby dismissed.

53.2 Based on the above ground of appeal, the learned CIT-A has held as under: The eleventh and twelfth ground of appeal relate to not granting of credit for dividend distribution tax (DDT) for Rs.44,15,37,467 and short grant of TDS for Rs.2,83,716. The AO is directed to verify the payments of DDT made by Appellant and allow credit of such taxes while giving effect to this order. The AO also directed to verify the claim of Appellant regarding short credit of TDS and if it is found that income pertaining to such TDS is already offered to tax, credit of such TDS needs to be given while giving effect to this order.

53.3 From the above direction, we note that the learned CIT-A has just instructed the AO to allow the claim of the assessee subject to the direction. As such, at the time of hearing the learned DR has not brought any infirmity in the direction given by the learned CIT-A. Accordingly, we do not find any infirmity in the order of the learned CIT-A and therefore decline to interfere in the same. Hence the ground of appeal of the revenue is hereby dismissed.

Coming to CO. No. 41/Ahd/2019 by the assessee in ITA No. 14/Ahd/2018 for A.Y. 2012-13.

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55.1 The assessee also filed additional ground of objection vide letter dated 22-10-2021 which are as under: Appellant craves leave to raise these additional grounds of Cross Objections before the Hon'ble ITAT. These are legal grounds and therefore, as per the decision of Hon'ble Supreme court in the case of National Thermal Power (229 ITR 383), it can be raised before the Hon'ble ITAT.

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In view of the above, the appellant hereby raises following grounds as additional grounds of Cross Objections, which is without prejudice to the grounds raised by the appellant while filing appeal in Form 36A. "1- Without prejudice to all the grounds raised, in law and in the facts and circumstances of the appellant's case, the appellant requests for admission of its additional claim and for allowing deduction of Rs. 9,84,48,624/- in respect of Education Cess and the Secondary and Higher Education Cess on income tax, on the ground that such expenditure is allowable business expenditure u/s 37(1) of the Act as per settled legal precedents. 2. Without prejudice to all the grounds raised, in law and in the facts and circumstances of the appellant's case, the appellant requests for admission of its additional claim and for allowing deduction of Rs.1,89,74,745/- in respect of Education Cess and the Secondary and Higher Education Cess on Dividend Distribution Tax, on the ground that such expenditure is allowable business expenditure u/s.37(1) of the Act as per settled legal precedent. 3. Without prejudice to all the grounds raised, in law and in the facts and circumstances of the appellant's case, the appellant requests for admission of its additional claim and for not including the proceeds of Rs. 3,21,68,86,818/- received on sale of carbon credits, while computing the Book Profit u/s. 115JB of the Act on the ground that it is income in the nature of "capital receipts" as per the settled legal precedents.

57.1 Without prejudice to the above, the assessee also contended that during the year it incurred expense of Rs. 11,40,67,489/- in relation to maintenance of streetlights contracts. Out of above cost, an amount of Rs. 5,48,55,284/- has already been adjusted against impugned income. Therefore, if the assessee is denied the benefit of deduction under section 80-IA of the Act from its streetlight maintenance activity, then the net amount of

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expenditure should only also be excluded from computation of income under section 80-IA of the Act. Accordingly, the assessee claimed that it incurred net expenses of Rs. 71,31,629/- over the income from streetlights maintenance. (note: there appears some typographical mistake in the amount of net expense i.e. 71,31,629.00.)

57.2 However, the AO disregarded the contention of the assessee by observing that the income from the maintenance of streetlights activity is not derived from the power distribution activity. The maintenance activity is altogether separate and independent to the power distribution activity. It is not necessary for providing the maintenance services to AMC that the assessee should be engaged in the activity of power distribution. Accordingly, the AO held that the income from streetlights maintenance services cannot be made eligible for deduction under section 80IA of the Act.

57.3 The AO further held that the claim of the assessee that it incurred a cost of Rs. 11,40,67,489/- cannot be accepted for the reason that the same is not supported by the evidences. There was also no explanation furnished by the assessee that how it worked the amount of Rs. 71,31,629/- being the expenditure over income. Nevertheless, the AO held that expenses incurred by the assessee in relation to maintenance services cannot be denied. Therefore, the AO estimated the profit from the activity of streetlight maintenance services at Rs. 1,08,66,911/- being 0.00065% of total revenue and excluded the same from the computation of income under section 80-IA of the Act.

