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TMI Blog2017 (9) TMI 650X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the following Grounds of appeal :- "1) Whether on the facts and in the circumstances of the case and in the law, the Ld. CIT(A) is justified in allowing the assessee's claim of deduction u/s. 80IA(4)(iv) in respect the windmills units after availing on all the units depreciation benefits u/s. 80IA for 100 percent deduction on eligible profit in the initial years and after the costs are depreciated ? 2) Whether on the facts and in the circumstances of the case and in the law, the Ld. CIT(A) is justified in allowing the assessee's claim of deduction u/s. 80IA that the receipt in the nature of carbon credit are capital in nature and not liable to be taxed although not derived from industrial undertakings, even though the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the profits eligible for deduction u/s 80IA(4)(iv) of the Act. Accordingly, the Assessing Officer worked out the profits of the six respective units as per his interpretation of Sec. 80IA(5) of the Act and arrived at a figure of loss in respect of four out of the six units and consequently, denied assessee's claim for deduction to the extent of Rs. 5,25,99,585/-. Notably, this disallowance has been reduced to Rs. 4,02,23,291/- by the Assessing Officer on account of rectification of a mistake. 5. Before the CIT(A), assessee assailed the working of the Assessing Officer and pointed out that having regard to the provisions of Sec. 80IA(5) of the Act, as understood by the Hon'ble Madras High Court in the case of Velayudhaswamy Spinning M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Notwithstanding anything contained in any other provision of this Act, the profits and gains of an eligible business to which the provisions of sub-section (1) apply shall, for the purposes of determining the quantum of deduction under that sub-section for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year, be computed as if such eligible business were the only source of income of the assessee during the previous year relevant to the initial assessment year and to every subsequent assessment year up to and including the assessment year for which the determination is to be made." In the above section, the interpretation to the expression 'initial assessment year' placed by the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he CBDT Circular is relevant :- "The matter has been examined by the Board. It is abundantly clear from sub-section (2) that an assessee who is eligible to claim deduction u/s 80IA has the option to choose the initial/ first year from which it may desire the claim of deduction for ten consecutive years, out of a slab of fifteen (or twenty) years, as prescribed under that sub-section. It is hereby clarified that once such initial assessment year has been opted for by the assessee, he shall be entitled to claim deduction u/s 80IA for ten consecutive years beginning from the year in respect of which he has exercised such option subject to the fulfillment of conditions prescribed in the section. Hence, the term 'initial assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore us is in direct conflict with the directions of the CBDT and, therefore, on this count also we find no merit in the ground raised by the Revenue. The same is hereby dismissed. 8. Insofar as Ground of appeal no. 2 is concerned, the same relates to the nature and taxability of income earned on account of transfer of Carbon Credit. At the assessment stage, the receipt of Rs. 2,01,68,049/- on account of transfer of Carbon Credit was considered as a revenue income and not eligible for the benefits of Sec. 80IA of the Act. Before the CIT(A), assessee, inter-alia, asserted that the said receipt was in the nature of a capital receipt not chargeable to tax as it was neither derived from business nor it was an off-shoot of the activity of busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Income Tax Rules, 1962 (in short 'the Rules') and computed the disallowance u/s 14A of the Act at Rs. 9,81,130/- and since assessee had already suo motu disallowed a sum of Rs. 6,32,214/- in the return of income, the difference of Rs. 3,48,916/- was added to the returned income. The disallowance worked out by the Assessing Officer was comprising of Rs. 3,74,411/- out of interest expenditure as per Rule 8D(2)(ii) of the Rules and Rs. 6,06,719/- out of administrative expenses as per Rule 8D(2)(iii) of the Rules. 11. Before the CIT(A), assessee canvassed that there was sufficient own interest-free funds to cover the investments in the exempt instruments and, therefore, the interest expenditure could not be subject to disallowance. In s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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