DCIT, Circle-3(1), Hyd, Hyderabad V. Rain CII Carbon (Vizag) Ltd., Hyd, Hyderabad

ITA 1102/HYD/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6136 (ITAT-HYDERABAD)
• Duration Of Justice: 5 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-02-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 19-08-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Capital asset; Business income; Revision of order; Depreciation; Transfer pricing; International transaction; Capital receipt; Revised return; Unabsorbed depreciation; Set aside; CHAPTER IV
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 143(3); 92; 10B; 143(1); 250; 72

Judgement Text

1 ITA.NO.1102/HYD/2016 M/S. RAIN CII CARBON (VIZAG) LTD., HYDERABAD. IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ITA.NO.1102/HYD/2016 ASSESSMENT YEAR 2011-2012 THE DCIT, CIRCLE-3(1) HYDERABAD. VS. M/S. RAIN CII CARBON (VIZAG) LTD., HYDERABAD. PAN AAECR1067K (APPELLANT) (RESPONDENT) FOR REVENUE : SHRI P. CHANDRASEKHAR FOR ASSESSEE : SHRI NISHANT THAKKAR DATE OF HEARING : 14.02.2017 DATE OF PRONOUNCEMENT : 17.02.2017 ORDER PER G. PAVAN KUMAR, J.M. THE REVENUE HAS FILED THE ABOVE APPEAL AGAINST THE O RDER OF THE CIT(A)-3, HYDERABAD DATED 22.03.2016 PASSED UNDE R SECTION 143(3) R.W.S. 250 OF THE I.T. ACT, 1961. THE REVENUE HAS RAI SED THE FOLLOWING GROUNDS : 1. THE LD. CIT(A) ERRED INN LAW AND ON FACTS OF THE C ASE. 2. THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THE FACT T HAT THE ASSESSEE IN ITS ORIGINAL RETURN OF INCOME OFFERED T HE RECEIPTS OF RS.8,50,76,388 ON ACCOUNT OF SALE OF CERS (CARBON E MISSION RECEIPTS) FROM ITS CO-GEN UNIT AS REVENUE. SINCE TH E CARBON CREDITS ARE NOT TO BE CONSIDERED AS CAPITAL ASSET I N THE HANDS OF THE ASSESSEE, THE INCOME DERIVED THEREFROM IS NOT A CAPITAL INCOME. THE CARBON CREDITS ARE PART AND PARCEL OF I TS PRODUCTION ACTIVITY. 3. THE LD. CIT(A) ERRED IN NOT TREATING THE RECEIPTS O F SALE OF CARBON CREDITS AS REVENUE RECEIPTS. 2 ITA.NO.1102/HYD/2016 M/S. RAIN CII CARBON (VIZAG) LTD., HYDERABAD. 4. THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT THE S ET OFF OF LOSSES/UNABSORBED DEPRECIATION IS TO BE ALLOWED IN THE FIRST INSTANCE AGAINST PROFITS AVAILABLE AND THE EXEMPTIO N U/S.10B IS TO BE THEN ALLOWED ON THE BALANCE OF PROFITS. 5. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF H EARING. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-C OMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING O F CALCINED PETROLEUM COKE (IN SHORT CPC) AND FILED THE RETURN O F INCOME FOR A.Y. 2011-2012 ON 29.09.2011 WITH TOTAL INCOME OF RS.15,73 ,62,351 AFTER CLAIM OF SET-OFF OF BROUGHT FORWARD LOSSES UNDER NOR MAL PROVISIONS OF INCOME TAX AND CALCULATED BOOK PROFITS UNDER MAT U/SE C.15JB OF THE ACT RS.152,78,60,350. FURTHER, ASSESSEE-COMPANY FILED REVISED RETURN OF INCOME ON 24.01.2013 WITH TOTAL INCOME OF RS.6,29, 17,500 AFTER CLAIMING SET-OFF OF LOSS OF RS.111,79,88,599 FROM C O-GEN UNIT UNDER THE NORMAL COMPUTATION OF INCOME. THE RETURN OF INCOME WAS PROCESSED UNDER SECTION 143(1) OF THE I.T. ACT, 1961. THE ASSESS EE COMPANY HAS INTERNATIONAL TRANSACTIONS WITH ITS A.E. EXCEEDING RS.15 CRORES. AND THE LD. A.O. REFERRED THE MATTER TO THE TPO UNDER SECTION 9 2 OF THE I.T. ACT, 1961 TO DETERMINE THE ARMS LENGTH PRICE (IN SHORT ALP ). THE LD. TPO PASSED ORDER UNDER SECTION 92CA(3) OF THE I.T. ACT, 19 61 WITH NO ADJUSTMENTS TO THE ALP ADOPTED BY THE ASSESSEE-COMPANY. A ND THE LD. A.O. PASSED THE FINAL ASSESSMENT ORDER UNDER SECTION 1 43(3) OF THE I.T. ACT, 1961 ON 26.03.2015. 2.1. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE LD. A.R. OF THE ASSESSEE APPEARED FROM TIME TO TIME AND SUBMITTED THE INFORMATION. THE LD. A.O. ON PERUSAL OF THE FINANCIAL STATEMENTS AND THE DOCUMENTARY EVIDENCE, FOUND THAT THE ASSESSEE HAS FILE D THE REVISED RETURN OF INCOME CLAIMING RECEIPT OF RS.8,50,76,388 O N SALE OF CERS 3 ITA.NO.1102/HYD/2016 M/S. RAIN CII CARBON (VIZAG) LTD., HYDERABAD. FROM ITS CO-GEN UNIT AS CAPITAL RECEIPT WHICH WAS OFFER ED EARLIER AS REVENUE RECEIPT IN THE ORIGINAL RETURN OF INCOME FILED ON 29.09.2011. THE A.R. RELIED ON THE COORDINATE BENCH DECISION OF TH IS TRIBUNAL AND HONBLE HIGH COURT OF A.P. IN THE CASE OF M/S. MY HO ME POWER LTD., 365 ITR 82 (A.P.) WHERE THE RECEIPT ON SALE OF CERS IS TRE ATED AS CAPITAL RECEIPT. THE A.O. DISCUSSED THE ISSUE OF CARBON CRED ITS IN PAGE NO.4 AT PARAS 2.5 AND 2.6 OF HIS ORDER AND DISTINGUISHED THE DECISIONS RELIED ON BY THE ASSESSEE AND BROUGHT THE RECEIPT ON SALE OF CERS RS.8,50,76,388 TO TAX TREATING AS REVENUE RECEIPT. 2.2. THE ASSESSEE-COMPANY CLAIMED EXEMPTION U/SEC.1 0B OF THE ACT PRIOR TO SET OFF OF CURRENT YEAR LOSSES FROM THE CO -GEN UNIT AND THE LD. A.R. OF THE ASSESSEE, STRONGLY RELIED ON THE DECIS ION OF JURISDICTIONAL HIGH COURT IN THE CASE OF CCL PRODUCTS INDIA LTD., VS. CIT (ITTA.NO.360 OF 2011) DATED 20.08.2013. FURTHER SUPPORTED WITH THE OFFICE MEMORANDUM DATED 28.08.2012 ISSUED BY CBDT WITH RES PECT TO CLAIM OF EXEMPTION UNDER SECTION 10B OF THE ACT. BUT THE LD. A .O. OBSERVED THAT THE OPINION OF THE JUDICIARY ON THE ISSUE OF CLAIM OF EXEMPTION UNDER SECTION 10B OF THE ACT, PRIOR TO SET-OFF OF LOSS ES IS DIVIDED AND HELD THAT THE UNABSORBED