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activity of streetlight maintenance is closely connected with the activity of distribution of power. Thus, the same is eligible for deduction under section 80 IA of the Act.

38.3 From the ratio of the aforesaid decision of the Apex Court, it is clear that the phrase ‘derived from’ covers receipts from the actual conduct of business of the specified industry as provided under section 80-IA of the Act. 38.4 Likewise, as per the Bombay High Court in the case of Hindustan Lever Ltd. v. CIT [1980] 121 ITR 951/3 Taxman 390, the word ‘derived’ as far as incometax law is concerned, has been given a narrow meaning - a strict meaning, by the courts and has been understood in the restricted sense of a direct derivation and not understood in the broad sense as equivalent to be derived directly or

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indirectly. In other words, only the proximate source has to be considered and not the source to which it may ultimately be referable. 38.5 In the light of the aforesaid discussion, it may be safely concluded that the expression "Profit and gain derived from an Industrial undertaking" used in sections 80-IA of the Act, will include all the profits and gains earned by the Industrial undertaking by the actual conduct of its business. It would mean that all the income which has a direct nexus with the business of the Industrial Undertaking, will be includible in such profits and gains. Thus, we are of the view that profit and gain earned by the assessee from the services of maintenance of street light are not the profit and gain from the activity or undertaking of generation and distribution of power. As there is no nexus between the business of power distribution and maintenance /service of street light. Thus, we hold that profit and gains derived from street light maintenance services should not be included in amount of deduction under section 80IA of the Act. Hence we do not find any infirmity in the finding of the authority below. Accordingly the assessee’s ground of appeal is dismissed

62.1 Respectfully following the above finding of coordinate bench in own case of the assessee, we hold that the assessee is not eligible for deduction of income derived from the services of streetlight maintenance.

62.2 Regarding the alternate contention of the assessee that it should be allowed to be adjusted the income of streetlight maintenance with the corresponding expenses. We find force in the alternate contention of the assessee. However, the onus lies upon the assessee to furnish the supporting evidences of the expenses incurred against the income from streetlight maintenance. But we find from the concurrent finding of the authorities below that no such detail has been furnished by the assessee. As such in the absence of necessary details, the AO was pleased to estimate the income of the assessee. In other words, the AO has given the benefit of the expenses against the income from streetlight maintenance on ad hoc basis. Even before us, the learned AR has not brought anything on record about the expenses incurred against such street light maintenance income. Thus in the absence of such details, we do not find any merit in the argument of the learned AR of the assessee. Before parting, we also note that the basis adopted by the AO for computing the income relating to streetlight maintenance does not seem to the proper. It is because, the AO has considered all the income of the assessee for working out the profit from the activity of streetlight maintenance instead of making the estimate directly on the income shown by the assessee under the head streetlight maintenance. In simple words, the AO could have estimated the profit on some reasonable basis in relation to the gross income shown by the assessee from the activity of streetlight maintenance. As such, we are of the

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view that the justice shall be served to the assessee and the revenue, if the income of the assessee from the streetlight maintenance is estimated at the rate of 8% of Rs. 5,48,55,284/- being gross income from the streetlight maintenance activity. Hence the ground of appeal of the assessee is partly allowed.

64.1 However, the AO was of the view that no benefit of bad debts recovery can be granted by allowing deduction under section 80IA of the Act for the reason that the amount of bad debt was recognized by the assessee when its unit was not eligible for deduction under section 80-IA of the Act. If the deduction under section 80-IA of the Act is allowed, then the same would lead to the double deduction. Firstly, when these bad debts were written off in the books of account in the earlier year and secondly when these bad debts were recovered in the form of deduction under section 80-IA of the Act. However, the AO found that there were bad debts written off in the year under consideration of Rs. 1,95,57,671/- and Rs. 20,70,696/- in connection with Ahmedabad unit and Surat unit

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which was allowed to be net of against such bad debts recovered. Thus, the AO effectively excluded the sum of Rs. 93,15,306/- and Rs. 38,97,867/- from the amount of deduction claimed under section 80IA of the Act for Ahmedabad unit and Surat Unit.

