M/S VANDANA ISPAT LIMITED, RAIPUR (CG) V. A.C.I.T. 1(2), RAIPUR (CG)

CO 139/BIL/2015

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 1535 (ITAT-RAIPUR)
• Duration Of Justice: 22 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 30-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: misc
• Appeal Filed On: 08-10-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Business income; Opportunity of being heard; Question of law; Cost of acquisition; Right to appeal; Capital receipt; Condonation of delay
• Section: 6

Judgement Text

1 ITA NO.216/BLPR/2011, ITA NO. 109/BLPR/2011 ITA NO. 71/BLPR/2012 CO NOS. 139, 136 & 137/BLPR/2015. IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR BENCH, RAIPUR. BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. I.T. A. NOS. 109/BLPR/2011 & 71/BLPR/2012 & C.O. NOS. 136 & 137/BLPR/2015 ASSESSMENT YEARS : 2008 - 09 & 2009 - 10. ASSTT. COMMISSIONER OF INCOME - TAX - 1(2), SHREE NAKODA ISPAT LTD., RAIPUR. VS. RAIPUR. APPELLANT RESPONDENT/ CROSS OBJECTOR. DEPARTMENT BY : SHRI RAJIV V AR SHNEY. ASSESSE ` E BY : SHRI P.C. MALOO.. I.T. A. NO. 216/ BLPR /2011 & C.O. NO. 139 /BLPR /2015 ASSESSMENT YEAR : 2008 - 09. ASSTT. COMMISSIONER OF INCOME - TAX1(1)/, VANDANA ISPAT LTD., 1(2), RAIPUR. VS. RAIPUR. APPELLANT RESPONDENT. / CROSS O BJECTOR. DEPARTMENT BY : SHRI RAJIV V ARSHNEY . ASSESSEE BY : SHRI P.S. BAMB. DATE OF HEARING : 1 3 - 10 - 2015. DATE OF PRONOUNCEMENT : 30 TH OCT., 2015. O R D E R PER SHRI SHAMIN YAHYA, A.M . THESE APPEALS BY THE R EVENUE AND CROSS OBJECTIONS BY THE ASSESSES EMANATE OUT OF SEPARATE ORDERS OF LEARNED CIT(APPEALS). SINCE THE ISSUES 2 ITA NO.216/BLPR/2011, ITA NO. 109/BLPR/2011 ITA NO. 71/BLPR/2012 CO NOS. 139, 136 & 137/BLPR/2015. INVOLVED ARE COMMON AND CONNECTED AND THE APPEALS WERE HEARD TOGETHER, THES E ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. ONE COMMON ISSUE RAISED IN APPEALS BY THE REVENUE IS AS TO WHETHER THE CIT(APPEALS) WAS JUSTIFIED IN DELETING THE DISALLOWANCE OF DEDUCTION MADE BY THE AO U/ S 80IA IN RESPECT OF CARBON CREDIT. 3. . IN THIS REGARD THE ASSESSEE HAS FILED CROSS OBJECTION RAISING THE FOLLOWING GROUND : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, GAIN ON ACCOUNT OF CARBON CREDIT IS A CAPITAL RECEIPT IN VIEW OF JUDGMENT OF HONBL E ANDHRA PRADESH HIGH COURT IN THE CASE OF CIT VS. MY HOME POWER LTD. 365 ITR 82 AND, THEREFORE, NOT LIABLE TO TAX. THE LD. A.O. HAS ERRED IN HOLDING IT AND THEREBY TAXING IT AS REVENUE RECEIPT. 4. AT THE THRESHOLD WE NOTE THAT THE CROSS OBJECTIONS FILED BY THE ASSESSEE ARE DELAYED AS UNDER : CO NO. 136/BLPR/2015 IN RESPECT OF ITA 109/BLPR/2011 : 1498 DAYS. CO NO. 137/BLPR/2015 IN RESPECT OF ITA NO. 71/BLPR2012: 1145 DAQYS CO NO. 139/BLPR/2015 IN RESPECT OF ITA NO.216/BLPR/2015: 1341 DAYS. LEARN ED COUNSEL OF THE ASSESSEE HAVE PRAYED FOR CONDONATION OF THE DELAY IN FILING OF THE CROSS OBJECTIONS. 5. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. THE LEARNED COUNSEL OF THE ASSESSEE WHILE PLEADING THAT THE CONDONATION OF DELAY IN FILING T HE CROSS OBJECTIONS HAS REFERRED TO THE DECISION OF HONBLE APEX COURT IN THE CASE OF NATIONAL THERMAL POWER CO. LTD. VS. CIT 2 2 9 ITR 383 FOR THE PROPOSITION THAT THE ASSESSEE IS ENTITLED TO RAISE CROSS OBJECTION/ADDITIONAL GROUND IN THE MATTER NOT RAISED EARLIER. LEARNED COUNSEL FURTHER SUBMITTED THAT FOLLOWING THIS VERY DECISION OF HONBLE APEX COURT, ITAT, MUMBAI IN THE CASE OF ULTRATECH 3 ITA NO.216/BLPR/2011, ITA NO. 109/BLPR/2011 ITA NO. 71/BLPR/2012 CO NOS. 139, 136 & 137/BLPR/2015. CEMENT LTD. VS. ADDL. CIT ITA NO. 1348/MUM/2012 FOR ASSESSMENT YEAR 2008 - 09 HAS ACCEPTED THIS VERY ISSUE AS ADDITION AL GROUND IN RESPECT OF CARBON CREDIT TO BE CONSIDERED AS CAPITAL RECEIPT AS AGAINST REVENUE RECEIPT TAKEN BEFORE THE AO LEARNED COUNSEL HAS FURTHER PLACED RELIANCE O N SEVERAL OTHER CASE LAWS FOR THE PROPOSITION THAT THE DELAY SHOULD BE CONDONED IN THE SU BSTANTIAL INTEREST OF JUSTICE. IN THIS REGARD LEARNED COUNSEL HAS ALSO PLACED RELIANCE UPON HONBLE APEX COURT DECISION IN THE CASE OF COLLECTOR LAND ACQUISITION VS. MST KA TIJI & OTHERS 167 ITR 471 (SC). 6. PER CONTRA LEARNED D.R. SUBMITTED THAT THIS ISSU E WAS NEVER RAISED BEFORE THE AUTHORITIES BELOW. IT HAS NEITHER BEEN ADJUDICATED BY THE AUTHORITIES BELOW. HE PLEADED THAT THE ISSUE IS NOT AT ALL EMANAT ING OUT OF THE ORDERS OF THE AUTHORITIES BELOW. LEARNED D.R. FURTHER SUBMITTED THAT THE ASSESSEE HAS H IMSELF OFFERED THIS INCOME AS REV E NUE RECEIPT AND SOUGHT DEDUCTION U/S 80IA. HENCE LEARNED D.R. PLEADED THAT THE ASSESSEE NOW CANNOT BE ALLOWED TO TAKE AN ALTOGETHER DIFFERENT STAND AND PLEAD THAT THE IMPUGNED RECEIPT IS A CAPITAL RECEIPT. 7. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND PERUSED THE RECORDS. WE FIND THAT THE ASSESSEE HAS RAISED A CROSS OBJECTION PLEADING THAT THE IMPUGNED RECEIPTS ARE CAPITAL RECEIPTS AND NOT REVENUE RECEIPTS. THE STRENGTH OF THIS PLEADING IS A DECISION OF HONBLE H IGH COURT ANDHRA PRADESH DELIVERED SUBSEQUENT TO THE ORDER OF THE AUTHORITIES BELOW. WE FIND THAT IN IDENTICAL SITUATION THE ITAT, MUMBAI BENCH IN THE CASE OF ULTRATECH CEMENT LTD. VS. ADDL. CIT (SUPRA) HAS ADMITTED SIMILAR ADDITIONAL GROUND PLACING RELI ANCE UPON THE HONBLE APEX COURT DECISION IN THE CASE OF NATIONAL THERMAL POWER CO. LTD. 2 2 9 ITR 383. WE MAY GAINFULLY REFER TO THE SAID HONBLE APEX COURT DECISION AS UNDER : 4 ITA NO.216/BLPR/2011, ITA NO. 109/BLPR/2011 ITA NO. 71/BLPR/2012 CO NOS. 139, 136 & 137/BLPR/2015. UNDER SECTION 254 OF THE INCOME - TAX ACT, 1961, THE APPELLATE TRIBUNAL MAY, AFT ER GIVING BOTH THE PARTIES TO THE APPEAL AN OPPORTUNITY OF BEING HEARD, PASS SUCH ORDERS THEREON AS IT THINKS FIT. THE POWER OF THE TRIBUNAL IN DEALING WITH APPEALS IS THUS EXPRESSED IN THE WIDEST POSSIBLE TERMS. THE PURPOSE OF THE ASSESSMENT PROCEEDINGS B EFORE THE TAXING AUTHORITIES IS TO ASSESS CORRECTLY THE TAX LIABILITY OF AN