DEPRECIATION OF THE CARRY FORWA RD LOSSES ARE TO BE ALLOWED IN THE FIRST INSTANCE AGAINST PROFITS AVAILAB LE AND EXEMPTION UNDER SECTION 10B IS TO BE ALLOWED ON THE BALANCE OF P ROFITS. THE LD. A.O. DEALT EXHAUSTIVELY ON THE TECHNICALITIES OF CBD T CIRCULAR, JUDICIAL DECISIONS AND DISTINGUISHED THE DECISIONS RELIED BY TH E ISSUE AND ALLOWED CLAIM UNDER SECTION 10B THAT ONLY AFTER SET OF F OF LOSSES, AND ALSO DEALT ON COMMUNICATION EXPENSES WHILE COMPUTING E XEMPTION UNDER SECTION 10B AND ASSESSED THE INCOME AT RS.117,9 4,01,233 AND PASSED ORDER UNDER SECTION 143(3) DATED 26.03.2015. 3. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE-C OMPANY HAS FILED AN APPEAL BEFORE THE CIT(A). IN THE APPEAL PROCEEDINGS, THE LD. 4 ITA.NO.1102/HYD/2016 M/S. RAIN CII CARBON (VIZAG) LTD., HYDERABAD. A.R. OF THE ASSESSEE ARGUED THE GROUNDS AND REITERATE D THE SUBMISSIONS MADE IN THE ASSESSMENT PROCEEDINGS ALONG WITH THE EVID ENCE FILED IN RESPECT OF CLAIM AND FILED THE WRITTEN SUBMISSIONS SUPP ORTING THE CLAIM IN RESPECT OF CARBON CREDIT AS NON-TAXABLE WHICH WAS TR EATED AS REVENUE RECEIPT. THE LD. CIT(A) DISCUSSED THE ISSUE OF CER RE CEIPT AND RELIED ON THE TRIBUNAL DECISION OF HYDERABAD COORDINATE BENCH A ND HIGH COURT DECISION OF M/S. MY HOME POWER LTD., 365 ITR 82 (A.P .) AND ACCEPTED THE FACT THAT THE CER RECEIPT IS TO BE TREATED AS CAPITAL R ECEIPT AND NOT TAXABLE REFERRED AT PARA 3.2 AT PAGE-4 OF HIS ORDER WH ICH READ AS UNDER: 3.2. THE TAXABILITY OF CERS IS DECIDED BY THE HON BLE HIGH COURT OF ANDHRA PRADESH IN FAVOUR OF THE ASSESSEE IN THE CASE OF CIT VS MYHOME POWER LTD (365 ITR 82). IN THE CASE OF CIT V. MY HOME POWER (365 ITR 82), T HE HONBLE JURISDICTIONAL HIGH COURT HAS UPHELD THE ORDER OF T HE ITAT AND HELD THAT THE SALE PROCEEDS FROM CERS IS CAPITA L IN NATURE AND NOT LIABLE TO TAX. THE RELEVANT EXTRACTS ARE PR OVIDED BELOW: ' TRIBUNAL HAS FACTUALLY FOUND THAT 'CARBON CREDI T IS NOT AN OFFSHOOT OF BUSINESS BUT AN OFFSHOOT OF ENVIRONM ENTAL CONCERNS. NO ASSET IS GENERATED IN THE COURSE OF BU SINESS BUT IT IS GENERATED DUE TO ENVIRONMENTAL CONCERNS. WE AGREE WITH THIS FACTUAL ANALYSIS AS THE ASSESSEE IS CARRYING O N 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 RECEIP T AND IT CANNOT BE BUSINESS RECEIPT OR INCOME. IN VIEW OF THE ABOVE DECISION OF HONBLE HIGH COURT OF ANDHRA PRADESH, THE INCOME FROM CERS IS TO BE TREATED AS C APITAL RECEIPT, THEREFORE NOT TAXABLE AS INCOME. 