65.1 However the learned CIT (A) disregarded the contention of the assessee by observing that the AO has given categorical finding that the bad debts were claimed in the earlier years which were also allowed as deduction when the undertaking was not eligible for deduction under section 80-IA of the Act. Therefore, any recovery of such bad debts cannot be allowed as deduction under section 80 IA of the Act. The finding of the AO has not been controverted by the assessee. The learned CIT(A) also found that identical disallowance was also made in earlier year being AY 2008-09 to 2010-11 which has been confirmed by the ld. predecessor CIT(A). Thus, the learned CIT(A) confirmed the disallowance made by the AO.

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45.1 From the above, there remains no ambiguity to the fact that the assessee is eligible for deduction under section 80 IA of the Act with respect to the impugned bad debt recovery shown as income in the year under consideration. Thus the ground of appeal of the assessee is allowed.

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69.1 Before us, no material has been placed on record by the Revenue to demonstrate that the decision of Tribunal as discussed above has been set aside / stayed or overruled by the Higher Judicial Authorities. Before us, Revenue has not placed any material on record to point out any distinguishing feature in the facts of the case for the year under consideration and that of earlier year nor has placed any contrary binding decision in its support. Thus, respectfully following the order this tribunal in the own case of assessee, we hereby set aside the finding of the learned CIT(A). Thus, the ground of objection raised by the Assessee is hereby allowed.

71.1 However, the AO found that the amount of interest income from the fixed deposits and IT refund are not arising from the activity of distribution of power. Therefore, the same is not eligible for deduction under section 80-IA of the Act. Likewise, the alternate contention for netting of the interest income is not maintainable for the reason that there was no nexus brought on record by the assessee suggesting that there was the expenditure incurred by the assessee against such fixed deposit in the form of interest. Thus, the AO was pleased to exclude the gross amount of interest income being from FD and IT refund from the amount eligible for deduction under section 80-IA of the Act.

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76.1 Before us, no material has been placed on record by the learned AR or DR to demonstrate that the decision of Tribunal as discussed above has been set aside / stayed or overruled by the Higher Judicial Authorities. Before us, learned AR or DR has not placed any material on record to point out any distinguishing feature in the facts of the case for the year under consideration and that of earlier year nor has placed any contrary binding decision in its support. Thus, respectfully following the order this tribunal in the own case of assessee, we hereby confirm the finding of the learned CIT(A). Thus, the ground of objection raised by the Assessee is hereby dismissed.

78.1 The AO was of the view that the impugned rental income has no connection with the power distribution activity. Therefore, the same cannot be allowed as deduction under section 80-IA of the Act. Likewise, the alternate contention of the assessee was also rejected by the AO in the absence of the necessary information about the expenditure incurred by it against such rental income. Thus, the AO excluded the gross amount of rental income of � 6,19,431/- from the amount eligible for deduction under section 80-IA of the Act.

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exclude the rental income from the amount of eligible profit net of the expenses qua to such rental income. Hence the ground of appeal of the assessee is partly allowed.

83.1 Before us, no material has been placed on record by the learned AR or DR to demonstrate that the decision of Tribunal as discussed above has been set aside / stayed or overruled by the Higher Judicial Authorities. Before us, learned AR or DR has not placed any material on record to point out any distinguishing feature in the facts of the case for the year under consideration and that of earlier year nor has placed any contrary binding decision in its support. Thus, respectfully following the order this tribunal in the own case of assessee, we hereby set aside the finding of the learned CIT(A). Thus, the ground of objection raised by the Assessee is hereby partly allowed.

85.1 However, the AO held that the impugned receipts are not directly linked to the activity of power distribution. Therefore, the same cannot be held as income derived from the eligible business under section 80-IA of the Act. Hence, the AO excluded the same from the computation of eligible profit under section 80-IA of the Act.

