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Assistant Commissioner of Income-tax v/s Intex

    IT Appeal No. 147 (Mad.) of 2014

    Decided On, 30 January 2015

    At, Income Tax Appellate Tribunal Chennai

    By, THE HONOURABLE MR. A. MOHAN ALANKAMONY
    By, ACCOUNTANT MEMBER & THE HONOURABLE MR. CHALLA NAGENDRA PRASAD
    By, JUDICIAL MEMBER

    For the Appellant: S. Das Gupta, Jt. CIT. For the Respondent: N. Quadir Hoseyn, Advocate.



Judgment Text

Challa Nagendra Prasad, Judicial Member

1. This appeal is filed by the Revenue against the order of the Commissioner of Income-tax (Appeals), Tiruchirapalli, dated October 23, 2013 for the assessment year 2010-11.

2. The first issue in the grounds of appeal of the Revenue is that the Commissioner of Income-tax (Appeals) ought to have taken into consideration that losses from windmill business for the assessment years 2004-05 to 2006-07 have to be set off only against profit from windmill business of the assessment year 2010-11.

3. The Departmental representative places reliance on the order of the Assessing Officer.

4. At the time of hearing, counsel for the assessee submits that this issue is squarely covered by the judgment of the jurisdictional High Court in the case of Velayudhaswamy Spg. Mills (P.) Ltd. v. Asstt. CIT [2012] 340 ITR 477/21 taxmann.com 95 (Mad) which the Commissioner of Income-tax (Appeals) followed. Counsel for the assessee supports the order of the Commissi

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oner of Income-tax (Appeals).

5. Heard both sides. Perused orders of the lower authorities and the decision relied on. This issue has been considered by the Commissioner of Income-tax (Appeals) and following the decision of the jurisdictional High Court in the case of Velayudhaswamy Spg. Mills (P.) Ltd. (supra) allowed the claim of the assessee observing as under :

"9. I have gone through the submissions made by the authorised representative of the appellant. The only issue is regarding allowability of deduction claimed by the appellant under section 80-IA for the year under consideration. The Assessing Officer has denied deduction claimed by the appellant by referring to section 80-IA(5) and held that the profits and gains of an eligible business (windmill business) for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year, i.e., in the case of appellant for assessment year 2009-10 onwards, should be computed as if the eligible business was the only source of income of the appellant. Losses from windmill business for the assessment years 2005-06 to 2007-08 have to be set off against the profits from windmill business of assessment year under consideration, i.e., assessment year 2010-11 and the balance alone is eligible for deduction under section 80-IA.

10. However, the authorised representative of the appellant claims that section 80-IA allows the assessee to claim deduction of 100 per cent. of profit derived from the eligible business for 10 consecutive assessment years within a period of 15th assessment year beginning with the assessment year in which the assessee begins operating and maintaining the eligible business. The authorised representative of the appellant is also of the opinion that section 80-IA also allows the assessee to choose the initial assessment year at its option for claiming the deduction. Thus, the appellant had chosen assessment year 2009-10 as its initial assessment year. The authorised representative of the appellant has placed his reliance in the ratio in the case of Velayudhaswamy Spg. Mills (P.) Ltd. v. Asstt. CIT [2012] 340 ITR 477 (Mad.) wherein the deduction was allowed under section 80-IA by claiming that losses from initial assessment year here in the case of the appellant the assessment year 2009-10 is to be considered and not the losses prior to the initial assessment year which have already been set off against some other profits of the concerned assessment years.

11. On verifying the contentions of the authorised representative of the appellant prior to the amendment to section 80-IA by the Finance Act, 1999 the initial assessment year was defined in the Act. But after the amendment there is no definition for initial assessment year in the Act and there is option to the assessee in selection of the year of claiming relief under section 80-IA. In view of this, there is no question of setting off notionally carried forward unabsorbed business loss against the profits of the eligible business and the appellant is entitled to claim deduction under section 80-IA on current assessment year for current year profit. After the amendment to section 80-IA which granted the assessee an option to select initial assessment year for claiming such deduction the decision of Madras High Court in Velayudhaswamy Spinning Mills (P.) Ltd. v. Asstt. CIT [2012] 340 ITR 477 (Mad.) is applicable in the case of the appellant for the year under consideration and I concur with the claim made by the authorised representative of the appellant for the deduction claimed under section 80-IA. The Assessing Officer also agreed with the contention of the appellant for claiming deduction under section 80-IA. However, the Assessing Officer differed with the appellant on the ground that the decision in the case of Velayudhaswamy Spinning Mills (P.) Ltd. v. Asstt. CIT [2012] 340 ITR 477 (Mad.) has been contested by the Department by filing special leave petition in the hon'ble Supreme Court and denied the claim of the appellant. Subject to final verdict by the Supreme Court in the case of Velayuthasamy Spinning Mills (P.) Ltd. [2012] 340 ITR 477 (Mad.) the contention of the authorised representative of the appellant based on the jurisdictional High Court decision in the case of Velayuthasamy Spinning Mills (P.) Ltd. is accepted and accordingly the deduction claimed by the appellant under section 80-IA(5) is to be allowed."