ASSESSEE IN ACCORDANCE WITH LAW. IF, FOR EXAMPLE, AS A RESULT OF A JUDICIAL DECISION GIVEN WHILE THE APPEAL IS PENDING BEFORE THE TRIBUNAL, IT IS FOUND THAT A NON - TAXABLE ITEM IS TAXED OR A PERMISSIBLE DEDUCTION IS DENIED, THERE IS NO REASON WHY THE ASSESSEE SHOULD BE PREVENTED FROM RAISING THAT QUESTION BEFORE THE TRIBUNAL FOR THE FIRST TIME, SO LONG AS THE RELEVANT FACTS ARE ON RECORD IN RESPECT OF THE ITEM. THERE IS NO REASON T O RESTRICT THE POWER OF THE TRIBUNAL UNDER SECTION 254 ONLY TO DECIDE THE GROUNDS WHICH ARISE FROM THE ORDER OF THE COMMISSIONER OF INCOME - TAX (APPEALS). BOTH THE ASSESSEE AS WELL AS THE DEPARTMENT HAVE A RIGHT TO FILE AN APPEAL/CROSS - OBJECTIONS BEFORE T HE TRIBUNAL. THE TRIBUNAL SHOULD NOT BE PREVENTED FROM CONSIDERING THE QUESTIONS OF LAW ARISING IN ASSESSMENT PROCEEDINGS, ALTHOUGH NOT RAISED EARLIER. THE VIEW THAT THE TRIBUNAL IS CONFINED ONLY TO ISSUES ARISING OUT OF THE APPEAL BEFORE THE COMMISSIONER (APPEALS) IS TOO NARROW A VIEW TO TAKE OF THE POWERS OF THE TRIBUNAL. UNDOUBTEDLY, THE TRIBUNAL HAS THE DISCRETION TO ALLOW OR NOT TO ALLOW A NEW GROUND TO BE RAISED. BUT WHERE THE TRIBUNAL IS ONLY REQUIRED TO CONSIDER THE QUESTION OF LAW ARISING FROM FACT S WHICH ARE NON RECORD IN THE ASSESSMENT PROCEEDINGS, THERE IS NO REASON WHY SUCH A QUESTION SHOULD NOT BE ALLOWED TO BE RAISED WHEN IT IS NECESSARY TO CONSIDER THAT QUESTION IN ORDER TO CORRECTLY ASSESS THE TAX LIABILITY OF AN ASSESSEE. WE FIND THAT THE REASON ADOPTED IN THE ABOVE SAID DECISION CAN BE APPLIED TO THE PRESENT CASE ALSO. THE ISSUE IS PURELY LEGAL ONE AND GOES TO THE ROOT OF THE MATTER. NO ADDITIONAL FACT OTHER THAN THAT ALREADY ON RECORD IS REQUIRED TO BE GONE INTO T O ADJUDICATE THIS PROPOSITION. ACCORDINGLY FOLLOWING THE ABOVE SAID HONBLE APEX COURT DECISION AND THAT OF THE COORDINATE BENCH OF ITAT MUMBAI, WE ARE OF THE CONSIDERED OPINION THAT THE CROSS OBJECTION DESERVES TO BE ADMITTED AND THE SAME IS ADMITTED AS SUCH IN THE INTEREST OF SUBSTANTIAL JUSTICE. 5 ITA NO.216/BLPR/2011, ITA NO. 109/BLPR/2011 ITA NO. 71/BLPR/2012 CO NOS. 139, 136 & 137/BLPR/2015. 8. IN CONDONING THE DELAY IN FILING THE CROSS OBJECTIONS WE ALSO PLACE RELIANCE UPON HONBLE APEX COURT EXPOSITION IN THE CASE OF MST KATIJI & OTHERS (SUPRA) AS UNDER : 1. ORDINARILY, A LITIGANT DOES NOT STAND TO BENEFIT BY LODGING AN APPEAL LATE. 2. REFUSING TO CONDONE DELAY CAN RESULT IN A MERITORIOUS MATTER BEING THROWN OUT AT THE VERY THRESHOLD AND CAUSE OF JUSTICE BEING DEFEATED. AS AGAINST THIS, WHEN DELAY IS CONDONED, THE HIGHEST THAT CAN HAPPEN IS THAT A CAUSE WOULD BE DECIDED ON MERITS AFTER HEARING THE PARTIES. 3. EVERY DAYS DELAY MUST BE EXPLAINED DOES NOT MEAN THAT A PEDANTIC APPROACH SHOULD BE MADE. WHY NOT EVERY HOURS DELAY, EVERY SECONDS DELAY? THE DOCTRINE MUST BE APPLIED IN A RAT IONAL, COMMON SENSE AND PRAGMATIC MANNER. 