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90.1 The sum of � 16,88,995/- represents incentive to the assessee on account of collection made of the arrears of Maharashtra State Electricity Distribution Company Ltd (MSEDCL). Admittedly, the incentive given by MSEDCL is not connected with the generation and distribution activity of the assessee. Thus, the same is not eligible for deduction under the provisions of section 80IA of the Act. However, while excluding the impugned miscellaneous receipt, the assessee is eligible for deduction of the expenses incurred, if any, against such miscellaneous (incentive income) receipt.

90.2 Moving further, we note that the amount of � 14,53,059/- represents the receipts from the contractors on account of various reasons such as detailed below: i. late submission of the bill ii. penalty for poor quality

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iii. HR penalty iv. safety violation penalty

90.3 Admittedly, the miscellaneous receipts discussed above is not connected with the generation and distribution activity of the assessee. Thus, the same is not eligible for deduction under the provisions of section 80IA of the Act. However, while excluding the impugned miscellaneous receipt, the assessee is eligible for deduction of the expenses incurred, if any, against such miscellaneous receipt.

90.4 With respect to the other income of Rs. 31,53,127/-, we find that no detail has been furnished by the assessee in support of his contention that such other revenue represents the income from the activity of power generation and power distribution. In the absence of any nexus, we do not find any reason to interfere in the finding of the learned CIT-A. Accordingly, we confirm the same. Hence, the ground of appeal of the assessee is partly allowed.

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The Appellant has carried out street light maintenance activity for AMC for which various material charges in form of bulbs, tube lights are separately recovered from AMC. The AO has treated such income of Rs.1,18,67,2067- as income not eligible for deduction under Section 80-IA on the ground that as street light maintenance income is not held as eligible for deduction, such income also cannot be subject matter of deduction. On the other hand, Appellant has argued that such income is part of distribution services as contended while dealing with income relating to street light maintenance hence such income is eligible for deduction. However, this contention of Appellant cannot be accepted for the reasons given by undersigned while adjudicating issue of allowability of deduction under Section 80-IA on street light maintenance, supra. The Appellant has also contended that expenditure incurred for Rs. 99,24,9057-need to be allowed from above receipt. This claim was denied by AO on the ground that no supporting documents were submitted and even such details are not submitted in present Appellate Hearing hence alternate contention of taxing of net income cannot be allowed.

97.1 Before us, no material has been placed on record by the learned AR or DR to demonstrate that the decision of Tribunal as discussed above has been set aside / stayed or overruled by the Higher Judicial Authorities. Before us, learned AR or DR has not placed any material on record to point out any distinguishing feature in the facts of the case for the year under consideration and that of earlier year nor has placed any contrary binding

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decision in its support. Thus, respectfully following the order this tribunal in the own case of assessee, we hereby set aside the finding of the learned CIT(A). Thus, the ground of objection raised by the Assessee is hereby dismissed.

Particulars Amount (Rs.) A Surat Distribution 1 Income from shifting 328035 of services 2. Refund against sales 141575 tax 3. Capacitor Rent 60473 Recovery Charges 4. Other Misc. Icome 147270 677353 B Bhiwandi Distribution 1 Excess provision of 111198 111198 depreciation w/o C SUGEN 1. Net Gain/(Loss) 1592957 1592957 On Foreign Currency Transactions TOTAL 2381508

99.1 However, the AO was of the view that such other income is not eligible for deduction under section 80IA of the Act as it has no nexus with the activity of power generation and power distribution carried out by the assessee. Thus, the AO disallowed the same and added to the total income of the assessee.

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has already made separate addition hence disallowance under Section 80-IA made again is deleted. So far as other income being refund of sales tax, rent recovery charges, miscellaneous income and excess provision for depreciation written back are concerned, Appellant has not proved that such incomes are inextricably linked with business operations and even no details were submitted during the course of Assessment Proceedings hence addition made by AO to that extent is confirmed.

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Now coming to the additional ground of objection raised by the assessee.

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Tribunal. The Tribunal should not be prevented from considering questions of law arising in assessment proceedings, although not raised earlier.

109.1 The view that the Tribunal is confined only to the issues arising out of the appeal before Commissioner (Appeals) is too narrow a view to describe the powers of the Tribunal. Undoubtedly, the Tribunal has the discretion to allow or not to allow a new ground to be raised. But where the Tribunal is only required to consider the question of law arising from the facts which are on record in the assessment proceedings, there is no reason why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee.

