ACIT, Trichy V. Atlas Export Enterprises, Karur

ITA 117/CHNY/2016

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 7748 (ITAT-CHENNAI)
• Duration Of Justice: 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2016
• Appeal Filed By: Department
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 21-01-2016
• Court: TRIBUNAL
• Department Lawyers: P RADHAKRISHNAN
• Assessee Lawyers: G BASKAR
• Keywords: Business income; Capital receipt; Condonation of delay

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , . , BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY , JUDICIAL MEMBER I.T.A.NO S . 1814/MDS/2013 AND 1 17/MDS/2016 ASSESSMENT YEAR S :200 9 - 1 0 & 2010 - 11 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE II , 4, WILLIAMS ROAD, TRICHY. VS. M/S. ATLAS EXPORT ENTERPRISES, 29 - J, PUGALUR ROAD, KARUR 639 001. [PAN : A A AFA4788R ] ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI P. RADHAKRISHNAN , JCIT / RESPONDENT BY : SHRI G. BASKAR , ADVOCATE / DATE OF HEARING : 1 4 . 0 3 .201 6 / D ATE OF P RONOUNCEMENT : 18 . 0 3 .201 6 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : BOTH THE APPEAL S FILED BY THE REVENUE ARE DIRECTED AGAINST THE COMMON ORDER OF THE LD. COMMI SSIONER OF INCOME TAX (APPEALS) , TIRUCHIRAPALLI DATED 26 . 07 .201 3 R ELEVANT TO THE ASSESSMENT YEAR S 200 9 - 1 0 AND 2010 - 11 . 2. BOTH T HE APPEAL S OF THE REVENUE ARE FOUND TO HAVE BEEN FILED LATE BY ONE DAY . THE ASSESSING OFFICER HAS FILED AFFIDAVIT FOR CONDONATION OF DELAY . BY PLEADING THE REASONS STATED IN THE AFFIDAVIT, I.T.A. NO S . 1814 /M/ 1 3 & I.T.A. NO. 117/ M/16 2 TH E LD. DR HAS REQUESTED FOR CONDONING THE DELAY AND TO ADMIT THE APPEAL FOR HEARING. THE LD. COUNSEL FOR THE ASSESSEE HAS NOT SERIOUSLY OBJECT TO THE SUBMISSIONS OF THE LD. DR . THUS , WE CONDONE THE DELAY OF ONE DAY IN FILING BOTH THE APPEAL S AND ADMIT THE A PPEAL S FOR HEARING. 3 . THE FIRST COMMON GROUND RAISED IN THE APPEALS OF THE REVENUE IS WITH REGARD TO DEDUCTION UNDER SECTION 80IA OF THE INCOME TAX ACT [ ACT IN SHORT] . THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND EXPORT OF TEXTILES AND W IND MILL POWER GENERATION. THE ASSESSEE HA S FILED ITS RETURN DECLARING GROSS TOTAL INCOME OF . 1,97,15,370/ - FOR THE ASSESSMENT YEAR 2009 - 10 AND .5,01,23,403/ - FOR THE ASSESSMENT YEAR 2010 - 11 AND CLAIMED DEDUCTION UNDER SECTION 80IA OF THE INCOME TAX ACT IN RESPECT OF THE ABOVE GROSS TOTAL INCOME . IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER H AS DISALLOWED THE DEDUCTION CLAIMED BY THE ASSESSEE UNDER SECTION 80IA OF THE ACT ONLY ON THE GROUND THAT THE DEPARTMENT HAS FILED SLP BEFORE THE HON BLE SUPREME COURT CHALLENGING THE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF VELAYUD HASWAMY SPINNING MILLS P. LTD. V. ACIT 231 CTR (MAD) 36 8 ): [2012] 340 ITR 477. O N APPEAL, THE LD. CIT(A), BY FOLLOWING THE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS & OTHERS V. ACIT (SUPRA), DIRECTED TH E ASSESSING OFFICER TO ALLOW THE CLAIM OF THE ASSESSEE. I.T.A. NO S . 1814 /M/ 1 3 & I.T.A. NO. 117/ M/16 3 4 . WHEN THE APPEAL WAS TAKEN UP FOR HEARING, THE LD. DR HAS FAIRLY ACCEPTED THE ISSUE INVOLVED IN THIS APPEAL IS COVERED BY THE DECISION IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS & OTHERS V. ACI T (SUPRA), HOWEVER, HE HAS SUBMITTED THAT THE SLP PREFERRED BY THE DEPARTMENT IS PENDING BEFORE THE HON BLE SUPREME COURT. 