INDOWIND ENERGY LIMITED,CHENNAI vs. DCIT, CHENNAI

आदेश / O R D E R

PER MANOMOHAN DAS, J.M: This appeal by the Assessee is directed against the order of the learned Commissioner of Income Tax (Appeals)-6, Chennai (CIT(A) dated 25-10-2018 and pertains to the assessment year 2012-13. The assessee has not pressed the grounds No.4, 5, 8, 9, 11 & 18. The remaining effective grounds of appeals of the assessee are as under:

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“1. The order of the Commissioner of Income Tax (Appeals) - 6, Chennai dated 25.10.2018 in I.T.A.No.112/CIT(A)-6/2015-16 for the above mentioned Assessment Year is contrary to law, facts, and in the circumstances of the case. 2. The CIT (Appeals) erred in confirming partly the disallowance of notional expenses for earning tax free income/for maintaining tax free portfolio within the scope of section 14A of the Act read with Rule 8D of the Income Tax Rules, 1962 without assigning proper reasons and justification. 3. The CIT (Appeals) failed to appreciate that the provisions of section 14A of the Act had no application and ought to have appreciated that in the absence of requisite satisfaction on the incurring of expenses for earning tax free income/for maintaining tax free portfolio, the mechanical application of section 14A of the Act should be reckoned as bad in law.

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and engaged in the business of Power generation and commissioning

of Wind Mill. The assessee filed its return of income for the

assessment year 2012-13 electronically on 29-12-2012, claiming a

loss of Rs. 9,76,68,833/-. The return of income was processed u/s

143(1) of the Act. Subsequently, the case was selected for scrutiny

under CASS and statutory notices were served upon the assessee.

The assessee in compliance to that statutory notices appeared and

furnished details. The ld. Assessing Officer [AO] considered the details

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submitted by the assessee and completed the assessment vide order

dated 31-03-2015 by making various disallowances.

CIT(A).The ld. CIT(A) vide order dated 25-10-2018 partly allowed the

appeal of the assessee.

the Tribunal. Heard the representatives of both the parties and

perused the materials on record. We adjudicate the appeals of the

assessee as under:

The ld. AO during the assessment proceedings noticed that the

assessee had shown of Rs. 4,45,95,891/- which are exempt income

yielding investments of the assessee. As per section 14A of the Act

no expenditure incurred for the purpose of earning an exempt income

shall be allowed against the taxable profits. The ld. AO believed that

the assessee incurred some expenditure towards maintaining the

investments. Accordingly, the ld. AO disallowed an amount of

Rs.7,46,393. The claim of the assessee is that no exempt income was

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earned during the year under consideration. The ld. CIT(A) accepted

the submissions of the assessee that Section 14A of the Act is not

applicable, however, the ld. CIT(A) partly allowed the ground of the

assessee finally. The ld. CIT(A) vide para No. 4.3.2 and 4.3.3 of his

order considered a number of case laws including the decision of the

Hon’ble jurisdictional High Court of Madras in the case of Chettinad

Logistics Pvt. Ltd. TCA No. 24 of 2017 dated 13-03-2017 and decided

the issue that, Respectfully following the Jurisdictional Hon’ble Madras

High Court decision as well as the other decisions cited above, it is

hereby held that no disallowance can be made if the appellant does

not have any exempt income during the year under consideration”.

exempt income during the year under consideration. The ld. CIT(A)

observed that if the appellant does not have any exempt income no

disallowance can be made. Therefore, it is proved that the assessee

did not earn any exempt income during the year under consideration.

We observe that the assessee has succeeded in convincing the ld.

CIT(A) that no exempt income was earned during the year under

consideration. As no exempt income was earned by the assessee, full

relief has to be given to the assessee instead of partial relief.

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Accordingly, we decide the issue of disallowance of Rs. 7,46,393/-

made u/s 14A r.w.r 8D in favour of the assessee fully and set aside the

order of the ld. CIT(A) dated 25.10.2018 as well as the order of the ld.

AO dated 31-03-2015 to that extent as related to disallowance of

Rs.7,46,393/- and direct the ld. AO to delete the addition of

Rs.7,46,393/- from the total income of the assessee.

The facts of the case on this issue was that the assessee paid

Rs. 4,87,247/- to the Bank of New York as shares listing charges in

Luxembourg Exchange. No TDS was deducted by the assessee while

paying of this sum to the Bank of New York. The ld. CIT(A) vide para

No. 8.3.5 and para no. 8.3.7 of his order upheld the disallowance

made by the ld. AO. The claim of the assessee is that the payment

was made for services rendered outside India which attracts no TDS.

