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2014 (7) TMI 1295 - AT - Income TaxCharacter of the expenditure - Revenue or capital expenditure - payment for executing export commitment spanning over a period of 10 years - assessee company instead of creating the facilities in its own premises, selected M/s. Cibi International to shoulder the responsibility of the production of knitted garments utilizing their facilities and to improve the facilities - HELD THAT:- A clear nexus is apparent between the payment of ₹ 650 lakhs to M/s. Cibi International and the business interests of the assessee company. Therefore, it is clear that the assessee company has made the payment to M/s. Cibi International on the basis of the business agreement for the purpose of carrying on of its business more effectively and more economically. In such circumstances, it is not possible to hold that the assessee has acquired an enduring benefit by creating new capital asset by making payment to M/s. Cibi International. In fact, the assessee has made the payment to M/s. Cibi International for the purpose of executing its export commitment spanning over a period of 10 years. The expenditure is, therefore, incurred for running the business and not for creating the facilities to run the business. Therefore, we find that the payment made by the assessee company is an expenditure allowable under sec.37 of the Act. - Decided in favour of assessee. Deduction under sec.80IA - exclusion of receipts from trading of carbon credit and insurance claim while computing the deduction - HELD THAT:- We are bound to follow the judgment of CIT vs. M/s. My Home Power Ltd. [2014 (6) TMI 82 - ANDHRA PRADESH HIGH COURT] to hold that the receipts in the hands of the assessee generated out of sale of excess carbon credit are in the nature of capital receipts and, therefore, not includible in the computation of taxable income. Once the entire receipts are excluded from the computation of income itself, there is no question of any separate argument of sec.80IA deduction. As far as carbon credit receipt is concerned, the issue is decided in favour of the assessee. Therefore, the Assessing Officer is directed to exclude the carbon credit receipts from the computation of assessee’s income. Quantum of deduction u/s 80IA - Initial assessment year in which the assessee claimed deduction under sec.80IA - Whether depreciation of earlier years (which already have been absorbed) cannot be notionally carried forward and considered in computing the quantum of deduction under sec.80IA? - HELD TJAT:- This issue is already covered by the judgment of CIT v. Velayuthasamy Spinning Mills [2010 (3) TMI 860 - MADRAS HIGH COURT]. As the Revenue has filed an SLP before the Hon’ble Supreme Court, the Revenue is free to keep such issues alive and file appeals before the appropriate court. But as on today, the issue is covered by the decision of the Hon’ble jurisdictional High Court, we find that the order of the Commissioner of Income-tax(Appeals) is just and proper in law - Decided against revenue
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