4. WHEN SUBSTANTIAL JUSTICE AND TECHNICAL CONSIDERATIONS ARE PITTED AGAINST EACH OTHER, THE CAUSE OF SUBSTANTIAL JUSTICE DESERVES TO BE PREFERRED, FOR THE BOTHER SIDE CANNOT CLAIM TO HAVE VESTED RIGHT IN INJUSTICE BEING DONE BECAUSE OF NON - DELIBERATE DELAY. 5. THERE IS NO PRESUMPTION THAT DELAY IS OCCASIONED DELIBERATELY, OR ON ACCOUNT OF CULPABLE NEGLIGENCE, OR ON ACCOUNT OF MALA FIDES. A LITIGANT DOES NOT STAND TO BENEFIT BY RESORTING TO DELAY. IN FACT, HE RUNS A SERIOUS RISK. 6. IT MUST BE GRASPED THAT THE JUDICIARY IS RESPECTED NOT ON ACCOUNT OF ITS POWER TO LEGALIZE INJUSTICE ON TECHNICAL GROUNDS BUT BECAUSE IT IS CAPABLE OR REMOVING INJUSTICE AND IS EXPECTED TO DO SO. 9 . THE BRIEF COMMON FACT IN THESE CASES I S THAT THE ASSESSEE IS A LIMITED COMPANY ENGAGED IN THE BUSINESS OF SPONGE IRON, INGOT/BILLET AND GENERATION OF POWER. THE ASSESSEE HAS CLAIMED DEDUCTION U/S 80IA ON THE PROFIT & GAIN FROM SALE OF CARBON CREDIT . THE AO HAS HELD THAT THERE IS NO DIRECT NEX US BETWEEN THE INCOME OF THIS ACTIVITY AND THE UNDERTAKING, GENERATING AND DISTRIBUTING POWER. THAT THIS ACTIVITY TO THE BEST BE TREATED AS INCOME INCIDENTAL TO THE ELIGIBLE BUSINESS. THAT IT S GENUS LIES IN AN EFFICIENT W A ST E RECOVERY SYSTEM ADOPTED BY TH E ASSESSEE. THAT IT DOES NOT QUALIFY FOR DEDUCTION U/S 6 ITA NO.216/BLPR/2011, ITA NO. 109/BLPR/2011 ITA NO. 71/BLPR/2012 CO NOS. 139, 136 & 137/BLPR/2015. 80IA. LEARNED CIT(APPEALS), HOWEVER, HAS HELD THAT THE ASSESSEE IS ENTITLED FOR DEDUCT ION U/S 80IA. FOR THIS PROPOSITION LEARNED CIT(APPEALS) HAS REFERRED TO SEVERAL CASE LAWS AND HAS ALSO BROUGHT ON R ECORD THE PROCESS BY WHICH THE INCOME FROM CARBON CREDIT COMES INTO EXISTENCE. WE MAY GAINFULLY REFER THE FOLLOWING O B SERVATION OF LEARNED CIT(APPEALS) IN ITA NO. 109/BLPR/1011 IN PARA 3.4.1 AS UNDER : PERUSAL OF THE PROVISIONS OF SECTION 80IA REVEALS TH AT ANY PROFITS AND GAINS DERIVED BY AN UNDERTAK ING FROM BUSINESS OF GENERATION OR GENERATION AND DISTRIBUTION OF POWER IS ELIGIBLE FOR DEDUCTION UNDER THIS SECTION. PROVISION CLEARLY INDICATES THAT THE GAINS OF THE UNDERTAKING NEED NOT NECESSARILY BE FROM SALE OF POWER BUT THE GAINS SHOULD BE DERIVED BY AN UNDERTAKING FROM BUSINESS OF GENERATION OF POWER. BUSINESS OF GENERATION OF POWER INCLUDES GENERATION OR PRODUCTION OF ANY ARTICLE OR THING WHICH IS BOUND TO GENERATE SIMULTANEOUSLY IN COURSE OF GENERATI ON OF POWER. IN OTHER WORDS, IF AN ARTICLE OR THING IS PRODUCED OR GENERATED SIMULTANEOUSLY IN COURSE OF GENERATION OF POWER, ANY GAIN DERIVED FROM SUCH ARTICLE OR THING CONSTITUTES INCOME DERIVED FROM BUSINESS OF GENERATION OF POWER. IN THE PRESENT CASE, THE POWER GENERATION UNIT IS INTEGRATED WITH SPONGE IRON UNIT. THE FLUE GAS FLOWING FROM SPONGE IRON ROTARY KILN IS PASSED THROUGH BURNING CHAMBER AND WASTE HEAT RECOVER BOILER TO PRODUCED STEAM. THE STEAM SO GENERATED OPERATES THE TURBINE TO GENERATE ELE CTRICITY. THIS TECHNOLOGY OF GENERATION OF ELECTRICITY RESULTS IN TO REDUCTION OF GREEN HOUSE GASES. REDUCTION OF GREEN HOUSES GASES IS BOUND TO OCCUR IN COURSE