M/s. Sripathi Paper & Boards (P) Ltd., Coimbatore V. DCIT, Coimbatore

ITA 1452/CHNY/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64552 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 27-11-2012
• Assessment Year: 2009-2010
• Appeal Filed On: 09-07-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GURU BASHYAM IRS
• Assessee Lawyers: M NARAYANAN
• Keywords: Business income; Capital receipt

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER I.T.A.NO. 1452/MDS/2012 ASSESSMENT YEAR : 2009-10 M/S. SRIPATHI PAPER & BOARDS (P) LTD., 1680/31, RAMANIS REGENCY TRICHY ROAD, RAMANATHAPURAM COIMBATORE 641 045. PAN AAGCS7439C VS. THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-I(2), COIMBATORE. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI M. NARAYANAN RESPONDENT BY : SHRI GURU BASHYAM, IRS, J CIT DATE OF HEARING : 27 TH NOVEMBER, 2012 DATE OF PRONOUNCEMENT : 29 TH NOVEMBER, 2012 O R D E R PER DR. O.K. NARAYANAN, VICE-PRESIDENT THIS APPEAL IS FILED BY THE ASSESSEE. THE RELEVAN T ASSESSMENT YEAR IS 2009-10. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS)-I, AT ITA 1452/12 :- 2 -: COIMBATORE DATED 16.4.2012 AND ARISES OUT OF THE AS SESSMENT COMPLETED UNDER SEC.143(3) OF THE INCOME-TAX ACT, 1 961. 2. THE GROUNDS RAISED IN ORIGINAL BY THE ASSESSEE I N THE PRESENT APPEAL READ AS BELOW : 2. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) ERRED IN AGREEING WITH THE ASSESSING OFFICER THAT THE INCOME FROM SALE OF CARBON CREDITS IS TO BE ASSESSED UNDER OTHER SOURCES INSTEAD UNDER TH E HEAD BUSINESS. 3. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) ERRED IN AGREEING WITH THE ASSESSING OFFICER THAT T HE INCOME FROM SALE OF CARBON CREDITS IS NOT ELIGIBLE FOR DEDUCTION U/S. 80IA(4)(IV)(A) OF THE IT ACT. 4. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) AFTER AGREEING IN PARA 6 THAT THE INCOME FROM SALE OF CARBON CREDITS IS LIKE DUTY DRAWBACK, WHICH FALLS U NDER THE HEAD BUSINESS, ERRED IN HOLDING THAT IT IS TO B E ASSESSED UNDER OTHER SOURCES. 5. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) SHOULD HAVE HELD THAT THE ASSESSEE IS ELIGIBLE FOR THE ITA 1452/12 :- 3 -: DEDUCTION OF ` 20,25,207 BEING THE INCOME FROM SALE OF CARBON CREDIT IS ELIGIBLE FOR DEDUCTION U/S 80IA(4)(IV)(A) OF IT ACT. 6. FOR THESE AND OTHER GROUNDS THAT MAY BE TAKEN, IT IS RESPECTFULLY SUBMITTED AND PRAYED THAT THE ORDERS O F THE AUTHORITIES BELOW MAY BE REVERSED AND DEDUCTION U/S 80IA(4)(IV)(A) MAY BE ORDERED TO BE ALLOWED IN THE INTERESTS OF JUSTICE. 3. THE ASSESSEE HAS ALSO FILED ADDITIONAL GROUNDS B EFORE US WHICH READ AS BELOW : 1. THE LEARNED INCOME TAX AUTHORITIES BELOW SHOUL D NOT HAVE TAXED THE SALE VALUE OF CARBON CREDITS IN VIEW OF THE LEGAL POSITION THAT IT IS A CAPITAL RECEIPT. 