2015 (5) TMI 812 - AT - Income Tax

Disallowance of deduction under section 80IA - sale of carbon credit, TUF interest subsidy receipt and generation loss compensation receipt - Held that - As relying on case of C.N.V Textiles Pvt. Ltd., Vs. DCIT 2015 (5) TMI 808 - ITAT CHENNAI we hold that income from carbon credit is capital receipt not exigible to tax and such income is not eligible for deduction under section 80IA of the Act. As relying on case of C.N.V Textiles Pvt. Ltd., Vs. DCIT supra we hold that TUF is a capital receipt and not a revenue receipt and not entitled for deduction under section 80IA on such receipt. Respectfully following the said decisions of of C.N.V Textiles Pvt. Ltd supra & Magnum Power Generation Ltd. vs DCIT 2010 (5) TMI 605 - ITAT DELHI we hold that generation loss compensation is eligible for deduction under section 80IA of the Act. Entitlement to claim deduction under Section 80-IA - Held that - The business undertaking of the assessee is wind mill power generation/hosiery goods, etc., and it has claimed the benefit of deduction under Section 80IA of the Income Tax Act for the assessment year in question and for the subsequent years as well. Having exercised its option and its losses have been set off already against other income of the business enterprise, the assessee in this appeal falls within the parameters of Section 80IA of the Income Tax Act. There appears to be no distinction on facts in relation to the decision reported in Velayudhaswamy Spinning Mills case (2010 (3) TMI 860 - Madras High Court). - Decided in favour of the assessee

Issues Involved:
1. Disallowance of deduction under section 80IA on sale of carbon credit, TUF interest subsidy receipt, and generation loss compensation receipt.
2. Entitlement of the assessee for deduction under section 80IA of the Act.
3. Delay in filing the cross objection by the Revenue.

Issue-wise Detailed Analysis:

1. Disallowance of Deduction under Section 80IA:
- Sale of Carbon Credit: The Commissioner of Income Tax (Appeals) confirmed the disallowance of deduction under section 80IA on the sale of carbon credit. The assessee argued that it is a capital receipt, not liable to tax, as held by the Hon'ble Andhra Pradesh High Court in the case of CIT Vs. My Home Power Ltd. The Tribunal, following the co-ordinate Bench decision in C.N.V Textiles Pvt. Ltd. Vs. DCIT, held that income from carbon credit is a capital receipt not exigible to tax and not eligible for deduction under section 80IA.
- TUF Interest Subsidy Receipt: The Tribunal, referencing the decision in C.N.V Textiles Pvt. Ltd. Vs. DCIT and the Hon'ble Punjab & Haryana High Court in CIT Vs. Shamlal Bansal, concluded that TUF interest subsidy is a capital receipt and not liable to be treated as income, thus not entitled for deduction under section 80IA.
- Generation Loss Compensation Receipt: The Tribunal, relying on the decision in C.N.V Textiles Pvt. Ltd. Vs. DCIT and the Delhi Bench in Magnum Power Generation Ltd. Vs. DCIT, held that generation loss compensation is eligible for deduction under section 80IA.

2. Entitlement of the Assessee for Deduction under Section 80IA:
- The Revenue contested the Commissioner of Income Tax (Appeals)'s decision allowing the assessee's deduction under section 80IA. The Assessing Officer restricted the deduction based on section 80IA(5), considering the eligible undertaking as the only source of income. The Commissioner of Income Tax (Appeals), following the jurisdictional High Court decision in CIT Vs. Velayudhaswamy Spinning Mills P. Ltd., allowed the claim. The Tribunal upheld this decision, emphasizing that the initial assessment year means the year in which the assessee begins to claim the deduction, and losses of earlier years set off against other income should not be notionally brought forward.

3. Delay in Filing the Cross Objection by the Revenue:
- The cross objection filed by the Revenue was delayed by 119 days without a condonation petition. The Tribunal dismissed the cross objection in limine due to the absence of any argument or petition for condonation of delay.

Conclusion:
- The appeal of the assessee was partly allowed, granting relief on the capital receipt nature of carbon credit and TUF interest subsidy but denying the section 80IA deduction on these receipts.
- The appeal and cross objection of the Revenue were dismissed, with the Tribunal affirming the assessee's entitlement to section 80IA deduction based on the jurisdictional High Court's precedent and dismissing the cross objection due to procedural delay.

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