2014 (9) TMI 1228 - AT - Income Tax

Deduction u/s 80IA - initial assessment year - Whether earlier depreciation which has already been absorbed can be notionally carried forward and set off against the profits available for deduction under sec.80IA? - HELD THAT - This issue has been considered by the Hon ble Madras High Court in the case of Sri Velayudhasamy Spinning Mills P. Ltd. 2010 (3) TMI 860 - MADRAS HIGH COURT where the court has held that such notionally carried forward and set off past losses and depreciation is not permissible under the provisions of sec.80IA. In view of the decision of the Hon ble High Court we set aside the orders of the lower authorities on this issue and direct the Assessing Officer to compute the deduction available to the assessee under sec.80IA without any sort of notionally carried forward and set off past depreciation and losses Whether carbon credit receipts are revenue in nature? - HELD THAT This issue is also now covered by the decision of the Hon ble Andhra Pradesh High Court in the case of My Home Power Ltd. 2014 (6) TMI 82 - ANDHRA PRADESH HIGH COURT . As such this issue is also decided in favour of the assessee. Accordingly we direct the Assessing Officer to exclude the carbon credits from computing the total income of the assessee. Eligibility of deduction u/s 80IA - HELD THAT - This issue is covered by the decision of case of Sri Velayudhasamy Spinning Mills P. Ltd. 2010 (3) TMI 860 - MADRAS HIGH COURT in favour of the assessee and as such these appeals are liable to be dismissed.

Summary

Issues:
1. Notional carry forward of past losses and depreciation for deduction under sec.80IA.
2. Nature of carbon credit receipts as revenue.
3. Entitlement of deduction under sec.80IA for the assessee.

Analysis:
1. The first issue pertains to the notional carry forward of past losses and depreciation for deduction under sec.80IA. The appeals filed by the assessee argue against the Commissioner of Incometax(Appeals) holding that the initial assessment year is 2009-10, allowing for such notional carry forward. However, referencing the decision of the Hon'ble Madras High Court in a similar case, it was established that such notionally carried forward and set off past losses and depreciation is not permissible under sec.80IA. Consequently, the orders of the lower authorities were set aside, directing the Assessing Officer to compute the deduction without any notionally carried forward past depreciation and losses.

2. The second issue involves the nature of carbon credit receipts as revenue, contested by the assessee. The Commissioner of Income-tax(Appeals) had classified these receipts as revenue in nature, which was challenged. Citing the decision of the Hon'ble Andhra Pradesh High Court in a relevant case, it was determined that carbon credits should be excluded from computing the total income of the assessee. This decision favored the assessee, and the Assessing Officer was directed accordingly.

3. The final issue concerns the entitlement of deduction under sec.80IA for the assessee, which was the common ground raised by the Revenue in its appeals. The Revenue argued against the assessee being entitled to this deduction. However, referring to the decision of the Hon'ble Madras High Court in a specific case, it was established that the assessee is indeed entitled to the deduction under sec.80IA. Consequently, the appeals filed by the assessee were allowed, and those filed by the Revenue were dismissed.

In conclusion, the judgment favored the assessee on all counts, with the appeals filed by the assessee being allowed and those by the Revenue being dismissed. The decision was pronounced in an open court in Chennai on September 10, 2014.