109.2 Since the claim of the assessee is purely legal claim and entire facts are available on records. Thus, it is not justified in not admitting the purely legal ground raised by the assessee for the first time. Hence, the additional ground of objection raised by the assessee is hereby admitted.

109.3 At the time of hearing, the learned AR on behalf of the assessee contended that the carbon credit being capital receipt should not be considered for the purpose of calculating the book profit under the provisions of section 115JB of the Act. The learned AR in support of his contention has relied on various orders submitted in the written submission filed by the assessee, which is available on record.

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of Hon’ble Kolkata High Court in case of PCIT vs. Ankit Metal & Power Ltd. reported in 109 taxmann.com 93 where it was held as under: 27. In this case since we have already held that in relevant assessment year 2010-11 the incentives 'Interest subsidy' and 'Power subsidy' is a 'capital receipt' and does not fall within the definition of 'Income' under Section 2(24) of Income Tax Act, 1961 and when a receipt is not on in the character of income it cannot form part of the book profit under Section 115JB of the Act, 1961. In the case of AppolloTyres Ltd. (supra) the income in question was taxable but was exempt under a specific provision of the Act as such it was to be included as a part of the book profit. But where a receipt is not in the nature of income at all it cannot be included in book profit for the purpose of computation under Section 115JB of the Income Tax Act, 1961. For the aforesaid reason, we hold that the interest and power subsidy under the schemes in question would have to be excluded while computing book profit under Section 115 JB of the Income Tax Act, 1961.

111.1 In view of the above we hold that the amount received by the assessee on the sale of carbon credit being capital in nature cannot be made subject to tax under the provisions of MAT as specified under section 115 JB of the Act. Hence, the additional ground of appeal of the assessee is hereby allowed.

Coming to ITA No. 2047/Ahd/2018 an appeal by the Revenue for A.Y. 2013-14

2)that the Ld. CIT (A) has erred in law and on the facts in deleting the additions made while making certain adjustments from the profits of the eligible unite while computing the deduction u/s. 80IA of the l.T. Act as under:.

(a) that the Ld. CIT (A) has erred in taw and on the facts in deleting the addition made on account of interest on delayed payment to customers on sale amounting to Rs. 3,49.84,75/- and delayed payment charges of Rs. 6,09,84,470/-.

(b) that the Ld. CIT (A) has erred in law and on the facts in deleting the addition made on account of late delivery payment of Rs.11,30,229,/- and supplier's discount and penalty of Rs.1,06,07,952/-. (c) that the Ld. CIT (A) has erred in law and on the facts in deleting, the addition made on account of miscellenaneous receipts of Scrap Sales of Rs. 2,42,03,238;-

(d) that the Ld. CIT (A) has erred in law and on the facts in deleting the addition made on account of UI(Unscnednted Interchange) Income of Rs.3,66,81,586/-

(e) that the Ld. CIT (A) has erred in law and on the facts in deleting the addition made on account of Meter fixing fees of Rs.41,5l,680/-

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(f) that the Ld. CIT (A) has erred in law and on the facts In deleting the addition of Income –from Shifting of services of Us. 33,81 329/-

(g) that the Ld. CIT (A) has erred in law and on the facts in deleting the addition made on account of Liquidated, damage of Rs.4,32,144/-

(h) that the Ld. CIT (A) has erred in law and on the facts in deleting addition made on discount of (Jain on foreign currency transaction of Rs.56, 56,459/- 3) that the Ld. CIT (A) has erred in law and on the facts in deleting the addition made on account of disallowance u/s. 14A r.w r 8D of the l.T. Act of Rs.7,82,31,933/-

4) that the Id. CIT (A) has erred in law and on the facts in deleting the addition made, on account of disallowance of interest expenditure made on account of diversion of borrowed funds for making interest free advances to subsidiary companies of Rs.7,49,50,542/- 5) that the Ld.CIT(A) has erred in law and on the facts in deleting the addition made on account of disallowing deductions claimed by the assessee company u/s.80G of Rs.25,00,000/- and u/s.80GGB of Rs.3,50,00,000/- 6) that the Ld.CIT(A) has erred in law and on the facts in deleting the addition to Book Profit u/s.14A r.w.r. 8D of the Act of Rs.10,79,29,887/-