4. ON SECOND ISSUE, THE LD. A.R. SUBMITTED THAT THE A SSESSEE- COMPANY HAS 03 UNITS AND OUT OF 03 UNITS, 02 UNITS ARE GENERATING INCOME, WHEREAS COGEN UNIT (POWER GENERATING UNIT) THE RE IS LOSS. ASSESSEE-COMPANY WHILE CLAIMING EXEMPTION UNDER SECTI ON 10B OF THE 5 ITA.NO.1102/HYD/2016 M/S. RAIN CII CARBON (VIZAG) LTD., HYDERABAD. ACT, HAS CLAIMED THE EXEMPTION WITHOUT SETTING-OFF OF LO SSES OF OTHER UNIT. THE LD. CIT(A) HAS DEALT ON THE ISSUE AT PAGES 6 TO 8 OF HIS ORDER AND RELIED ON THE DECISION OF KARNATAKA HIGH COURT IN THE CASE OF YOKOGAWA INDIA LTD., (2012) 341 ITR 385 (KARN.) AND THE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF CCL PRODUCTS INDIA LTD., VS. CIT (ITTA.NO.360 OF 2011) AND ASSESSEES OWN CASE FOR TH E A.Y. 2007-08, AND THE SAME WAS UPHELD BY THE TRIBUNAL IN ITA.NO.123 7/H/2015 ON 19.02.2016. SINCE THE COORDINATE BENCH OF THE TRIBUNAL HAS ALLOWED THE CLAIM OF 10B DEDUCTION, THE LD. CIT(A) HAS ALLOWED THE GROUND OF THE ASSESSEE RELYING ON THE JUDICIAL DECISIONS AND PA SSED THE ORDER. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE REVENUE HAS FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 5. BEFORE US, THE LD. D.R. ARGUED THE GROUNDS AND EX PLAINED THAT THE DECISION ON THE CARBON CREDIT HAS NOT BECOME FIN AL AND THE REVENUE HAS FILED SLP. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE, RELIED ON THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. SUBHASH KABINI POWER CORPORATION LTD ., (2016) 385 ITR 592 (KARN.) WHEREIN THE HONBLE HIGH COURT OBSERVED T HAT THE SALE OF CARBON CREDIT IS A CAPITAL RECEIPT AND NOT BUSINESS INC OME AND NOT LIABLE FOR TAX. THE HONBLE HIGH COURT OBSERVED AS UNDER : 10. THE HON'BLE HIGH COURT HAS HELD THAT FULFILLME NT OF TWIN CONDITION IS MUST I.E. ASSESSMENT ORDER SHOULD BE ERRONEOUS A ND IT SHOULD CAUSE A PREJUDICE TO THE REVENUE. IF ANY ONE CONDIT ION IS LACKING, THEN ACTION U/S 263 WOULD NOT BE JUSTIFIED. IN THE ABOVE CASE, THE ASSESSMENT ORDER WAS ERRONEOUS BECAUSE THE LEARNED ASSESSING OFFICER FAILED TO COMPUTE THE LONG TERM CAPITAL GAI N AND SHORT TERM CAPITAL GAIN SEPARATELY. BUT THE TRIBUNAL ULTIMATEL Y ARRIVED AT A CONCLUSION THAT EVEN IF THIS EXERCISE IS BEING DONE , THEN THERE WILL NOT BE ANY TAX LIABILITY AND THEREFORE, THERE IS NO NEE D TO SET ASIDE THE ASSESSMENT ORDER. THE HON'BLE HIGH COURT HAS UPHELD THIS FINDING OF THE TRIBUNAL. IN THE LIGHT OF THE ABOVE, LET US EXA MINE THE FACTS OF THE PRESENT CASE. THERE IS NO DISPUTE THAT THE ASSESSEE IS IN THE BUSINESS OF HYDRO POWER PROJECT. IT HAS EARNED CARBON CREDIT WHICH HAS BEEN RATED BY THE AGENCY AND IT HAS SOLD THOSE CARBON CR EDIT TO A JAPANESE 6 ITA.NO.1102/HYD/2016 M/S. RAIN CII CARBON (VIZAG) LTD., HYDERABAD. COMPANY. THE DETAILS INDICATING SERVICE FROM CARBON MANAGEMENT SERVICE, ALLOTMENT OF LETTER OF CARBON CREDIT, SALE BILL FOR SALE OF CARBON CREDITS ARE AVAILABLE ON PAGE NOS. 102 TO 110 OF TH E PAPER BOOK. THE ITAT HYDERABAD HAS DECIDED THIS ISSUE FOR THE FIRST TIME AND THE DISCUSSION MADE BY THE ITAT HYDERABAD BENCH WORTH T O NOTE, IT READ AS UNDER: '24. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. CARBON CREDIT IS IN THE NATURE OF 'AN ENTIT LEMENT' RECEIVED TO IMPROVE WORLD ATMOSPHERE AND ENVIRONMENT REDUCING C ARBON, HEAT AND GAS EMISSIONS. THE ENTITLEMENT EARNED FOR CARBO N CREDITS CAN, AT BEST, BE REGARDED AS A CAPITAL RECEIPT AND CANNOT B E TAXED AS A REVENUE RECEIPT. IT IS NOT GENERATED OR CREATED DUE TO CARRYING ON BUSINESS BUT IT IS ACCRUED DUE TO 'WORLD CONCERN'. IT HAS BEEN MADE AVAILABLE ASSUMING CHARACTER OF TRANSFERABLE RIGHT OR ENTITLEMENT ONLY DUE TO WORLD CONCERN. THE SOURCE OF CARBON CREDIT I S WORLD CONCERN AND ENVIRONMENT. DUE TO THAT THE ASSESSEE GETS A PR IVILEGE IN THE NATURE OF TRANSFER OF CARBON CREDITS. THUS, THE AMO UNT RECEIVED FOR CARBON CREDITS HAS NO ELEMENT OF PROFIT OR GAIN AND IT CANNOT BE SUBJECTED TO TAX IN ANY MANNER UNDER ANY HEAD OF IN COME. IT IS NOT LIABLE FOR TAX FOR THE ASSESSMENT YEAR UNDER CONSID ERATION IN TERMS OF SECTIONS 2(24), 28, 45 AND 56 OF THE INCOME-TAX ACT , 1961. CARBON CREDITS ARE MADE AVAILABLE TO THE ASSESSEE ON ACCOU NT OF SAVING OF ENERGY CONSUMPTION AND NOT BECAUSE OF ITS BUSINESS. FURTHER, IN OUR OPINION, CARBON CREDITS CANNOT BE CONSIDERED AS A B I-PRODUCT. IT IS A CREDIT GIVEN TO THE ASSESSEE UNDER THE KYOTO PROTOC OL AND BECAUSE OF INTERNATIONAL UNDERSTANDING. THUS, THE ASSESSEES WH O HAVE SURPLUS CARBON CREDITS CAN SELL THEM TO OTHER ASSESSEES TO HAVE CAPPED EMISSION COMMITMENT UNDER THE KYOTO PROTOCOL. TRANS FERABLE CARBON CREDIT IS NOT A RESULT OR INCIDENCE OF ONE'S BUSINE SS AND IT IS A CREDIT FOR REDUCING EMISSIONS. THE PERSONS HAVING CARBON C REDITS GET BENEFIT BY SELLING THE SAME TO A PERSON WHO NEEDS CARBON CR EDITS TO OVERCOME ONE'S NEGATIVE POINT CARBON CREDIT. THE AMOUNT RECE IVED 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 CAPITA L AND HENCE INCOME EARNED ON SALE OF THESE CREDITS IS CAPITAL RECEIPT. FOR THIS PROPOSITION, WE PLACE RELIANCE ON THE JUDGMENT OF THE SUPREME CO URT IN THE CASE OF CIT V. MAHESHWARI DEVI JUTE MILLS LTD. (57 ITR 3 6) WHEREIN HELD THAT TRANSFER OF SURPLUS LOOM HOURS TO OTHER MILL O UT OF THOSE ALLOTTED TO THE ASSESSEE UNDER AN AGREEMENT FOR CONTROL OF P RODUCTION WAS CAPITAL RECEIPT AND NOT INCOME. BEING SO, THE CONSI DERATION RECEIVED BY THE ASSESSEE IS SIMILAR TO CONSIDERATION RECEIVE D BY TRANSFERRING OF LOOM