India Dyeing Mills Private Limited, Tiruppur V. DCIT, Tiruppur

ITA 1979/CHNY/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96672 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2015
• Appeal Filed By: Assessee
• Bench Allotted: D
• Next Hearing Date: 14-12-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 21-07-2014
• Court: TRIBUNAL
• Department Lawyers: DR B NISCHALJCIT
• Assessee Lawyers: N VIJAYAKUMAR
• Keywords: Depreciation; Capital receipt

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI , ! ' ! # . $ , % &' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ ITA NO. 1979/MDS/2014 / ASSESSMENT YEAR : 2010-11 M/S. INDIA DYEING MILLS PVT. LTD., NO. 10-12, KUMAR NAGAR SOUTH, 2 ND STREET, TIRUPPUR -641603. PAN AAACI4602B (/ APPELLANT) V. THE DEPUTY COMMISSIONER OF INCOME-TAX, COMPANY CIRCLE, TIRUPPUR. (/ RESPONDENT) AND ./ ITA NO. 2096/MDS/2014 / ASSESSMENT YEAR : 2010-11 THE DEPUTY COMMISSIONER OF INCOME-TAX, TIRUPPUR. (/ APPELLANT) V. M/S. INDIA DYEING MILLS PVT. LTD. TIRUPPUR -641603. (/ RESPONDENT) ASSESSEE BY : SHRI N. VIJAYAKUMAR, CA DEPARTM ENT BY : DR. B. NISCHAL, JCIT # $ % &'( / DATE OF HEARING : 14.12.2015 )* % &'( / DATE OF PRONOUNCEMENT: 31.12.2015 - - ITA 1979 & 2096/14 2 ( / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THESE CROSS APPEALS BY THE ASSESSEE AND BY THE REVENUE ARE DIRECTED AGAINST THE ORDER OF THE COMMI SSIONER OF INCOME-TAX(APPEALS) DATED 30.5.2014 FOR THE ASSESS MENT YEAR 2010-11. 2. THE ONLY GROUND IN ASSESSEES APPEAL IS WITH REG ARD TO TREATMENT OF CARBON CREDIT RECEIPTS. 3. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. SIMILAR ISSUE WAS CONSIDERED BY THE TRI BUNAL IN THE CASE OF M/S. ARUN TEXTILES PVT. LTD.IN ITA NO.2174/ MDS/2014 DATED 19.6.2015, WHEREIN IT WAS HELD AS UNDER: 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN OUR OPINION, CARBON CREDIT IS IN THE NATURE OF AN ENTITLEMENT RECEIVED TO IMPROVE WORL D ATMOSPHERE AND ENVIRONMENT REDUCING CARBON, HEAT AN D GAS EMISSIONS. THE ENTITLEMENT EARNED FOR CARBON CREDITS CAN, AT BEST, BE REGARDED AS A CAPITAL RECE IPT AND CANNOT BE TAXED AS A REVENUE RECEIPT. IT IS NOT GE NERATED OR CREATED DUE TO CARRYING ON BUSINESS BUT IT IS AC CRUED DUE TO WORLD CONCERN. IT HAS BEEN MADE AVAILABLE ASSUMING CHARACTER OF TRANSFERABLE RIGHT OR ENTITLE MENT ONLY DUE TO WORLD CONCERN. THE SOURCE OF CARBON CR EDIT IS WORLD CONCERN AND ENVIRONMENT. DUE TO THAT THE ASSESSEE GETS A PRIVILEGE IN THE NATURE OF TRANSFER OF CARBON CREDITS. THUS, THE AMOUNT RECEIVED FOR CARB ON - - ITA 1979 & 2096/14 3 CREDITS HAS NO ELEMENT OF PROFIT OR GAIN AND IT CAN NOT BE SUBJECTED TO TAX IN ANY MANNER UNDER ANY HEAD OF INCOME. IT IS NOT LIABLE FOR TAX FOR THE ASSESSMEN T YEAR UNDER