OF GENERATION OF POWER AND SUCH REDUCTION OF GREEN HOUSE GASES IS CALLED CARBON CREDIT WHICH IS SALEABLE IN MARKET. THUS, THE CARBON CREDIT IS GENERATED SIMULTANEOUSLY WITH THE GENERATION OF POWER. THE CARBON CREDIT SO GENERATED IS ALSO MEASURED IN TERMS OF QUANTUM OF ELECTRICITY PRODUCED. IF NO ELECTRICITY IS GENERATED, CARBON CREDIT CAN NOT BE GENERATED . IN CASE, THE POWER IS GENERATED FROM VARIOUS CONVENTIONAL RAW MATERIAL LIKE COAL, OIL AND GASES WHICH POLLUTES THE ATMOSPHERE AND GENERATES GREE N HOUSE GASES, NO CARBON CREDIT IS EARNED. IT IS ONLY THE BENEFIT ARIS I NG IN COURSE OF PRESENT TECHNOLOGY OF GENERATION OF POWER FROM FLUE GASES. IN VIEW OF ABOVE PRODUCTION PROCESS, I AM OF THE, CONSIDERED OPINION, THAT GENERATION/ACCRUAL OF CARBON CREDIT IS DIRECTLY RELATED WITH THE GENERATION OF POWER. IN THIS PROCESS, THE CARBON CREDIT CAN NOT BE EARNED IN ISOLATION WITH THE POWER GENERATION AND, THEREFORE, THE PROCESS OF EARNING CARBON CREDIT HAS DIRECT NEXUS WITH 7 ITA NO.216/BLPR/2011, ITA NO. 109/BLPR/2011 ITA NO. 71/BLPR/2012 CO NOS. 139, 136 & 137/BLPR/2015. GENERATION OF POWER MEANING THEREBY, THAT THE GAIN FROM SALE OF CARBON CREDIT IS A GAIN DERIVED BY AN UNDERTAKING ENGAGED IN THE BUS INESS OF GENERATION OF POWER. 10 . NOW AGAINST THE ABOVE ORDER, REVENUE HAS APPEALED AND THE ASSESSEE HAS FILED THE CROSS OBJECTION. IN THE CROSS OBJECTION IT HAS BEEN SUBMITTED THAT THE RECEIPT ON ACCOUNT OF SALE OF CARBON CREDIT IS A CAPITAL RECEIPT. FO R THIS PROPOSITION LEARNED COUNSEL OF THE ASSESSEE HAS PLACED RELIANCE UPON SEVERAL CASE LAWS FROM THE TRIBUNAL AND ALSO THE DECISION OF HONBLE ANDHRA PRADESH HIGH COURT AS UNDER : 1. CIT VS. MY HOME POWER LTD. (2014) 365 ITR 82 (AP). 2. MY HOME POWER LTD. VS. DCIT (2013) 21 ITR 186 (HYD). 3. SHREE CEMENT LTD. VS. AD. CIT (2014) 31 ITR 513 (JAIPUR) 4. AM BIKA COTTON MILLS LTD. VS. DCIT (2013) 27 ITR 44 (CHHENAI) 5. SRI VELAYUDHASWAMY SPINNING MILLS (P) LTD. VS. DCIT 27 ITR 106 (CHENNAI). 1 1 . PER CONT RA LEARNED D.R. HAS SUBMITTED THAT THE SAID RECEIPT IS A REVENUE RECEIPT. FOR THIS PROPOSITION HE HAS PLACED RELIANCE UPON THE ITAT, COCHIN BENCH DECISION IN THE CASE OF APPOLO TYRES LTD. VS. ACIT IN ITA NO. 4 OF 2013 VIDE ORDER DATED MARCH 7, 2014. LEARNE D D.R. HAS EXTENSIVELY QUOTED FROM THE SAID DECISION. THE LEARNED D.R. SUBMITTED THAT THE BENCH HAS TAKEN INTO ACCOUNT ALL THE FUSES OF THE ISSUE AND HAS COME TO THE CONCLUSION THAT THE AMOUNT RECEIVED ON ACCOUNT OF CARBON CREDIT SALE IS A REVENUE RECEIP T. THE LEARNED D.R. FURTHER DEALT WITH THE PROCESS BY WHICH CARBON CREDIT IS GENERATED. HE CLAIMED THAT THE CARBON CREDIT IS SALABLE INTERNATIONALLY AND HENCE THE SAME IS REVENUE RECEIPT. 