2016 (8) TMI 1523 - HC - Income Tax

Carbon Credit Sales Deemed Capital Receipts, Not Taxable Income Under IT Act, Favoring Assessee Over Revenue.

The HC upheld the ITAT's decision, confirming that receipts from the sale of carbon credits are capital receipts and thus not taxable under the Income Tax ... Deduction u/s 80 IA - Unabsorbed depreciation of the earlier years before the first year or claim, which has already been absorbed, should not be notionally carried forward and taken into consideration for computation of deduction u/s.80 IA - HELD THAT:- Similar to the facts and circumstances of the case, while adverting to the substantial questions of law raised and after considering the judgment of the Hon'ble Apex Court in Liberty India vs. CIT [2009 (8) TMI 63 - SUPREME COURT] and the judgment of the Rajasthan High Court in CIT vs. Mewar Oil & General Mills Ltd. [2003 (10) TMI 12 - RAJASTHAN HIGH COURT], a Hon'ble Division Bench of this Court in Velayudhaswamy Spinning Mills Pvt. Ltd.'s case [2010 (3) TMI 860 - MADRAS HIGH COURT] held that once the losses and other deductions are set off against the income of the assessee in the previous year, it should not be re-opened again, for the purpose of computation of current year income, under Sections 80-I and 80-IA of the Act. Questions of law raised are answered against the Revenue and in favour of the assessee and the instant appeal deserves to be dismissed. Issues:Challenge to order passed by Income Tax Appellate Tribunal regarding deduction under section 80 IA of the Income Tax Act for Assessment Year 2011-12.Analysis:The Tax Appeal challenged the Tribunal's dismissal of the Revenue's appeal against the Commissioner of Income-Tax (Appeals) order for the Assessment Year 2011-12. The primary issues raised included the entitlement to deduction under section 80 IA of the Income Tax Act and the treatment of unabsorbed depreciation for computation of deduction. The Court referred to previous decisions and highlighted the consistency in following the decision in M/s.Velayudhaswamy Spinning Mills case. The Tribunal's decision was based on the interpretation that carbon credits are capital receipts and not taxable under various sections of the Income Tax Act.Decision:The Court upheld the Tribunal's decision, emphasizing that the receipt from the sale of carbon credits should be considered a capital receipt and therefore not taxable. The judgment favored the assessee, concluding that there were no valid grounds to reverse the orders. The Court dismissed the Tax Case Appeal, stating that the questions of law were answered against the Revenue and in favor of the assessee.