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2013 (8) TMI 935 - AT - Income TaxRevenue outgo incurred on Compact Drafting System allowed as revenue expenditure. Expenditure of carding machines gave enduring benefit to the assessee and was a capital outgo. Claim of the assessee under Section 80-IA - Held that - Initial assessment year could only be considered as the first year in which assessee had claimed deduction under Section 80-IA of the Act, and by virtue of the decision of Hon ble jurisdictional High Court in the case of Velayudhaswamy Spinning Mills v. ACIT (2010 (3) TMI 860 - Madras High Court), for the purpose of claiming deduction under Section 80-IA, each unit has to be considered independently. Lower authorities fell in error in considering the Carbon Credit as revenue receipts.
Issues:
1. Disallowance of expenditure on Compact Drafting System as revenue outgo 2. Allowance of claim under Section 80-IA of Income-tax Act, 1961 3. Disallowance of claim of Carbon Credit as capital receipt 4. Disallowance of claim on expenditure incurred for carding machines Issue 1: Disallowance of expenditure on Compact Drafting System as revenue outgo The Revenue raised concerns about the directions of the CIT(Appeals) allowing the claim of expenditure on the Compact Drafting System as a revenue outgo. The Revenue argued that the replacement of machinery by the assessee should be considered a capital outgo, following the decision of the Hon'ble Apex Court in a specific case. However, the Tribunal upheld the decision of the CIT(Appeals) based on a previous decision of a co-ordinate Bench of the Tribunal, which allowed the claim of the assessee related to the Compact Drafting System as revenue expenditure. The Tribunal found no reason to interfere with the order of the CIT(Appeals) in this regard. Issue 2: Allowance of claim under Section 80-IA of Income-tax Act, 1961 The Revenue also contested the allowance of the claim under Section 80-IA of the Income-tax Act, 1961, by the CIT(Appeals. The Tribunal noted that the CIT(Appeals) correctly followed the decision of the Hon'ble jurisdictional High Court in a specific case, which determined the initial assessment year for claiming deduction under Section 80-IA. The Tribunal upheld the decision of the CIT(Appeals) in this matter as well. Issue 3: Disallowance of claim of Carbon Credit as capital receipt The assessee challenged the disallowance of its claim of Carbon Credit as a capital receipt, which was considered a revenue receipt by the lower authorities. The Tribunal referred to a previous decision of the Tribunal and held that Carbon Credits are capital receipts and not taxable as revenue. The Tribunal disagreed with the lower authorities' treatment of Carbon Credits as revenue receipts and canceled the addition made in this regard. Issue 4: Disallowance of claim on expenditure incurred for carding machines The assessee's claim on expenditure incurred for carding machines was disallowed by the CIT(Appeals) and was challenged by the assessee. However, the Tribunal upheld the decision of the CIT(Appeals) in this matter, citing the decision of the Hon'ble Apex Court regarding the enduring benefit of such expenditure. The Tribunal found no reason to interfere with the order of the CIT(Appeals) on this issue. In conclusion, the appeal of the Revenue was dismissed, while that of the assessee was partly allowed. The Tribunal pronounced the order on the specified date in Chennai.
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