2. FOR THESE AND OTHER GROUNDS THAT MAY BE TAKEN, IT IS RESPECTFULLY SUBMITTED AND PRAYED THAT THE ORDERS O F THE AUTHORITIES BELOW MAY BE REVERSED AND THE AMOUNT RECEIVED ON SALE OF CARBON CREDIT MAY BE DELETED AS CAPITAL RECEIPT IN THE ALTERNATIVE TO THE ORIGINAL GROUNDS TAKEN. ITA 1452/12 :- 4 -: 4. IN SUPPORT OF THE ADDITIONAL GROUND, THE LEARNED COUNSEL APPEARING FOR THE ASSESSEE HAS PLACED RELIANCE ON THE DECISION OF THE HYDERABAD BENCH IN THE CASE OF MY HOME POWER LTD. V. DCIT (27 TAXMANN 27) WHEREIN THE TRIBUNAL HAS HELD THAT CARBON CREDITS AVAILABLE TO THE ASSESSEE ARE IN THE NATURE OF CAPITAL RECEIPT AND THEREFORE, NOT AT ALL TAXABLE AS INCOME . WE DO NOT ENDORSE THE ABOVE VIEW. INCOME ARISING AS A RESULT OF CARBON CREDITS AWARDED TO AN ASSESSEE IS GAINS EARNED IN T HE COURSE OF CARRYING ON BUSINESS. THEREFORE, WE ARE INCLINED T O REJECT THE ADDITIONAL GROUND RAISED BY THE ASSESSEE. 5. NOW COMING TO THE REGULAR GROUNDS, THE ASSESSEE HAS A VERY STRONG CASE. THE ASSESSEE HAS ERECTED A WIND MILL TO GENERATE POWER AND CLAIMED DEDUCTION UNDER SEC.80IA . THE CLAIM WAS DISALLOWED BY THE LOWER AUTHORITIES ON TH E GROUND THAT THE MAIN BUSINESS OF THE ASSESSEE IS THAT OF MANUFA CTURE AND SALE OF KRAFT PAPER AND WINDMILL CANNOT BE TREATED AS AN INDEPENDENT UNIT AND AS SUCH, THE ASSESSEE IS NOT E NTITLED FOR THE BENEFIT OF SEC.80IA. WE FIND THAT THE RUNNING OF A WINDMILL IS A SEPARATE AND INDEPENDENT BUSINESS. THEREFORE, THE ASSESSEE IS ENTITLED FOR THE BENEFIT AVAILABLE UNDER SEC.80IA. THE INCOME OF ITA 1452/12 :- 5 -: THE WINDMILL UNIT NEED NOT BE MIXED UP WITH THE OTH ER BUSINESSES CARRIED ON BY THE ASSESSEE. IT IS WITHIN LAW THAT AN ASSESSEE MAY CARRY MULTIPLE BUSINESSES AND STILL COULD CLAIM DED UCTION UNDER SEC.80IA. THEREFORE, WE DIRECT THE ASSESSING OFFIC ER TO GRANT THE ASSESSEE THE BENEFIT OF DEDUCTION UNDER SEC.80IA TR EATING THE WINDMILL AS A SEPARATE AND INDEPENDENT BUSINESS UNI T. 6. ONCE THE ABOVE STAND IS UPHELD, THE NEXT QUESTIO N IS WHETHER THE INCOME FROM CARBON CREDIT IS TO BE ASSE SSED UNDER OTHER SOURCES OR UNDER THE HEAD BUSINESS. THERE IS NO BASIS TO TREAT SUCH INCOME AS INCOME FROM OTHER SOURCES. IT IS NOT AN INCOME FROM OTHER SOURCE. ON THE OTHER HAND, IT IS THE INCOME COMING FROM THE BUSINESS OF RUNNING THE WINDMILL. THE INCOME FROM SALE OF CARBON CREDITS IS EARNED BY THE ASSESS EE IN THE COURSE OF CARRYING ON THE BUSINESS OF RUNNING THE W INDMILL. THEREFORE, THIS IS BUSINESS INCOME. ACCORDINGLY TH E INCOME FROM SALE OF CARBON CREDITS WOULD FORM PART OF ELIGIBLE PROFITS IN THE HANDS OF THE ASSESSEE FOR THE PURPOSE OF WORKING OU T THE DEDUCTION AVAILABLE UNDER SEC.80IA. 6. IN RESULT, THIS APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ITA 1452/12 :- 6 -: ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF H EARING ON THURSDAY, THE 29 TH OF NOVEMBER, 2012 AT CHENNAI. SD/- SD/- (CHALLA NAGENDRA PRASAD) (D R.O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED THE 29 TH NOVEMBER , 2012 MPO* COPY TO : APPELLANT/RESPONDENT/CIT/CIT(A)/DR