Calcutta High Court
Principal Commissioner Of Income Tax vs M/S Itc Ltd on 21 July, 2025
Author: T.S Sivagnanam
Bench: T.S Sivagnanam
1
O-37
IN THE HIGH COURT AT CALCUTTA
SPECIAL JURISDICTION(INCOME TAX)
ORIGINAL SIDE
ITAT/90/2025
IA NO: GA/2/2025
PRINCIPAL COMMISSIONER OF INCOME TAX 1, KOLKATA
VS
M/S ITC LTD
BEFORE :
THE HON'BLE THE CHIEF JUSTICE T.S SIVAGNANAM
-A N D-
HON'BLE JUSTICE CHAITALI CHATTERJEE (DAS)
DATE : 21st July, 2025
Appearance:
Mr. Prithu Dhdhoria, Adv.
...for the appellant.
Mr. J.P. Khaitan,Sr. Adv.
Ms. Nilanjana Banerjee Pal, Adv.
...for the respondent.
The Court : This appeal filed by the revenue under Section 260A of the
Income Tax Act, 1961 (the Act) is directed against the order dated May 10, 2024
passed by the Income Tax Appellate Tribunal "C" Bench, Kolkata (the Tribunal)
in ITA No.1166/Kol/2017 & 1223/Kol/2017, both relating to the Assessment
Year 2011-12.
The revenue has raised the following substantial questions of law for
consideration:
i) Whether the Learned Income Tax Appellate Tribunal was justified in
law in holding that the foreign payment amounting to
Rs.7,30,11,344/- had been made on account of export commission
inasmuch as such conclusion had been reached without ascertaining
the true nature and purpose of the foreign payments and without
appreciating that the said payments were not supported by any
evidence including evidences of services rendered, tax residency
certificates, PE declaration etc.?
ii) Whether the Learned Income Tax Appellate Tribunal has committed
substantial error of law by rendering a judgment contrary to the
decision rendered by this Hon'ble Court in the case of CIT Vs.
Andaman Sea Food Pvt. Ltd. (ITAT No.19 of 2013) ?
iii) Whether the Learned Income Tax Appellate Tribunal was justified in
law in holding that market to market (MTM) Loss of Rs.1,07 crore
was real in nature and not notional, inasmuch as such conclusion
had been reached by the learned Tribunal without considering the
CBDT instruction number 3/2010 and without appreciating that, the
assessee company itself has reversed the notional debit on the
immediately succeeding day and that the assessee had itself
refrained from offering to tax the MTM gain resulting on other
receivable/payables treating the same to be notional in nature?
iv) Whether the Learned Income Tax Appellate Tribunal was justified in
deleting the addition of Rs.32,50,029/- by holding that the same
being liquidated damages received from the suppliers on account of
delayed installation of machineries and delayed construction of
building was a capital receipt without examining the nature, specific
terms and conditions of each of the contracts?
v) Whether the Learned Income Tax Appellate Tribunal was justified in
presuming that the investment in tax freе securities were made out of
own interest free fund and thereby deleting the disallowance of
Rs.15,66,62,000/- of interest in terms of Section 14A of the Income
Tax Act, 1961 read with Rule 8D (2)(ii) of the Income Tax Rules 1962,
without considering the fact that the assessee was having interest
bearing borrowings which were used for mixed purposes including
investment and without appreciating the effect of the clarificatory
amendment brought in by insertion of Explanation to Section 14A of
the Act by the Finance Act, 2022 ?
vi) Whether the Learned Income Tax Appellate Tribunal was justified in
law in holding that carbon credits which were valuable
entitlement/units receipt from the government bodies amounting to
Rs.4,31,82,738/- in the course of business and treadable in open
market was in the nature of capital receipt not liable to tax, instead of
taxable revenue receipt derived in the course of business of
renewable power generation and also by not considering the fact that
the issue of involvement of fresh introduction and investigation of
facts is pending for adjudication by the Hon'ble Apex Court in the
Revenue's SLP in the case of CIT Vs. Wescare (India) Ltd.[138
taxmann.com 185] and PCIT Vs. Chemplast Sanmat Limited (289
taxmann.com 168)?
vii) Whether the Learned Income Tax Appellate Tribunal was justified in
law in allowing the interest paid on income tax of Rs.1,42,06,476/-as
an allowable deduction without considering the fact that the same is
neither elgible for deduction under section 40a(ii) nor allowable as
business expenditure under any provision of the Act, including
Section 37(1) of the Act being the personal liability of the assessee?
viii) Whether the Learned Income Tax Appellate Tribunal was justified in
law in admitting fresh claim of ESOP and claim of Carbon Credit
raised by the assessee which was not made in the return of income
and in the course of assessment and which involved fresh
introduction and investigation of facts in the light of decision of the
Hon'ble Supreme Court in the case of Shriram Investments Vs. CIT
(167taxmann.com139) ?
We have elaborately heard Mr. Prithu Dudhoria, learned standing Counsel
for the appellant/revenue and Mr. J.P. Khaitan, learned Senior Counsel assisted
by Ms. Nilanjana Banerjee Pal, learned Advocate for the respondent/assessee.
The substantial questions of law nos. 1 to 5, 7 and 8 are covered by the
decision of this Court in the assessee's own case in ITAT/89/2025 (Principal
Commissioner of Income Tax-I, Kolkata Vs. M/s. ITC Limited) dated 21.07.2025.
Accordingly, the substantial questions of law are answered against the revenue.
With regard to the substantial question of law no.6 is concerned, the
learned Tribunal followed the assessee's own case for the assessment year
2009-10 and also the decision of the High Court of Judicature of Madras and
the High Court of Karnataka and granted relief to the assessee. The question
being whether the receipt from sale of Carbon Credit was a capital receipt and
sales not liable to tax. So far as the assessee's own case for the assessment
year 2009-10 is concerned, the revenue has preferred ITA No.51/2020 and
delay in filing the said appeal has been condoned and the appeal is pending.
Accordingly, except for substantial question of law no.6, all other
substantial questions of law suggested by the revenue are answered against the
revenue.
List this appeal along with ITA No. 51 of 2020 after two weeks.
(T.S. SIVAGNANAM)
CHIEF JUSTICE
(CHAITALI CHATTERJEE (DAS), J.)
spal/mg
