ACIT, Trichy V. M/s. iNTEX, Karur

ITA 147/CHNY/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86276 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 24-12-2014
• Assessment Year: 2010-2011
• Appeal Filed On: 16-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S DASGUPTA
• Assessee Lawyers: N QUADIR HOSEYN
• Keywords: Business income; Cost of acquisition; Capital receipt

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , B B ENCH, CHENNAI . , ' $ % , & ' BEFORE SHRI A.MOHAN ALANKAMONY ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./I.T.A.NO. 147/MDS/2014 ( / ASSESSMENT YEAR: 2010-11) ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-II, 4, WILLIAMS ROAD, TRICHY-620 001. VS M/S. INTEX, 16-D, COIMBATORE ROAD, KARUR-639 001. PAN: AAAFI1075M ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. S.DAS GUPTA, JCIT /RESPONDENT BY : MR. N.QUADIR HOSEYN, ADVOCATE /DATE OF HEARING : 24 TH DECEMBER, 2014 /DATE OF PRONOUNCEMENT : 30 TH JANUARY, 2015 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME TAX (APPEALS) TIRUCHIRAP ALLI DATED 23.10.2013 FOR THE ASSESSMENT YEAR 2010-11. 2. THE FIRST ISSUE IN THE GROUNDS OF APPEAL OF THE REVENUE IS THAT 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 T O BE SET 2 ITA NO.147/MDS/2014 OFF ONLY AGAINST PROFIT FROM WINDMILL BUSINESS OF T HE ASSESSMENT YEAR 2010-11. 3. DEPARTMENTAL REPRESENTATIVE PLACES RELIANCE ON T HE ORDER OF THE ASSESSING OFFICER. 4. AT THE TIME OF HEARING, COUNSEL FOR THE ASSESSEE SUBMITS THAT THIS ISSUE IS SQUARELY COVERED BY THE JUDGEMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF VELAYUD HASWAMY SPINNING MILLS LTD. VS. ACIT (340 ITR 477) WHICH T HE COMMISSIONER OF INCOME TAX (APPEALS) FOLLOWED. COUN SEL FOR THE ASSESSEE SUPPORTS THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). 5. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES AND THE DECISION RELIED ON. THIS ISSUE HAS BEEN CON SIDERED BY THE COMMISSIONER OF INCOME TAX (APPEALS) AND FOL LOWING THE DECISION OF THE JURISDICTIONAL HIGH COURT IN TH E CASE OF VELAYUDHASWAMY SPINNING MILLS P.LTD. (340 ITR 477) ALLOWED THE CLAIM OF THE ASSESSEE OBSERVING AS UNDER:- 3 ITA NO.147/MDS/2014 9. I HAVE GONE THROUGH THE SUBMISSIONS MADE BY TH E A.R. OF THE APPELLANT. THE ONLY ISSUE IS REGARDING ALLOWABILITY OF DEDUCTION CLAIMED BY THE APPELLANT U/S.80IA FOR THE YEAR UNDER CONSIDERATION. THE ASS ESSING OFFICER HAS DENIED DEDUCTION CLAIMED BY THE APPELLA NT BY REFERRING TO SECTION 80IA(5) AND HELD THAT THE PROF ITS 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 2 009-10 ONWARDS, SHOULD BE COMPUTED AS IF THE ELIGIBLE BUSI NESS WAS THE ONLY SOURCE OF INCOME OF THE APPELLANT. LO SSES FROM WINDMILL BUSINESS FOR ASSESSMENT YEAR 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 U/S.80IA. 10. HOWEVER, THE AR OF THE APPELLANT CLAIMS THAT SECTION 80IA ALLOWS THE ASSESSEE TO CLAIM DEDUCTION OF 100% OF PROFIT DERIVED FROM THE ELIGIBLE BUSINESS FOR 10 CONSECUTIVE ASSESSMENT YEARS WITHIN A PERIOD OF 15 TH ASSESSMENT YEAR BEGINNING WITH THE ASSESSMENT YEAR IN WHICH THE ASSESSEE BEGINS OPERATING AND MAINTAINING THE ELIGIBLE BUSINESS. A.R. OF THE APPELLANT IS ALSO OF THE OPINION THAT SECTION 80IA ALSO ALLOWS THE ASSESSEE TO CHOOSE THE INITIAL ASSESSMENT