The further claim of the assessee is that presumption of rendering

technical services to the assessee by the New York Bank is also ruled

out so as to apply the provisions of Section 9(i) (vii) of the Act.

various services to the assessee which are technical in nature. The

Bank of New York provided services to the assessee as an expert and

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accordingly, the paid amount of Rs. 4,87,247/- was the subject matter

of section 9(i)(vii) of the Act and the TDS was to be deducted by the

assessee. So, disallowance of that amount of Rs. 4,87,247/- by the ld.

AO was upheld by the ld. CIT(A). Before us, the assessee submitted

that the provisions of section 9(i)(vii) of the Act as well as provisions of

DTAA were not examined by the lower authority while sustaining the

technical addition.

examined by the ld. CIT(A), but examination of the provisions of DTAA

on the issue was not done. Therefore, it is our considered opinion that

this issue of addition of Rs.4,87,247/- on account of technical services

provided to the assessee should be re-examined by the ld. AO by

taking into consideration of the DTAA provisions also. Accordingly, we

direct the ld. AO to re-examine the issue in the light of the provisions of

DTAA after giving a reasonable opportunity of being heard to the

assessee. Thus, we allow this ground of the assessee and set-aside

the addition till the re-examination of the issue by the ld. AO. The ld.

AO shall pass an appropriate order after re-consideration of the issue.

Accordingly, appeal of the assessee on this issue is allowed for

statistical purposes only.

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The claim of Rs. 33,74,251/- by the assessee is related to the

prior period expenditure. The assessee, however, paid the amount

during the previous year. The claim of the assessee is that due to

dispute on the bill amount, the same could not be paid during the

relevant period. The ld. CIT(A) observed that the assessee did not

make any provision in the previous year 2010-11 in respect of the prior

period expenditures. No revised return was also filed by the assessee

for the Assessment Year 2011-12 incorporating these expenses in its

profit and loss account upon finalization of the dispute. Further, each

year is a separate and self- contained period of time and losses and

expenses incurred before and after that year cannot be allowed in

assessing the income of that particular year. Accordingly, the ld.

CIT(A) dismissed this ground of the assessee and upheld the order of

the ld. AO.

of the ld. CIT(A) is correct. The prior period expenditure cannot be

allowed in assessing the income of a particular year. We upheld the

observations of the ld. CIT(A) on this issue of prior period expenditure.

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Thus, this ground of the assessee on prior period expenses is

dismissed.

On this disallowance of carbon income, the claim of the

assessee is that it had been recognizing income from expected sale of

carbon credits based on the generation of electricity from the 18 MW

wind farm project at Karnataka in the earlier years. But the said project

was not recognized for the period for which the income was included.

Therefore, this had to write off due to non-recognition of the project.

Accordingly, the same is written off and reversed in the accounts

under “prior period items” in the year under consideration. However,

the ld. CIT(A) observed that carbon credit is a capital in nature hence,

write off / reversal of income as revenue loss cannot be allowed. Thus,

the ground of the assessee is dismissed.

2011-12had offered income from carbon credit amounting to

Rs.3,09,67,422/- and the Department had accepted it as other income.

Now the assessee write off this amount of Rs. 3,09,67,422/-due to

non-recognition of the project. It is therefore, our considered opinion is

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that the treatment which was given by the Department to the income of the assessee on carbon credit during the last five years i.e. from the year 2007-08 to 2011-12, the same treatment has to be given by the Department. Accordingly, we remand this issue to the file of the ld. AO to re-examine this issue of disallowance on carbon credit afresh. Accordingly, we set-aside the order of the ld. CIT(A) on this issue. Thus, we decide this issue in favour of the assessee for statistical purposes only.

Order pronounced on 05th January, 2024.

Sd/- Sd/- (मंजुनाथ. जी) (मनोमोहन दास) (Manjunatha. G) (Manomohan Das) �ाियक सद�/Judicial Member लेखा सद�य लेखा सद�य /Accountant Member लेखा लेखा सद�य सद�य चे�ई/Chennai, �दनांक/Dated: 05th January, 2024. EDN/-

आदेश क� �ितिलिप अ�ेिषत/Copy to: 1. अपीलाथ*/Appellant 2. ,-थ*/Respondent 3. आयकर आयु./CIT 4. िवभागीय ,ितिनिध/DR 5. गाड( फाईल/GF