6. On going through the above order of the Commissioner of Income-tax (Appeals) we do not find any good reason to interfere with the findings and thus we uphold the order of the Commissioner of Income-tax (Appeals) on this issue.

7. The next issue in the appeal of the Revenue is that the Commissioner of Income-tax (Appeals) erred in considering sale of carbon credit as capital in nature.

8. Counsel for the assessee submits that this issue has been decided in favour of the assessee by the co-ordinate Bench of this Tribunal in the case of Prabhu Spg. Mills (P.) Ltd. v. Dy. CIT [I.T. Appeal Nos. 651 & 652 (Mds) of 2013, dated 31-7-2014]. Counsel further submits that an identical issue has been decided by the hon'ble Andhra Pradesh High Court in the case of CIT v. My Home Power Ltd. [2014] 365 ITR 82/225 Taxman 8 (Mag.)/46 taxmann.com 314 holding that income earned on sale of carbon credit is capital in nature by affirming the order of the Hyderabad Bench of this Tribunal in the case of My Home Power Ltd. v. Dy. CIT [2012] 27 taxmann.com 27/[2014] 63 SOT 227. Counsel places reliance on the order of the Commissioner of Income-tax (Appeals).

9. The Departmental representative places reliance on the order of the Assessing Officer.

10. Heard both sides. Perused orders of the lower authorities and the decisions relied on. This issue has been decided in favour of the assessee by the co-ordinate Bench of this Tribunal in Prabhu Spg. Mills (P.) Ltd. (supra) following the decision of the hon'ble Andhra Pradesh High Court in the case of My Home Power Ltd. (supra) observing as under (page 210 of 4 ITR (Trib)-OL) :

'5. Heard both sides. On going through the orders of the lower authorities and the decision of the hon'ble Andhra Pradesh High Court in the case of CIT v. My Home Power Ltd. [2014] 365 ITR 82 (AP), we find that the issue in these two appeals is squarely covered by the above decision. The Revenue could not point out any contrary decision to the above cited decision. The hon'ble Andhra Pradesh High Court in the case of My Home Power Ltd. [2014] 365 ITR 82 (AP) while deciding the issue in favour of the assessee held as under :

'This appeal is sought to be preferred and admitted against the judgment and order of the learned Tribunal, dated November 2, 2012 (My Home Power Ltd. v. Deputy CIT [2013] 21 ITR (Trib) 186 (Hyd)), on the following substantial questions of law :

"1. Whether, in the facts and in the circumstances of the case and in law, the Income-tax Appellate Tribunal is correct in holding that the sale of carbon credits is to be considered as capital receipt and not liable for tax under any head of income under the Income-tax Act, 1961 ?

2. Whether, in the facts and in the circumstances of the case and in law, the Income-tax Appellate Tribunal is correct in holding that there is no cost of acquisition or cost of production to get entitlement for the carbon credits, without appreciating that generation of carbon credits is intricately linked to the machinery and processes employed in the production process by the assessee ?"

Sri J.V. Prasad, learned counsel appearing for the appellant-Revenue, submits that the consideration received on account of sale of carbon credits should be treated to be business income as the sale has been made in connection with the business.

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.'

6. Respectfully following the said decision, we hold that amount received on sale of carbon credit is capital in nature and therefore we reverse the orders of the Commissioner of Income-tax (Appeals) and the Assessing Officer on this issue.'

11. Respectfully following the above decision of the co-ordinate Bench of this Tribunal cited above and the judgment of the hon'ble Andhra Pradesh High Court in the case of My Home Power Ltd. (supra) we sustain the order of the Commissioner of Income-tax (Appeals) and reject the grounds raised by the Revenue on this issue.

12. In the result, appeal of the Revenue is dismissed.
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