YEAR AT ITS OPTION F OR CLAIMING THE DEDUCTION. THUS, THE APPELLANT HAD CHO SEN ASSESSMENT YEAR 2009-10 AS ITS INITIAL ASSESSMENT Y EAR. THE AR OF THE APPELLANT HAS PLACED HIS RELIANCE IN THE RATIO IN THE CASE OF M/S. VELAYUTHASAMY SPINNING MI LLS P.LTD. VS. ACIT 231 CTR 368 WHEREIN THE DEDUCTION W AS ALLOWED U/S.80IA BY CLAIMING THAT LOSSES FROM INITI AL ASSESSMENT YEAR HERE IN THE CASE OF THE APPELLANT A Y 2009-10 IS TO BE CONSIDERED AND NOT THE LOSSES PRI OR 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 AR OF THE APPELLANT PRIOR TO THE AMENDMENT TO SECTION 80IA BY FINANCE ACT, 1999 THE INITIAL ASSESSMENT YEAR WAS DEFINED IN THE ACT. BUT AFTER THE AMENDMENT THERE I S NO DEFINITION FOR INITIAL ASSESSMENT YEAR IN THE ACT A ND THERE IS OPTION TO THE ASSESSEE IN SELECTION THE YEAR OF CLAIMING RELIEF U/S.80IA. IN VIEW OF THIS, THERE IS NO QUEST ION OF SETTING OFF NOTIONALLY CARRIED FORWARD UNABSORBED BUSINESS LOSS AGAINST THE PROFITS OF THE ELIGIBLE B USINESS AND THE APPELLANT IS ENTITLED TO CLAIM DEDUCTION U/ S.80IA ON CURRENT ASSESSMENT YEAR FOR CURRENT YEAR PROFIT. AFTER 4 ITA NO.147/MDS/2014 THE AMENDMENT TO SECTION 80IA WHICH GRANTED THE ASSESSEE AN OPTION TO SELECT INITIAL ASSESSMENT YEA R FOR CLAIMING SUCH DEDUCTION THE DECISION OF MADRAS HIGH COURT IN M/S. VELAYUTHASAMY SPINNING MILLS P.LTD. V S. ACIT 231 CTR 368 IS APPLICABLE IN THE CASE OF THE APPELLANT FOR THE YEAR UNDER CONSIDERATION AND I CO NCUR WITH THE CLAIM MADE BY THE AR OF THE APPELLANT FOR THE DEDUCTION CLAIMED U/S.80IA. THE ASSESSING OFFICER A LSO AGREED WITH THE CONTENTION OF THE APPELLANT FOR CLA IMING DEDUCTION U/S.80IA. HOWEVER, THE ASSESSING OFFICER DIFFERED WITH THE APPELLANT ON THE GROUND THAT THE DECISION IN THE CASE OF M/S. VELAYUTHASAMY SPINNING MILLS P. LTD. VS. ACIT 231 CTR 368 HAS BEEN CONTESTED BY THE DEPARTMENT BY FILING SLP IN HONBLE SUPREME COURT A ND DENIED THE CLAIM OF THE APPELLANT. SUBJECT TO FINAL VERDICT BY THE SUPREME COURT IN THE CASE OF M/S. VELAYUTHAS AMY SPINNING MILLS P.LTD. THE CONTENTION OF THE AR OF THE APPELLANT BASED ON THE JURISDICTIONAL HIGH COURT DE CISION IN THE CASE OF M/S. VELAYUTHASAMY SPINNING MILLS P. LTD. IS ACCEPTED AND ACCORDINGLY THE DEDUCTION CLAIMED B Y THE APPELLANT U/S.80IA(5) IS TO BE ALLOWED. 6. ON GOING THROUGH THE ABOVE ORDER OF THE COMMISSI ONER OF INCOME TAX (APPEALS) WE DO NOT FIND ANY GOOD REA SON 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 T HAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONSI DERING 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-OR DINATE BENCH OF THIS TRIBUNAL IN THE CASE OF M/S. PRAB HU SPINNING 5 ITA NO.147/MDS/2014 MILLS LTD. & M/S. SIVARAJ SPINNING MILLS LTD. IN IT A NO. 651 & 652/MDS/2013 DATED 31.07.2014. COUNSEL FURTHER SUBMITS THAT AN IDENTICAL ISSUE HAS BEEN DECIDED BY THE HON BLE ANDHRA PRADESH HIGH COURT IN THE CASE OF CIT VS. M Y HOME POWER LTD.(365 ITR 82) 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. (151 TTJ 616). COUNSEL PLACES RELIANCE ON THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS). 9. DEPARTMENTAL REPRESENTATIVE PLACES RELIANCE ON THE ORDER OF THE ASSESSING OFFICER. 10. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHO RITIES AND THE DECISIONS RELIED ON. THIS ISSUE HAS BEEN D ECIDED IN FAVOUR OF THE ASSESSEE BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN ITA NO.651 & 652/MDS/2013 DATED 31.07.2 014 FOLLOWING THE DECISION OF HONBLE ANDHRA PRADESH HI GH COURT IN THE CASE OF CIT VS. MY HOME POWER LTD.(SUPRA) O BSERVING AS UNDER:- 5. HEARD BOTH SIDES. ON GOING THROUGH THE ORDERS OF LOWER AUTHORITIES AND THE DECISION OF THE HONBLE A NDHRA PRADESH HIGH COURT IN THE CASE OF CIT VS. MY HOME POWER LTD.(SUPRA), WE FIND THAT THE ISSUE IN THESE TWO 6 ITA NO.147/MDS/2014 APPEALS IS SQUARELY COVERED BY THE ABOVE DECISION. THE REVENUE COULD NOT POINT OUT ANY CONTRARY DECISION T O THE ABOVE CITED DECISION. THE HONBLE ANDHRA PRADESH H IGH COURT IN THE CASE OF MY HOME POWER LTD. (SUPRA) WH ILE DECIDING THE ISSUE IN FAVOUR OF THE ASSESSEE HELD A S UNDER:- THIS APPEAL IS SOUGHT TO BE REFERRED AND ADMITTED AGAINST THE JUDGMENT AND ORDER OF THE LEAR NED TNBUNAL, DATED NOVEMBER 2, 2012 (MY HOME POWER LTD. V. DEPUTY ERR [2013] 21 ITR (TRIB) 186 (HYD)), ON THE FOLLOWI NG 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 CO NSIDERED AS CAPITAL RECEIPT AND NOT LIABLE FOR TAX UNDER ANY HE AD OF INCOME UNDER INCOME-TAX ACT, 1961 ? 2. WHETHER, IN THE FACTS AND IN THE CIRCUMSTAN CES OF THE CASE AND IN LAW, THE INCOME-TAX APPELLATE TRIBUNAL IS CORRECT IN HOLDING THAT THERE IS NO COST OF ACQUISITION OR COS T OF PRODUCTION TO GET ENTITLEMENT FOR THE CARBON CREDITS, WITHOUT APPRECIATING THAT GENERATION OF CARBON CREDITS IS INTRICATELY LI NKED 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 R ECEIVED ON ACCOUNT OF SALE OF CARBON CREDITS SHOULD BE TREATED TO BE BUSINESS INCOME AS THE SALE HAS BEEN MADE IN CONNEC TION WITH THE BUSINESS. WE HAVE CONSIDERED THE AFORESAID SUBMISSION AND WE ARE UNABLE TO ACCEPT THE SAME, AS THE LEARNED TRIBU NAL HAS FACTUALLY FOUND THAT 'CARBON CREDIT IS NOT AN OFFSH OOT OF BUSINESS BUT AN OFFSHOOT OF ENVIRONMENTAL CONCERNS. NO ASSET IS GENERATED IN THE COURSE OF BUSINESS BUT IT IS GE NERATED DUE TO ENVIRONMENTAL CONCERNS'. WE AGREE WITH THIS FACT UAL ANALYSIS AS THE ASSESSEE IS CARRYING ON THE BUSINES S OF POWER GENERATION. THE CARBON CREDIT IS NOT EVEN DIRECTLY LINKED WITH POWER GENERATION. ON THE SALE OF EXCESS CARBON CRED ITS THE INCOME WAS RECEIVED AND HENCE AS CORRECTLY HELD BY THE TRIBUNAL IT IS CAPITAL RECEIPT AND IT CANNOT BE BUS INESS RECEIPT OR INCOME. IN THE CIRCUMSTANCES, WE DO NOT FIND ANY ELEMENT OF LAW IN THIS APPEAL. 6. RESPECTFULLY FOLLOWING THE SAID DECISION, WE HOL D THAT AMOUNT RECEIVED ON SALE OF CARBON CREDIT IS CA PITAL IN NATURE AND THEREFORE WE REVERSE THE ORDERS OF COMMISSIONER OF INCOME TAX (APPEALS) AND THE ASSESSING OFFICER ON THIS ISSUE. 7 ITA NO.147/MDS/2014 11. RESPECTFULLY FOLLOWING THE ABOVE DECISION OF TH E CO- ORDINATE BENCH OF THIS TRIBUNAL CITED ABOVE AND TH E JUDGEMENT OF HONBLE ANDHRA PRADESH HIGH COURT IN T HE 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 DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON FRIDAY, THE 30 TH DAY OF JANUARY, 2015 AT CHENNAI. SD/- SD/- ( . ) ( ( *+ ) ( A.MOHAN ALANKAMONY ) ( CHALLA NAGENDRA PRASAD ) - / ACCOUNTANT MEMBER * - / JUDICIAL MEMBER * /CHENNAI, / /DATED 30 TH JANUARY, 2015 SOMU 12 32 /COPY TO: 1. APPELLANT 2. RESPONDENT 3. 4 () /CIT(A) 4. 4 /CIT 5. 2 7 /DR 6. /GF .