2012 (11) TMI 1321 - AT - Income Tax

Summary

Issues involved:
The issues involved in the judgment are the assessment of income from the sale of Carbon Credits under the head Business or Other Sources, eligibility for deduction u/s 80IA(4)(iv)(a) of the IT Act, and the treatment of windmill income as a separate business unit for claiming deductions.

Assessment of income from sale of Carbon Credits:
The assessee contended that the income from the sale of Carbon Credits should be assessed under the head Business and be eligible for deduction u/s 80IA(4)(iv)(a) of the IT Act. However, the authorities disagreed and assessed it under Other Sources. The Tribunal held that income from Carbon Credits is akin to gains earned in the course of carrying on business and not a capital receipt. Therefore, the income from the sale of Carbon Credits is considered as business income and forms part of eligible profits for the purpose of claiming deductions under sec.80IA.

Treatment of windmill income:
The lower authorities disallowed the deduction claimed by the assessee under sec.80IA, stating that the windmill operation cannot be treated as an independent unit from the main business of manufacturing and selling kraft paper. The Tribunal disagreed and ruled that the windmill operation is a separate and independent business unit. It clarified that an assessee can engage in multiple businesses and still claim deductions under sec.80IA. Therefore, the Tribunal directed the Assessing Officer to grant the benefit of deduction under sec.80IA, treating the windmill as a distinct business entity.

Decision:
The Tribunal partly allowed the appeal filed by the assessee, upholding the treatment of income from Carbon Credits as business income and granting the benefit of deduction under sec.80IA for the windmill operation. The judgment was pronounced on November 29, 2012, in Chennai.