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118.1 However, we note that the items of income mentionedat serial numbers 6 to 10were raised by the revenue 1st time and therefore they need to be dealt and adjudicated separately. Accordingly, we take up the issues in seriatim as detailed below:

Supplier discount and penalty &Late delivery payment: Rs. 1,06,07,470/- &Rs. 11,30,229/-

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119.1 However, the AO disagreed with the submission of the assessee and held that the said receipt is not derived from the activity of power distribution activity as the same has no direct nexus with eligible activity of power distribution. Hence, the AO excluded the receipt of Rs. 1,06,07,470/- &Rs. 11,30,229/- from the income eligible for deduction under section 80IA of the Act.

“On careful consideration of the entire facts, it is observed the income in form of late delivery payment is inextricably linked with purchase cost of eligible unit and it reduces the cost incurred by appellant. Similarly, Supplier’s Discount and Penalty is nothing but reduction of purchase cost made by appellant as it is towards prompt payment of transaction charges. Hon’ble Delhi High Court in case of BSNL [73 taxmann.com 98] has held as under:

Section 80-IA of the Income-tax Act, 1961 - Deductions - Profits and gains from infrastructure undertakings (Telecommunication services) - Assessment years 2004-05 to 2008-09 - Assessee was engaged in business of providing telecommunication services - It claimed deduction under section 80-IA in respect of profits and gains derived from following six items: extraordinary items, refund from universal service fund, interest from others, liquidated damages, excess provision written back and others including sale of directories, publications, form, waster paper, etc. - Assessing Officer held that in terms of provisions of sub-section (2A) of section 80-IA profits and gains derived from above six items could not be said to be derived from eligible business of assessee and accordingly disallowed claim for deduction - Tribunal held that first degree nexus implicit in words 'derived from' used in section 80-IA(1) was not required for computation of deduction in case of undertaking engaged in providing telecommunication services, since words 'derived from' did not occur in sub-section (2A) of section 80-IA - It accordingly allowed assessee's claim for deduction under section 80-IA - Whether Tribunal was justified in its view - Held, yes [Paras 6 and 14] [In favour of appellant]

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Similar view is taken by Hon’ble MP High Court in the case of CIT vs Prakash Oils Ltd dated 08.03.2011 [58 DTR 279] in case of Late delivery payment charges. Hon’ble Gujarat High Court in the case of CIT vs Metrochem Industries Ltd. [[2017] 79 taxmann.com 440 has also allowed deduction u/s 80IA on Kasar and discount which is similar in nature of Supplier’s Discount and Penalty as discussed herein above. I find the deduction on these items were allowed in the earlier years in appellant’s own case by the CIT(A). Facts of the case continue to be the same. In this view the matter and also relying upon decisions referred supra, the Assessing Officer is directed to allow deduction u/s 80IA on Late delivery payment of Rs.11,30,229 and Supplier’s Discount and Penalty for Rs. 1,06,07,982/-. Related grounds of appeal is allowed.”

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124.1 Moving forward, the supplier discount and penalty fetched by the assessee because of quick payment made to GETCO has direct link with the activity of the assessee being distribution of power. Similarly, the amount of discount received by the assessee has presented in the financial statement in a different format. As such, the assessee instead of showing such discount income as a separate items income, it could have adjusted such receipt against the payment made to GETCO. In such an event, there would not have been any question of showing the impugned income and consequently for disallowing the deduction claimed by the assessee under the provisions of section 80 IA of the Act. Accordingly, we hold that the assessee is eligible for deduction on such discount.

Unscheduled interchange income Rs. 3,66,81,586/-

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deduction u/s 80IA of the Act made by Appellant for UI income for Rs. 3,66,81,586 is allowed. Related ground of appeal is allowed.”