HOURS. THE SUPREME COURT CONSIDERED THIS FACT AND OBSERVED THAT TAXABILITY OF PAYMENT RECEIVED FOR SALE OF LOO M HOURS BY THE ASSESSEE IS ON ACCOUNT OF EXPLOITATION OF CAPITAL A SSET AND IT IS CAPITAL RECEIPT AND NOT AN INCOME. SIMILARLY, IN THE PRESEN T CASE THE ASSESSEE TRANSFERRED THE CARBON CREDITS LIKE LOOM HOURS TO S OME OTHER CONCERNS 7 ITA.NO.1102/HYD/2016 M/S. RAIN CII CARBON (VIZAG) LTD., HYDERABAD. FOR CERTAIN CONSIDERATION. THEREFORE, THE RECEIPT O F SUCH CONSIDERATION CANNOT BE CONSIDERED AS BUSINESS INCOME AND IT IS A CAPITAL RECEIPT. ACCORDINGLY, WE ARE OF THE OPINION THAT THE CONSIDE RATION RECEIVED ON ACCOUNT OF CARBON CREDITS CANNOT BE CONSIDERED AS I NCOME AS TAXABLE IN THE ASSESSMENT YEAR UNDER CONSIDERATION. CARBON CREDIT IS NOT AN OFFSHOOT OF BUSINESS BUT AN OFFSHOOT OF ENVIRONMENT AL 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 PAR TY IN NEED OF REDUCTION OF CARBON EMISSION. IT DOES NOT INCREASE PROFIT IN ANY MANNER AND DOES NOT NEED ANY EXPENSES. IT IS A NATU RE OF ENTITLEMENT TO REDUCE CARBON EMISSION, HOWEVER, THERE IS NO COS T 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. 25. FURTHER, AS PER GUIDANCE NOTE ON ACCOUNTING FOR SELF-GENERATED CERTIFIED EMISSION REDUCTIONS (CERS) ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA (ICAI) IN JUNE, 2009 STATES THAT CERS SHOULD BE RECOGNISED IN BOOKS WHEN THOSE ARE CREATE D BY UNFCCC AND/OR UNCONDITIONALLY AVAILABLE TO THE GENERATING ENTITY. CERS ARE INVENTORIES OF THE GENERATING ENTITIES AS THEY ARE GENERATED AND HELD FOR THE PURPOSE OF SALE IN ORDINARY COURSE. EVEN TH OUGH CERS ARE INTANGIBLE ASSETS THOSE SHOULD BE ACCOUNTED AS PER AS-2 (VALUATION OF INVENTORIES) AT A COST OR MARKET PRICE, WHICHEVE R IS LOWER. SINCE CERS ARE RECOGNISED AS INVENTORIES, THE GENERATING ASSESSEE SHOULD APPLY AS-9 TO RECOGNISE REVENUE IN RESPECT OF SALE OF CERS. 26. THUS, SALE OF CARBON CREDITS IS TO BE CONSIDERE D AS CAPITAL RECEIPT. THIS GROUND IS ALLOWED. 6. IN RESPECT OF SECOND GROUND OF CLAIM OF 10B DED UCTION, THE LD. A.R. SUBMITTED THAT THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF YOKOGAWA INDIA LTD., (2012) 341 ITR 385 WAS UPHELD BY THE HONBLE SUPREME COURT REPORTED IN (2017) 77 TAXMANN.C OM 41 (SC) AND THE RELEVANT OBSERVATIONS OF THE HONBLE SUPREME COURT A RE AS UNDER : 16. FROM A READING OF THE RELEVANT PROVISIONS OF S ECTION 10A IT IS MORE THAN CLEAR TO US THAT THE DEDUCTIONS CONTEMPLA TED THEREIN IS QUA THE ELIGIBLE UNDERTAKING OF AN ASSESSEE STANDIN G ON ITS OWN AND WITHOUT REFERENCE TO THE OTHER ELIGIBLE OR NON- ELIGIBLE UNITS OR UNDERTAKINGS OF THE ASSESSEE. THE