ACIT CIR 1, THANE vs. LANXESS INDIA P.LTD, THANE

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ITA 4267/MUM/2014Status: DisposedITAT Mumbai10 February 2017AY 2007-083 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the provisions of Rule 8D were not applicable for the year under appeal, and disallowance should be restricted to 0.5% of average investment excluding strategic investment. Regarding Carbon Credits, the Tribunal found no evidence of receipt during the year and upheld the deletion of the addition.

What were the facts?

The Assessing Officer (AO) made additions to the assessee's income concerning disallowance under Section 14A and the value of Carbon Credits. The assessee appealed these additions.

What were the issues?

Applicability of Rule 8D for disallowance of expenses and the addition of Carbon Credit income without supporting evidence.

Which sections of the Income-tax Act were involved?

Section 14A

AI-generated summary — verify with the full judgment below

Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा सद�य लेखा सद�य,राजे�� के अनुसार लेखा सद�य लेखा सद�य राजे�� के अनुसार राजे�� के अनुसार -Per Rajendra,AM: राजे�� के अनुसार Challenging the order,dated 20/03/2014,of the CIT (A)-II,Thane the Assessing Officer(AO)has filed the present appeal. Assessee-company,engaged in the business of manufacturing and trading of chemicals and chemical intermediates,filed its return of income on 30/10/ 2007, declaring total income at Rs. 9.48 Crores.The AO completed the assessment u/s.143 (3) of the Act,on 21/12/2010, determining its income at Rs. 10.71 Crores.

2.First effective Ground of appeal is about deleting the addition of Rs.71.96 lakhs under section 14 A r.w.r 8D of the Income Tax Rules, 1962 (Rules).

3.It was brought to our notice that identical issue for the earlier year was decided by the Tribunal,in its order dated 29/08/2013 (ITA/1406/Mumbai/2012 and 1780/Mumbai/2012.). In its order, the Tribunal has held that the provisions of Rule 8D of the Rules were not applicable to that year,that disallowance at the rate of 0.5% of the average investment should be worked out after excluding the strategic investment.As the facts for the year under appeal are identical to the facts of earlier year,so,we hold that no part of interest expenditure should be disallowed under section 14 A of the Act.We further direct the AO that disallowance should be restricted to 0.5% of the average investment after excluding the strategic investment. First ground is allowed in favour of the AO, in part. 4.Second Ground of appeal is about deleting the addition on account of Carbon Credit (CC),amounting to Rs. 52.76 lakhs. During the assessment proceedings, the AO observed that the department was in possession of information that the assessee had received 7252 Certified

4267/M/14-(07-08) Lanxess IndiaPvt.Ltd. Emissions Reduction (CER.s) during the year. He directed the assessee to clarify as to why the same was not appearing in the return of income. After considering the submission of the assessee the AO held that it was not very feasible as to whether the CC sold in subsequent year included the CC received during the year i.e. 7252 CER.s. Finally, he assessed the value of CC at Rs. 52, 76, 400/-and made an addition of the said amount to the total income of the assessee.

5.Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority (FAA).Before him it made elaborate submissions. The FAA called for a remand report from the AO. In his report dated 14/02/2014, the AO stated that information was available with the Department about the CC,that records on which the then AO had relied upon were not traceable. After considering the available material,the FAA held that no information was available on record to show that the assessee had received CC of 7252 CER.s during the year under appeal, that it had shown the profit on sale of 11,593 CER.s in the succeeding assessment year, that in absence of any material available on record no addition was called for.

6.During the course of hearing before us, the Departmental Representative (DR) stated that matter could be decided on merits.The Authorised Representative (AR) relied upon the order of the FAA and stated that Department had no evidence about the credit of CC for the year under appeal. We find that in the remand report the AO himself as stated that no documentary evidence was available about receipt of CER.s during the year under consideration.Clearly the then AO had made the addition without any basis.Therefore, in our opinion, the order of the FAA does not need any interference from our side.Confirming the same, is decided against the AO. As a result, appeal filed by the AO stands partly allowed. फलतः िनधा�रती अिधकारी �ारा दािखल क� गई अपील अंशतःमंजूर क� जाती है. Order pronounced in the open court on 10th February, 2017. आदेश क� घोषणा खुले �यायालय म� �दनांक 10 फरवरी, 2017 को क� गई । Sd/- Sd/- (संजय गग� /Sanjay Garg) (राजे�� / RAJENDRA) �याियक सद�य / JUDICIAL MEMBER लेखा लेखा सद�य सद�य / ACCOUNTANT MEMBER लेखा लेखा सद�य सद�य मुंबई Mumbai; �दनांकDated : 10.02.2017. Jv.Sr.PS. आदेश क� क� �ितिलिप �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order forwarded to : आदेश आदेश आदेश क� क� �ितिलिप �ितिलिप अ�ेिषत अ�ेिषत 1.Appellant /अपीलाथ� 2. Respondent /��यथ� 3.The concerned CIT(A)/संब� अपीलीय आयकर आयु�, 4.The concerned CIT /संब� आयकर आयु� 2

4267/M/14-(07-08) Lanxess IndiaPvt.Ltd.

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