1 2 . UPON CAREFUL CONSIDERATION WE FIND THAT THE ISSUE AS TO WHETH ER THE RECEIPT ON ACCOUNT OF CARBON CREDIT SALE IS REVENUE OR CAPITAL WAS CONSIDERED BY THE 8 ITA NO.216/BLPR/2011, ITA NO. 109/BLPR/2011 ITA NO. 71/BLPR/2012 CO NOS. 139, 136 & 137/BLPR/2015. ITAT, HYDERABAD BENCH IN THE CASE OF MY HOME POWER LTD. VS. ACIT 21 ITR 186. AFTER CONSIDERING THE ISSUE ELABORATELY THE TRIBUNAL IN CONCLUDING PARAGRAPHS HAS HELD AS UNDER : 24.WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. CARBON CREDIT IS IN THE NATURE OF 'AN ENTITLEMENT' RECEIVED TO IMPROVE WORLD ATMOSPHERE AND ENVIRONMENT REDUCING CARBON, HEAT AND GAS EMISSIONS. THE ENTITLEMENT EARNED FOR CAR BON CREDITS CAN, AT BEST, BE REGARDED AS A CAPITAL RECEIPT AND CANNOT BE TAXED AS A REVENUE RECEIPT. IT IS NOT GENERATED OR CREATED DUE TO CARRYING ON BUSINESS BUT IT IS ACCRUED DUE TO 'WORLD CONCERN'. IT HAS BEEN MADE AVAILABLE ASSUMING CHARACTER OF TRANSFERABLE RIGHT OR ENTITLEMENT ONLY DUE TO WORLD CONCERN. THE SOURCE OF CARBON CREDIT IS WORLD CONCERN AND ENVIRONMENT. DUE TO THAT THE ASSESSEE GETS A PRIVILEGE IN THE NATURE OF TRANSFER OF CARBON CREDITS. THUS, THE AMOUNT RECEIVED FOR CARBON CREDITS H AS NO ELEMENT OF PROFIT OR GAIN AND IT CANNOT BE SUBJECTED TO TAX IN ANY MANNER UNDER ANY HEAD OF INCOME. IT IS NOT LIABLE FOR TAX FOR THE ASSESSMENT YEAR UNDER CONSIDERATION IN TERMS OF SECTIONS 2(24), 28, 45 AND 56 OF THE INCOME - TAX ACT, 1961. CARBON CRE DITS ARE MADE AVAILABLE TO THE ASSESSEE ON ACCOUNT OF SAVING OF ENERGY CONSUMPTION AND NOT BECAUSE OF ITS BUSINESS. FURTHER, IN OUR OPINION, CARBON CREDITS CANNOT BE CONSIDERED AS A BI - PRODUCT. IT IS A CREDIT GIVEN TO THE ASSESSEE UNDER THE KYOTO PROTOCOL AND BECAUSE OF INTERNATIONAL UNDERSTANDING. THUS, THE ASSESSEES WHO HAVE SURPLUS CARBON CREDITS CAN SELL THEM TO OTHER ASSESSEES TO HAVE CAPPED EMISSION COMMITMENT UNDER THE KYOTO PROTOCOL. TRANSFERABLE CARBON CREDIT IS NOT A RESULT OR INCIDENCE OF ONE'S B USINESS AND IT IS A CREDIT FOR REDUCING EMISSIONS. THE PERSONS HAVING CARBON CREDITS GET BENEFIT BY SELLING THE SAME TO A PERSON WHO NEEDS CARBON CREDITS TO OVERCOME ONE'S NEGATIVE POINT CAR BON CREDIT. THE AMOUNT RECEIVED IS NOT RECEIVED FOR PRODUCING AND /OR SELLING ANY PRODUCT, BI - PRODUCT OR FOR RENDERING ANY SERVICE FOR CARRYING ON THE BUSINESS. IN OUR OPINION, CARBON CREDIT IS ENTITLEMENT OR ACCRETION OF CAPITAL AND HENCE INCOME EARNED ON SALE OF THESE CREDITS IS CAPITAL RECEIPT. FOR THIS PROPOSITION, W E PLACE R ELIANCE ON THE JUDGEMENT OF THE SUPREME COURT IN THE CASE OF CIT VS. MAHESHWARI DEVI JUTE MILLS LTD. (57ITR 36) WHEREIN HELD THAT TRANSFER OF SURPLUS LOOM HOURS TO OTHER MILL OUT OF THOSE ALLOTTED TO THE ASSESSEE UNDER AN AGREEMENT FOR CONTROL OF PRODUCTIO N WAS CAPITAL RECEIPT AND NOT INCOME. BEING SO, THE CONSIDERATION RECEIVED BY THE ASSESSEE IS SIMILAR TO CONSIDERATION RECEIVED BY TRANSFERRING OF LOOM HOURS. THE SUPREME COURT CONSIDERED THIS FACT 9 ITA NO.216/BLPR/2011, ITA NO. 109/BLPR/2011 ITA NO. 71/BLPR/2012 CO NOS. 139, 136 & 137/BLPR/2015. AND OBSERVED THAT TAXABILITY OF PAYMENT RECEIVED FOR SALE OF LOOM HOURS BY THE ASSESSEE IS ON ACCOUNT OF EXPLOITATION OF CAPITAL ASSET AND IT IS CAPITAL RECEIPT AND NOT AN