CONSIDERATION 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 ACCOUNT OF SAVING OF ENERGY CONSUMPTION AND NOT BECAUSE OF ITS BUSINESS. FURTHER, IN OUR OPINION, CARBON CREDITS CANNOT BE CONSIDERED AS A BI-PRODUCT. IT IS A CREDIT GIVEN T O THE ASSESSEE UNDER THE KYOTO PROTOCOL AND BECAUSE OF INTERNATIONAL UNDERSTANDING. THUS, THE ASSESSEES W HO HAVE SURPLUS CARBON CREDITS CAN SELL THEM TO OTHER ASSESSEES TO HAVE CAPPED EMISSION COMMITMENT UNDER THE KYOTO CARBON CREDITS CAN SELL THEM TO OTHER ASSESSEES TO HAVE CAPPED EMISSION COMMITMENT UNDER THE KYOTO PROTOCOL. TRANSFERABLE CARBON CREDIT IS NOT A RESULT OR INCIDENCE OF ONES BUSINESS AND IT IS A C REDIT FOR REDUCING EMISSIONS. THE PERSONS HAVING CARBON CRED ITS GET BENEFIT BY SELLING THE SAME TO A PERSON WHO NEE DS CARBON CREDITS TO OVERCOME ONES NEGATIVE POINT CAR BON CREDIT. THE AMOUNT RECEIVED 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 ACCRET ION OF CAPITAL AND HENCE INCOME EARNED ON SALE OF THESE CR EDITS IS CAPITAL RECEIPT. THE SAME VIEW IS SUPPORTED BY THE FOLLOWING JUDICIAL PRECEDENTS, WHICH ARE RELIED ON BY THE LD. AR: 1. CIT V. MY HOME POWER LTD. (2014)[365 ITR 82](AP) 2. MY HOME POWER LTD. V. DCIT (2013)[21 ITR(TRIB) 1 86] (HYD) 3. AMBIKA COTTON MILLS LTD. V. DCIT (2013) [27 ITR (TRIB) 44] (CHENNAI) 4. DCIT V. SALONA COTSPIN LTD. IN ITA NO.426/MDS/20 13 FOR AY 2009-10 5. SRI VELAYUDHASWAMY SPINNING MILLS (P) LTD. V. DC IT IN ITA NO.582/MDS/2013 FOR AY 2009-10 - - ITA 1979 & 2096/14 4 6. SRI MATHA SPINNING MILLS PVT. LTD. V. DCIT IN IT A NO.617/MDS/ 2013 FOR AY 2009-10 7. SUDHAN SPINNING MILLS PVT. LTD. V. JCIT IN ITA NO. 616/MDS/2013 FOR AY 2009-10 8. PRABHU SPINNING MILLS (P) LTD. & ANR. V. DCIT I N ITA NOS. 651 & 652?MDS/2013 FOR AY 2009-10 9. VEDHA SPINNING MILLS (P) LTD. V. DCIT IN ITA NO .630/MDS/ 2013 FOR AY 2009-10 10.ADISANKARA SPINNING MILLS (P) LTD. V. DCIT IN ITA NO. 631/MDS/2013 FOR AY 2009-10 11.SRI SHANMUGAVEL MILLS (P) LTD. V. DCIT IN ITA NO. 619/MDS/2013 FOR AY 2009-10 12.ARUN TEXTILES PVT. LTD. V. ACIT IN ITA NO.268/ MDS/2014 FOR AY 2009-10 13.INDIA DYEING MILLS PVT. LTD. V. ACIT IN ITA NO .498/MDS/2014 FOR AY 2009-10 14.DCIT V. SREE RAYALASEEMA GREEN ENERGY LTD. (20 14) [36 ITR (TRIB) 627] (HYD) 15. EASTMAN SPINNING MILLS (P) LTD. V. DCIT IN IT A NO. 1428/ MDS/2014 FOR AY 2009-10 5. IN VIEW OF THE ABOVE, WE ARE INCLINED TO HOLD TH AT THE RECEIPT FROM SALE OF CARBON CREDITS HAS TO BE CONSI DERED AS CAPITAL RECEIPT AND ACCORDINGLY, IT IS NOT TAXABLE. THUS, THERE IS NO QUESTION OF CONSIDERING THE SAME FOR DEDUCTIO N U/S.80IA OF THE ACT. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. IN VIEW OF THE ABOVE, WE ALLOW THE GROUND OF APPEAL TAKEN BY THE ASSESSEE. - - ITA 1979 & 2096/14 5 4. NOW, COMING TO THE REVENUES APPEAL, THE ISSUE R AISED IS WITH REGARD TO DEDUCTION U/S.80IA OF THE ACT BY OBS ERVING THAT THE ASSESSMENT YEAR 2005-06 IS THE FIRST INITIAL ASSESS MENT YEAR IN WHICH THE ASSESSEE CLAIMED DEDUCTION AND, THEREFORE , THE DEPRECIATION OF EARLIER YEARS, WHICH HAVE BEEN ABSO RBED, CANNOT BE NOTIONALLY CARRIED FORWARD AND CONSIDERED IN COM PUTING THE QUANTUM OF DEDUCTION U/S.80IA. 5. AFTER HEARING BOTH THE PARTIES, IN OUR OPINION, THIS ISSUE IS COVERED BY THIS TRIBUNAL IN FAVOUR OF THE ASSESSEE IN THE CASE OF M/S. AMBIKA COTTON MILLS LTD. & OTHERS IN ITA NOS.1 958 & 1959/MDS/2015 ETC. DATED 8.12.2015, WHEREIN THE TRI BUNAL OBSERVED AS UNDER: 2. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD. THE ONLY ISSUE ARISES FOR ON SIDERATION IS WITH REGARD TO DEDUCTION CLAIMED BY THE ASSESSEE UNDER SECTION 80-IA OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) IN RESPECT OF WINDMILLS. THE ASSESSING OFFI CER REJECTED THE CLAIM OF THE ASSESSEES ON THE GROUND T HAT THE DEPARTMENT HAS FILED A SPECIAL LEAVE PETITION AGAIN ST THE JUDGMENT OF MADRAS HIGH COURT IN VELAYUDHASWAMY SPINNING MILLS (P) LTD VS. ACIT 231 CTR 368. HOWEV ER, THE COMMISSIONER OF INCOME TAX (APPEALS) BY FOLLOW ING THE JUDGMENT OF MADRAS HIGH COURT ALLOWED THE CLAIM OF THE ASSESSEES. 3. NOW THE ONLY CONTENTION OF THE DEPARTMENT BEFORE THIS TRIBUNAL IS THAT THE REVENUE HAS NOT ACCEPTED THE JUDGMENT OF MADRAS HIGH COURT AND AN APPEAL HAS - - ITA 1979 & 2096/14 6 ALREADY BEEN FILED ALONG WITH SPECIAL LEAVE PETITIO N AND THE SAME IS PENDING BEFORE THE APEX COURT. THIS TR IBUNAL IS OF THE CONSIDERED OPINION THAT MERE PENDENCY OF SPECIAL LEAVE PETITION BEFORE THE APEX COURT CANNOT BE A REASON TO TAKE A DIFFERENT VIEW. THE JUDGMENT OF M ADRAS HIGH COURT IS BINDING ON ALL THE AUTHORITIES IN THE STATE OF TAMIL NADU AND UNION TERRITORY OF PONDICHERRY. THEREFORE, THE COMMISSIONER OF INCOME TAX (APPEALS) HAS RIGHTLY ALLOWED THE CLAIM OF THE ASSESSEES BY FOLLOWING THE BINDING JUDGMENT OF MADRAS HIGH COURT IN VELAYUDHASWAMY SPINNING MILLS (P) LTD (SUPRA). THEREFORE, THIS TRIBUNAL DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). IN VIEW OF THE ABOVE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(APPEALS) AND THE SAME IS CONFIRMED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED AND THE APPEAL OF THE DEPARTMENT IS DISMISSED. ORDER PRONOUNCED ON THURSDAY, THE 31 ST OF DEC., 2015 AT CHENNAI. SD/- SD/- ( # + # , . - ./0 ) ( 1 2 3 4' ) ( DUVVURU RL REDDY ) (CHANDRA POOJARI) > ?@ /JUDICIAL MEMBER .( ?@/ACCOUNTANT MEMBER 1.> $ /CHENNAI, E? /DATED, THE 31 ST DEC., 2015. MPO* ?.F % &GH I.H& /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. # J& () /CIT(A) 4. # J& /CIT 5. HKL & M /DR 6. L0 N$ /GF.