5 . AFTER HEARING BOTH SIDES, WE FIND THAT THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPINNING MILLS & OT HERS V. ACIT (SUPRA) HAS HELD AS UNDER: 13. SEC.80 - IA READS AS FOLLOWS: [(1) WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE INCLUDES ANY PROFITS AND GAINS DERIVED BY AN UNDERTAKING OR AN ENTERPRISE FROM ANY BUSINESS REFERRED TO IN SUB - SECTION (4) (SUCH BUS INESS BEING HEREINAFTER REFERRED TO AS THE ELIGIBLE BUSINESS), THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, BE ALLOWED, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION OF AN AMOUNT EQUAL TO HUNDRED PER CENT OF T HE PROFITS AND GAINS DERIVED FROM SUCH BUSINESS FOR TEN CONSECUTIVE ASSESSMENT YEARS.] (2) THE DEDUCTION SPECIFIED IN SUB - SECTION (1) MAY, AT THE OPTION OF THE ASSESSEE, BE CLAIMED BY HIM FOR ANY TEN CONSECUTIVE ASSESSMENT YEARS OUT OF FIFTEEN YEARS BEGIN NING FROM THE YEAR IN WHICH THE UNDERTAKING OR THE ENTERPRISE DEVELOPS AND BEGINS TO OPERATE ANY INFRASTRUCTURE FACILITY OR STARTS PROVIDING TELECOMMUNICATION SERVICE OR DEVELOPS AN INDUSTRIAL PARK [OR DEVELOPS A SPECIAL ECONOMIC ZONE REFERRED TO IN CLAUSE (III) OF SUB - SECTION (4)] OR GENERATES POWER OR COMMENCES TRANSMISSION OR DISTRIBUTION OF POWER [OR UNDERTAKES SUBSTANTIAL RENOVATION AND MODERNISATION OF THE EXISTING TRANSMISSION OR DISTRIBUTION LINES ): (4) THIS SECTION APPLIES TO (I) ANY ENTERPRIS E CARRYING ON THE BUSINESS [OF (I) DEVELOPING OR (II) OPERATING AND MAINTAINING OR (III) DEVELOPING, OPERATING AND MAINTAINING] ANY INFRASTRUCTURE FACILITY WHICH FULFILS ALL THE FOLLOWING CONDITIONS, NAMELY : (A) IT IS OWNED BY A COMPANY REGISTERED IN IND IA OR BY A CONSORTIUM OF SUCH COMPANIES [OR BY AN AUTHORITY OR A BOARD OR A I.T.A. NO S . 1814 /M/ 1 3 & I.T.A. NO. 117/ M/16 4 CORPORATION OR ANY OTHER BODY ESTABLISHED OR CONSTITUTED UNDER ANY CENTRAL OR STATE ACT;] (B) IT HAS ENTERED INTO AN AGREEMENT WITH THE CENTRAL GOVERNMENT OR A STATE GOVERNMENT OR A LOCAL AUTHORITY OR ANY OTHER STATUTORY BODY FOR (I) DEVELOPING OR (II) OPERATING AND MAINTAINING OR (III) DEVELOPING, OPERATING AND MAINTAINING A NEW INFRASTRUCTURE FACILITY;] (C) IT HAS STARTED OR STARTS OPERATING AND MAINTAINING THE INFRASTRUCTURE FA CILITY ON OR AFTER THE 1ST DAY OF APRIL, 1995: 5) NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISION OF THIS ACT, THE PROFITS AND GAINS OF AN ELIGIBLE BUSINESS TO WHICH THE PROVISIONS OF SUB - SECTION (1) APPLY SHALL, FOR THE PURPOSES OF DETERMINING THE QUANTUM OF DEDUCTION UNDER THAT SUB - SECTION FOR THE ASSESSMENT YEAR IMMEDIATELY SUCCEEDING THE INITIAL ASSESSMENT YEAR OR ANY SUBSEQUENT ASSESSMENT YEAR, BE COMPUTED AS IF SUCH ELIGIBLE BUSINESS WERE THE ONLY SOURCE OF INCOME OF THE ASSESSEE DURING THE PREVIOUS YEAR RELEVANT TO THE INITIAL ASSESSMENT YEAR AND TO EVERY SUBSEQUENT ASSESSMENT YEAR UP TO AND INCLUDING THE ASSESSMENT YEAR FOR WHICH THE DETERMINATION IS TO BE MADE. FROM READING OF SUB - S (1), IT IS CLEAR THAT IT PROVIDES THAT WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE INCLUDES ANY PROFITS AND GAINS DERIVED BY AN UNDERTAKING FOR AN ENTERPRISE FROM ANY