INCOME. SIMILARLY, IN THE PRESENT CASE THE ASSESSEE TRANSFERRED THE CARBON CREDITS LIKE LOOM HOURS TO SOME OTHER CONCERNS FOR CERTAIN CONSIDER ATION. THEREFORE, THE RECEIPT OF SUCH CONSIDERATION CANNOT BE CONSIDERED AS BUSINESS INCOME AND IT IS A CAPITAL RECEIPT. ACCORDINGLY, WE ARE O THE OPINION THAT THE CONSIDERATION RECEIVED ON ACCOUNT OF CARBON CREDITS CANNOT BE CONSIDERED AS INCOME AS TAXABL E IN THE ASSESSMENT YEAR UNDER CONSIDERATION. CARBON CREDIT IS NOT AN OFFSHOOT OF BUSINESS BUT AN OFFSHOOT OF ENVIRONMENTAL CONCERNS. NO ASSET IS GENERATED IN THE COURSE OF BUSINESS BUT IT IS GENERATED DUE TO ENVIRONMENTAL CONCERNS. CREDIT FOR REDUCING CAR BON EMISSION OR GREENHOUSE EFFECT CAN BE TRANSFERRED TO ANOTHER PARTY IN NEED OF REDUCTION OF CARBON EMISSION. IT DOES NOT INCREASE PROFIT IN ANY MANNER AND DOES NOT NEED ANY EXPENSES. IT IS A NATURE OF ENTITLEMENT TO REDUCE CARBON EMISSION, HOWEVER, THERE IS NO COST OF ACQUISITION OR COST OF PRODUCTION TO GET THIS ENTITLEMENT. CARBON CREDIT IS NOT IN THE NATURE OF PROFIT OR IN THE NATURE OF INCOME. 25. FURTHER, AS PER GUIDANCE NOTE ON ACCOUNTING FOR SELF - GENERATED CERTIFIED EMISSION REDUCTIONS (CERS) IS SUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA (ICAI) IN JUNE, 2009 STATES THAT CERS SHOULD BE RECOGNISED IN BOOKS WHEN THOSE ARE CREATED BY UNFCCC AND/OR UNCONDITIONALLY AVAILABLE TO THE GENERATING ENTITY. CERS ARE INVENTORIES OF THE GENERATING E NTITIES AS THEY ARE G ENERATED AND HELD FOR THE PURPOSE OF SALE IN ORDINARY COURSE. EVEN THOUGH CERS ARE INTANGIBLE ASSETS THOSE SHOULD BE ACCOUNTED AS PER AS - 2 (VALUATION OF INVENTORIES) AT A COST OR MARKET PRICE, WHICHEVER IS LOWER. SINCE CERS ARE RECOGNI SED AS INVENTORIES, THE GENERATING ASSESSEE SHOULD APPLY AS - 9 TO RECOGNISE REVENUE IN RESPECT OF SALE OF CERS 26. THUS SALE OF CARBON CREDITS IS TO BE CONSIDERED AS CAPITAL RECEIPT. THIS GROUND IS ALLOWED. THE SAID DECISION OF THE HONBLE ITAT, HYDERABA D WAS SUBJECT MATTER OF ADJUDICATION BY THE HONBLE ANDH RA PRADESH HIGH COURT. THE HONBLE HIGH COURT IN ITS ORDER REPORTED IN 365 ITR 82 HAS HELD AS UNDER : WE HAVE CONSIDERED THE AFORESAID SUBMISSION AND WE ARE UNABLE TO ACCEPT THE SAME, AS THE LEARN ED TRIBUNAL HAS FACTUALLY 10 ITA NO.216/BLPR/2011, ITA NO. 109/BLPR/2011 ITA NO. 71/BLPR/2012 CO NOS. 139, 136 & 137/BLPR/2015. FOUND THAT CARBON CREDIT IS NOT AN OFFSHOOT OF BUSINESS BUT AN OFFSHOOT OF ENVIRONMENTAL CONCERNS. NO ASSET IS GENERATED IN THE COURSE OF BUSINESS BUT IT IS GENERATED DUE TO ENVIRONMENTAL CONCERNS. WE AGREE WITH THIS FACTUAL ANA LYSIS AS THE ASSESSEE IS CARRYING ON THE BUSINESS OF POWER GENERATION. THE CARBON CREDIT IS NOT EVEN DIRECTLY LINKED WITH POWER GENERATION. ON THE SALE OF EXCESS CARBON CREDITS THE INCOME WAS RECEIVED AND HENCE AS CORRECTLY HELD BY THE TRIBUNAL IT IS CAPIT AL RECEIPT AND IT CANNOT BE BUSINESS RECEIPT OR INCOME. IN THE CIRCUMSTANCES, WE DO NOT FIND ANY ELEMENT OF LAW IN THIS APPEAL. FROM THE ABOVE