Retrospective taxing of profits from DEPB licence sales is inequitable

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: We read your column in fe, December 9, on the Clean Development Mechanism. We understand carbon credits are awarded to companies/projects that replace Green House Gas-producing technologies with environment friendly technology and that carbon credits are tradeable. We are in the process of setting up a frozen food unit. In the past, Frion Gases, used for refrigeration units, were held responsible for the Green House effect. Could you let us know how we can build up our case for earning carbon credits? Also, can we use energy saving equipment in our existing processing and milling units to qualify for credits? Is there any nodal government or UN agency that can guide us?

—Pradeep Dadhwal, Satnam Overseas Limited through email

In order to execute a CDM project, it is essential that emissions reductions must occur with the implementation of the project. Therefore, it is required that the project is designed in a way that the emission baseline for the project could be developed to help establish environmental additionalities later on, and determine the carbon credits.

Second, once the project is implemented, there is an approved system in place to measure, verify, and certify actual emission levels. Both your projects could qualify for carbon credits. To develop the project you would require professional assistance. There are a number of consultants in India who would help develop the project and guide you through the process.

The list of consultants is available at: http://www.cdmindia.com/pdd-developers-consultants.htm.

We are a very small company, exporting brass components (castings) under DEPB scheme since 1998. As it is not economical to import small quantities of brass, we sell our DEPB licence in the market. Recently, we have been sent a notice by the IT department demanding tax on income from sale of licences since 1998. What should we do? Also, we hear that DEPB is going to be scrapped. What should we expect from the new Budget?

—Ravi Kumar from Mumbai through email

The IT department’s move has caused quite a stir. It was severely criticised and challenged by the exporting community. However, there is both bad and good news for you. First the bad news: the finance ministry had moved The Taxation Laws (Second Amendment) Bill to bring legal validity to the Income-Tax Department’s efforts to recover income-tax on retrospective basis on the profits earned by exporters from transfer of DEPB licences from 1997. This bill has been recently passed by Parliament.