BUSINESS REFERRED TO IN SUB - S(4) I.E. REFERRED TO AS THE ELIGIBLE BUSINESS, THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THE SECTION, BE ALLOWED, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION OF AN AMOUNT EQUAL TO 100 PERCENT OF THE PROFITS AND GAINS DERIVED FROM SUCH BUSINESS FOR TEN CONSECUTIVE ASSESSMENT YEARS. DEDUCTION IS GIVEN TO ELIGIBLE BUSINESS AND THE SA ME IS DEFINED IN SUB - S (4). SUBS - S(2) PROVIDES OPTION TO THE ASSESSEE TO CHOOSE 10 CONSECUTIVE ASSESSMENT YEARS OUT OF 15 YEARS. OPTION HAS TO BE EXERCISED. IF IT IS NOT EXERCISED, THE ASSESSEE WILL NOT BE GETTING THE BENEFIT. FIFTEEN YEARS IS OUTER LIMI T AND THE SAME IS BEGINNING FROM THE YEAR IN WHICH THE UNDERTAKING OR THE ENTERPRISE DEVELOPS AND BEGINS TO OPERATE ANY INFRASTRUCTURE ACTIVITY ETC. SUB - S(5) DEALS WITH QUANTUM OF DEDUCTION FOR AN ELIGIBLE BUSINESS. THE WORDS INITIAL ASSESSMENT YEAR ARE USED IN SUB - S(5) AND THE SAME IS NOT DEFINED UNDER THE PROVISIONS. IT IS TO NOTED THAT INITIAL ASSESSMENT YEAR EMPLOYED IN SUB - S(5) IS DIFFERENT FROM THE WORDS BEGINNING FROM THE YEAR REFERRED TO IN SUB - S(2) IMPORTANT FACTORS ARE TO BE NOTED IN SUB - S(5 ) AND THEY ARE AS UNDER: - (1) IT STARTS WITH NON OBSTANTE CLAUSE WHICH MEANS IT OVERRIDES ALL THE PROVISIONS OF THE ACT AND OTHER PROVISIONS ARE TO BE IGNORED. (2) IT IS FOR THE PURPOSE OF DETERMINING THE QUANTUM OF DEDUCTION; (3) FOR THE ASSESSMENT YE AR IMMEDIATELY SUCCEEDING THE INITIAL ASSESSMENT YEAR; I.T.A. NO S . 1814 /M/ 1 3 & I.T.A. NO. 117/ M/16 5 (4) IT IS A DEEMING PROVISION; (5) FICTION CREATED THAT THE ELIGIBLE BUSINESS IS THE ONLY SOURCE OF INCOME; AND (6) DURING THE PREVIOUS YEAR RELEVANT TO THE INITIAL ASSESSMENT YEAR AND EVERY SUBSEQUEN T ASSESSMENT YEAR. FROM READING THE ABOVE, IT IS CLEAR THAT THE ELIGIBLE BUSINESS WERE THE ONLY SOURCE OF INCOME DURING THE PREVIOUS YEAR RELEVANT TO INITIAL ASSESSMENT YEAR AND EVERY SUBSEQUENT ASSESSMENT YEARS. WHEN THE ASSESSEE EXERCISES THE OPTION, THE ONLY LOSSES OF THE YEARS BEGINNING FROM INITIAL ASSESSMENT YEAR ALONE ARE TO BE BROUGHT FORWARD AND NO LOSSES OF EARLIER YEARS WHICH WERE ALREADY SET OFF AGAINST THE INCOME OF THE ASSESSEE. LOOKING FORWARD TO A PERIOD OF TEN YEARS FROM THE INITIAL ASS ESSMENT IS CONTEMPLATED. IT DOES NOT ALLOW THE REVENUE TO LOOK BACKWARD AND FIND OUT IF THERE IS ANY LOSS OF EARLIER YEARS AND BRING FORWARD NOTIONALLY EVEN THOUGH THE SAME WERE SET OFF AGAINST OTHER INCOME OF THE ASSESSEE AND THE SET OFF AGAINST THE CURR ENT INCOME OF THE ELIGIBLE BUSINESS, ONCE THE SET OFF IS TAKEN PLACE IN EARLIER YEAR AGAINST THE OTHER INCOME OF THE ASSESSEE, THE REVENUE CANNOT REWORK THE SET OFF AMOUNT AND BRING IT NOTIONALLY. FICTION CREATED IN SUB - SECTION DOES NOT CONTEMPLATE TO BRIN G SET OFF AMOUNT NOTIONALLY. FICTION IS CREATED ONLY FOR THE LIMITED PURPOSE AND THE SAME CANNOT BE EXTENDED BEYOND THE PURPOSE FOR WHICH IT IS CREATED. 6 . IN VIEW OF THE ABOVE FINDINGS OF THE HON BLE JURISDICTIONAL HIGH COURT, WE FIND NO INFIRMITY IN T HE ORDER PASSED BY THE LD. CIT(A) AND ACCORDINGLY, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 7 . THE SECOND COMMON GROUND RAISED IN THE APPEALS OF THE REVENUE IS RELATING TO CARBON CREDIT. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS OBSERVED T HAT THE SALE OF ELECTRICITY IS DERIVED FROM THE BUSINESS OF GENERATION AND DISTRIBUTION OF POWER AND ALLOWED DEDUCTION UNDER SECTION 80IA OF THE ACT IN RESPECT OF PROFIT FROM SALE OF ELECTRICITY AND DISALLOWED THE DEDUCTION UNDER SECTION 80IA OF THE ACT AM OUNTING TO .54,88,882/ - FOR THE ASSESSMENT YEAR 2009 - 10 AND .33,10,042/ - FOR THE ASSESSMENT YEAR 2010 - 11 IN RESPECT OF PROFIT FROM SALE OF CARBON CREDIT. WHEN THE ASSESSEE CARRIED I.T.A. NO S . 1814 /M/ 1 3 & I.T.A. NO. 117/ M/16 6 THE MATTER IN APPEAL BEFORE THE LD. CIT(A), BY FOLLOWING THE DECISION OF THE HYDERABA D BENCH OF THE TRIBUNAL IN THE CASE OF MY HOME POWER LTD. V. DCIT IN ITA NO. 1114/HYB/2009 DATED 02.11.2012, THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO ALLOW THE CLAIM OF THE ASSESSEE ON CARBON CREDIT AS CAPITAL RECEIPT IF NOT UNDER 80IA OF THE ACT. 8 . ON BEING AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL FOR BOTH THE ASSESSMENT YEARS AND THE LD. DR HAS RELIED ON THE DECISION OF THE COCHIN BENCH OF THE TRIBUNAL IN THE CASE OF APOLLO TYRES LTD. V. ACIT IN I.T.A. NO. 616/COCH/2011 D ATED 20 .12.2013 9 . ON THE OTHER HAND, T HE LD. COUNSEL FOR THE ASSESSEE HAS RELIED ON THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF MY HOME POWER LTD. V. DCIT 21 ITR (TRIB) 186 (HYDERABAD) AND ALSO THE DECISION OF THE HON BLE HIGH COURT OF ANDHRA PRADESH IN THE CASE OF CIT V. MY HOME POWER LTD. (2014) 365 ITR 82. 10 . WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE FIND THAT THE ISSUE OF CARBON CREDITS RECEIPTS HAS BEEN CONSIDE RED BY THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF MY HOME POWER LTD. V. DCIT (SUPRA) AND HELD THAT THESE RECEIPTS ARE CAPITAL RECEIPTS. WHEN THE MATTER CARRIED HAS BEEN CARRIED BY THE DEPARTMENT BEFORE THE HON BLE HIGH COURT OF ANDHRA PRADESH, THE I.T.A. NO S . 1814 /M/ 1 3 & I.T.A. NO. 117/ M/16 7 HON BLE HIGH COURT HAS CONFIRMED THE ORDER OF THE TRIBUNAL BY HOLDING AS UNDER: ITAT HAVE CONSIDERED THE AFORESAID SUBMISSION AND ITAT ARE UNABLE TO ACCEPT THE SAME, AS THE LEARNE D 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.' ITAT AGREE WITH THIS FACTUAL AN ALYSIS 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 CAPI TAL RECEIPT AND IT CANNOT BE BUSINESS RECEIPT OR INCOME. IN THE CIRCUMSTANCES, WE DO NOT FIND ANY ELEMENT OF LAW IN THIS APPEAL. 1 1 . IN VIEW OF THE ABOVE DECISION OF THE HON BLE HIGH COURT OF ANDHRA PRADESH, WE HOLD THAT THE CARBON CREDITS RECEIPTS ARE CAPITAL IN NATURE. SO FAR AS CASE LAW RELIED ON BY THE LD. DR IN THE CASE OF APOLLO TYRES LTD. V. ACIT (SUPRA) IS CONCERNED, ONCE THERE IS A JUDGMENT OF THE HON BLE HIGH COURT, IT IS BOUNDEN DUTY OF THE TRIBUNAL TO FOLLOW THE JUDGMENT OF THE HIGH COURT. IN VIEW OF THE ABOVE JUDICIAL PRECEDENTS, WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A). THUS, THE GROUND RAISED BY THE REVENUE FOR BOTH THE ASSESSMENT YEARS ARE DISMISSED. 12 . IN THE RESULT, BOTH THE APPEAL S FILED BY THE REVENUE ARE DISMISSE D. ORDER PRONOUNCED ON THE 18 TH MARCH , 20 16 AT CHENNAI. SD/ - SD/ - ( CHANDRA POOJARI ) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 18 . 0 3 .201 6 VM/ - I.T.A. NO S . 1814 /M/ 1 3 & I.T.A. NO. 117/ M/16 8 / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.