Meter fixing fee: Rs. 41,51,680/-

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an inevitable part of distribution activity of the Appellant. Considering these facts, it is held that Meter fixing Fees, Testing Fees, Fault attending fees, etc. are inextricably linked to the distribution business of the Appellant and has direct and proximate link with the eligible activity, hence it is eligible for claiming deduction u/s 80IA of the Act. It is also observed that even in case of Appellant my predecessor CIT(A) has consistently allowed meter shifting charges as eligible for deduction under Section 80-IA and nature of income remains the same, therefore, hence the claim of deduction u/s 80IA of the Act made by Appellant on Meter fixing Fees, Testing Fees, etc. for Rs. 41,51,680/- is allowed. Related ground of appeal is allowed.”

Gain on foreign currency exchange: Rs. 56,56,459/-

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currency fluctuation has direct nexus with the activity of power generation. Therefore, the same is eligible for deduction under section 80IA of the Act. The assessee in support of its contention also referred to various case laws.

135.1 However, the AO disagreed with the claim of the assessee. The AO found that the loss/gain arising from the receipt or payment of foreign currency has nothing to do with business activity of the assessee. Such gain or loss is purely based on market condition of the particular currency, which is not in the control of the assessee. Further, such gain or loss recognized in the books separately from sale or purchases is as per the disclosure requirement made under the accounting standard 11 issued by the ICAI. The AO further found that deduction under section 80IA is eligible to the assessee only for the income derived from the eligible business i.e. generation or distribution of power but the gain on currency rate fluctuation is not derived from the eligible business. Hence, the AO excluded the same from the computation of eligible income under section 80IA of the Act.

It is observed that the facts are similar to A.Y. 2012-13 in whichmy predecessor CIT(A) has held as under:

“5.9.3 The submission is considered. It is observed that Appellant has explained the nature of gain on foreign currency transactions during Assessment Proceedings hence AO is not correct in holding that such details were not submitted. So far as merits of the case is concerned, it is observed that gain on foreign exchange fluctuation is on account of different rates of exchange on the dates of transactions and the rate of exchange on the balance sheet date or settlement or liability which is nothing but revenue in nature and directly related to business operations carried out by industrial undertaking.

In this connection, reliance is placed on the following decisions of Hon’ble Gujarat High Court: (i) CIT vs Deversons Industries Ltd. [[2015] 55 taxmann.com 189] dated 18.12.2014:

“Section 80-IA of the Income-tax Act, 1961 – Deductions – Profits and gains from infrastructure undertakings (Computation of deductions) – Assessment years 1995-96 to 2000-01 – Appellant firm was engaged in business of manufacturing and sale of dyes – Whether while computing deduction under section n80-IA, exchange rate difference should be treated to be derived

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from industrial undertaking whereas duty drawback should not be treated as delivered from Industrial Undertaking – Held, yes [Para 7] [Partly in favour of appellant]” (ii) CIT vs Metrochem Industries Ltd [[2017] 79 taxmann.com 440] dated 19.07.2016 “II Section 80-IA of the Income-tax Act, 1961 - Deductions - Profits and gains from infrastructure undertakings (Computation of deduction) - Assessment years 1994-95, 1996-97 and 1997-98 - Foreign exchange fluctuation and duty drawback is an income derived from industrial undertaking, eligible for deduction under sections 80-I and 80-IA [In favour of assessee]” In view of binding decision of Hon’ble Gujarat High Court referred supra, it is held that Appellant is entitled for deduction under Section 80-IA on gain on foreign currency transaction for Rs. 15,92,957.” Facts on the case continue to be same and also respectfully relying upon the judgment of jurisdictional High Court as above and following the decisions of my predecessor CIT(A), deduction under Section 80-IA towards Gain on Foreign currency transaction for Rs. 56,56,469 is allowed. Related ground of appeal is allowed.”

139.1 From the preceding discussion we note that impugned gain of foreign currency rate fluctuation arises on import of material, equipment and natural gas which were utilized in generation of power. Thus, the same has direct and live nexus with the eligible business. At

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this point, we also referred the judgment of Hon’ble Gujarat High Court in case of CIT vs. Deverson Industries Ltd. reported in 55 taxmann.com 440 where it was held as under: 5. So far as question regarding foreign exchange difference is concerned, the same is squarely governed by the decision of this Court in the case of CIT v. Priyanka Gems [2014] 367 ITR 575/51 taxmann.com 259 (Guj.) wherein this Court has answered the question in favour of the assessee and held that that the foreign exchange gain arising out of the fluctuation in the rate of foreign exchange cannot be divested from the export business of the assessee and once export is made, due to variety of reasons, the remission of the export sale consideration may not be made immediately and that all foreign currencies received by the assessee need not be converted into Indian Rupees on the last date of the accounting period.