BENEFIT OF DEDUCT ION IS GIVEN BY THE ACT TO THE INDIVIDUAL UNDERTAKING AND RESULTANT LY FLOWS TO THE ASSESSEE. THIS IS ALSO MORE THAN CLEAR FROM THE CON TEMPORANEOUS 8 ITA.NO.1102/HYD/2016 M/S. RAIN CII CARBON (VIZAG) LTD., HYDERABAD. CIRCULAR NO. 794 DATED 9.8.2000 WHICH STATES IN PAR AGRAPH 15.6 THAT, 'THE EXPORT TURNOVER AND THE TOTAL TURNOVER FOR THE PURPOSES OF SECTIONS 10A AND 10B SHALL BE OF THE UNDERTAKING LOCATED IN SPECIFIED ZONES OR 100% EXPO RT ORIENTED UNDERTAKINGS, AS THE CASE MAY BE, AND THIS SHALL NOT HAVE ANY MATERIAL RELATIONSHIP WITH THE OTHER B USINESS OF THE ASSESSEE OUTSIDE THESE ZONES OR UNITS FOR TH E PURPOSES OF THIS PROVISION.' 17. IF THE SPECIFIC PROVISIONS OF THE ACT PROVIDE [ FIRST PROVISO TO SECTIONS 10A(1); 10A(1A) AND 10A(4)] THAT THE UNIT THAT IS CONTEMPLATED FOR GRANT OF BENEFIT OF DEDUCTION IS T HE ELIGIBLE UNDERTAKING AND THAT IS ALSO HOW THE CONTEMPORANEOU S CIRCULAR OF THE DEPARTMENT (NO. 794 DATED 09.08.2000) UNDERSTOO D THE SITUATION, IT IS ONLY LOGICAL AND NATURAL THAT THE STAGE OF DEDUCTION OF THE PROFITS AND GAINS OF THE BUSINESS OF AN ELIG IBLE UNDERTAKING HAS TO BE MADE INDEPENDENTLY AND, THEREFORE, IMMEDI ATELY AFTER THE STAGE OF DETERMINATION OF ITS PROFITS AND GAINS. AT THAT STAGE THE AGGREGATE OF THE INCOMES UNDER OTHER HEADS AND THE PROVISIONS FOR SET OFF AND CARRY FORWARD CONTAINED IN SECTIONS 70, 72 AND 74 OF THE ACT WOULD BE PREMATURE FOR APPLICATION. THE DEDUCTI ONS UNDER SECTION 10A THEREFORE WOULD BE PRIOR TO THE COMMENC EMENT OF THE EXERCISE TO BE UNDERTAKEN UNDER CHAPTER VI OF THE A CT FOR ARRIVING AT THE TOTAL INCOME OF THE ASSESSEE FROM THE GROSS TOTAL INCOME. THE SOMEWHAT DISCORDANT USE OF THE EXPRESSION 'TOTAL IN COME OF THE ASSESSEE' IN SECTION 10A HAS ALREADY BEEN DEALT WIT H EARLIER AND IN THE OVERALL SCENARIO UNFOLDED BY THE PROVISIONS OF SECTION 10A THE AFORESAID DISCORD CAN BE RECONCILED BY UNDERSTANDIN G THE EXPRESSION 'TOTAL INCOME OF THE ASSESSEE' IN SECTIO N 10A AS 'TOTAL INCOME OF THE UNDERTAKING'. 18. FOR THE AFORESAID REASONS WE ANSWER THE APPEAL S AND THE QUESTIONS ARISING THEREIN, AS FORMULATED AT THE OUT SET OF THIS ORDER, BY HOLDING THAT THOUGH SECTION 10A, AS AMENDED, IS A PROVISION FOR DEDUCTION, THE STAGE OF DEDUCTION WOULD BE WHILE CO MPUTING THE GROSS TOTAL INCOME OF THE ELIGIBLE UNDERTAKING UNDE R CHAPTER IV OF THE ACT AND NOT AT THE STAGE OF COMPUTATION OF THE TOTAL INCOME UNDER CHAPTER VI. ALL THE APPEALS SHALL STAND DISPOSED OF ACCORDINGLY. 7. WE, CONSIDERING APPARENT FACTS, MATERIAL FOUND AND JUDICIAL DECISIONS, FIND THAT THE LD. CIT(A) RELIED ON THE COORD INATE BENCH