139.2 The above case law is in relation to export business whereas the case on hand of the appellant assessee has made import of materials and equipment for the eligible unit. But the principle laid down by the Hon’ble Court in the case cited above is squarely applicable in the case on hand. Thus, in view of the above, the ground of appeal of the Revenue is hereby dismissed.

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14/AHD/2018 for the assessment year 2012-13. Therefore, the findings given in ITA No. 14/AHD/2018 shall also be applicable for the year under consideration i.e. AY 2013-14. The appeal of the Revenue for the assessment 2012-13 has been decided by us vide paragraph No. 51 of this order against the Revenue. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2012-13 shall also be applied for the year under consideration i.e. AY 2013-14. Hence, the grounds of appeal filed by the Revenue is hereby dismissed.

Coming to CO No. 120/Ahd/2019 by the assessee in ITA No. 2047/Ahd/2018 for A.Y. 2013-14.

1.1 On the facts and in the circumstances of the case, the learned CIT(A) ought to have appreciated that as there is net interest expenditure in industrial undertaking eligible for deduction u/s 80IA, such deduction cannot be denied on gross interest income in view of binding decision of Hon'ble Gujarat High court in the case of K. Khodidas Patel Specific Family Trust v/s. ACIT dated 11.11.2014 [Tax Appeal No. 316 of 2001 and CIT v/s. RameshchandraS.Patel dated 03.12.2013 [Tax Appeal No. 663 of 2006]:

Incentive Income-Collection 16,42,702/-

Invoice TCD Income 24,01,431/-

GSPL Credit for the period 83,42, 041/-

Congestion Charges Payment 1,53,052/-

Recovery from Vendors towards Contractual obligation 1,82,000/-

Refund of excess demurrage charges 47,000/-

Transport Recovery from employees 42,202/-

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Other Misc. Income 40,521/-

Total Miscellaneous Income 1,28,50,949/-

149.1 The assessee also filed additional grounds of objection vide letter dated 22-10-2021 which are as under: Appellant craves leave to raise this additional ground of Cross Objections before the Hon'ble ITAT. This is legal ground and therefore, as per the decision of Hon'ble Supreme court in the case of National Thermal Power (229 ITR 383), it can be raised before the Hon'ble ITAT. In view of the above, the appellant hereby raises following ground as additional ground of Cross Objections, which is without prejudice to the grounds raised by the appellant while filing appeal in Form 36A. "1. Without prejudice to all the grounds raised, in law and in the facts and circumstances of the appellant's case, the appellant requests for admission of its additional claim and for allowing the reduction of its Book Profit u/s. 115JB of the Act by Rs. 23,80,78,403/-, being Debenture Redemption Reserve created during the year, as per the settled legal precedents. In view of the above, the additional ground raised may kindly be admitted in view of natural justice to the appellant.

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Now coming to additional grounds of objection

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consideration while computing the book profit under the provisions of section 115JB of the Act.

Order pronounced in the Court on 28/12/2022 at Ahmedabad.

Sd/- Sd/- (WASEEM AHMED) (SIDDHARTHA NAUTIYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad; Dated 28/12/2022 Manish/Tanmay TRUE COPY आदेशक���त�ल�प�े�षत/Copy of the Order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent. 3. संबं�धतआयकरआयु�त/ Concerned CIT 4. आयकरआयु�त(अपील) / The CIT(A) 5. �वभागीय��त�न�ध, आयकरअपील�यअ�धकरण/ DR, ITAT, 6. गाड�फाईल / Guard file. आदेशानुसार/BY ORDER,

उप/सहायकपंजीकार (Dy./Asstt.Registrar) आयकरअपील�यअ�धकरण, अहमदाबाद / ITAT, Ahmedabad