WE FIND THAT HONBLE ANDHRA PRADESH HIGH COURT HAS CONSIDERED THE ISSUE AND HAVE AFFIRMED THE TRIBUNALS FINDIN G THAT CARBON CREDIT IS NOT AN OFFSHOOT OF AN EN VIRONMENTAL CONCERNS. THAT NO ASSET IS GENERATED IN THE COURSE OF BUSINESS BUT IT IS GENERATED DUE TO ENVIRONMENTAL CONCERNS. THE HONBLE HIGH COURT HAS AGREED THAT THE FACTUAL ANALYSIS AS THE ASSESSEE WAS CARRYING THE BUSINESS OF POWER GENERATION. THAT T HE CARBON CREDIT IS NOT DIRECTLY LINKED WITH THE POWER GENERATION. HENCE HONBLE HIGH COURT CONCLUDED THAT ON THE SALE OF EXCESS CARBON CREDITS THE INCOME WAS RECEIVED AND THE SAME WAS CAPITAL RECEIPT AND IT CANNOT BE BUSINESS RECEIPT OR INCOME. 1 3 . NOW WE FIND THAT THE HONBLE HIGH COURT HAS HELD THAT THE RECEIPT ON ACCOUNT OF CARBON CREDIT SALE IS A CAPITAL RECEIPT ON THE FACTS AND CIRCUMSTANCES OF THE SAID CASE. THE FACTS LEADING TO THE EMERGENCE OF CARBON CREDIT IN THE CASES WE ARE ADJUDICATING ARE ALSO THE SAME. THERE IS NO DISPUTE THAT THE PROCESS BY WHICH CARBON CREDIT IS GENERATED BY THE ASSESSEE IN THIS CASE IS DIFFERENT FROM THE ONE DEALT WITH IN THE CASE OF THE ASSESSEE MY HOME POWER LTD.. NOW WE HAVE A SITUATION WHERE ON 11 ITA NO.216/BLPR/2011, ITA NO. 109/BLPR/2011 ITA NO. 71/BLPR/2012 CO NOS. 139, 136 & 137/BLPR/2015. SIMILAR FACTS THER E IS HONBLE HIGH COURT DECISION HOLDING THAT IN THESE FACTS THE CARBON CREDIT SALES ARE CAPITAL RECEIPTS. THERE ARE SEVERAL TRIBUNAL DECISIONS WHICH HAVE FOLLOWED THIS DECISION. LEARNED D.R. HAS ONLY BEEN ABLE TO POINT OUT BEFORE US THE DECISION OF ITAT, COCHIN BENCH IN THE CASE OF APPOLO TYRES LTD. VS. ACIT (SUPRA) WHEREIN IT HAS BEEN HELD HAT CARBON CREDIT SALE IS A REVENUE RECEIPT. NOW IT IS SETTLED LAW IN THE ORDER OF JUDICIAL PR ECEDENCE THAT THE DECISION OF HONBLE HIGH COURT TAKES PREDENCE OVER IN FERIOR COURT/TRIBUNALS DECISION. IT IS ALSO SETTLED LAW THAT WHATSOEVER AMOUNT OF WISDOM IS DISPLAYED BY INFERIOR TRIBUNALS AND COURTS THE SAME CANNOT OVERRIDE THE DECISION OF HONBLE HIGH COURT. EXACTLY SIMILAR VIEWS WERE ALSO HELD BY SEVERAL OTHER ITAT DECISIONS QUOTED BY THE LEARNED COUNSEL OF THE ASSESSEE REPRODUCED HEREIN ABOVE. IN THESE CIRCUMSTANCES WE HOLD THAT HE CARBON CREDIT SALE EMANATING TO THE ASSESSEE IS A CAPITAL RECEIPT NOT EXIGIBLE TO TAX. ACCORDINGLY THIS CROSS OBJECTION FILED BY THE A SSESSEE IS ALLOWED AND WE HOLD THAT THE ASSESSEE IS NOT LIABLE TO PAY ANY TAX ON THE CARBON CREDIT SALE RECEIPTS. 1 4 . BEFORE PARTING WE WOULD LIKE TO MENTION THAT CARBON CREDIT AS MENTIONED ABOVE IS GENERATED UNDER THE KYOTO PROTOCOL AND BECAUSE OF INTERNATIONAL UNDERSTANDING . B RIEFLY IN THE PRESENT CASE THE FLUE GAS FLOW FROM SPONGE IRON ROTARY KILN IS PASS ED THROUGH BURNING CHAMBER AND WASTE HEAT RECOVER BOILER TO PRODUCE STEAM. THE STEAM SO GENERATED OPERATE THE TURBINE TO GENERATE ELECTRICITY. T HIS TECHNOLOGY OF GENERATION OF ELECTRICITY RESULTS INTO REDUCTION OF GREEN HOUSE GASES. FOR THIS THE PRODUCERS ARE GRANTED CARBON CREDIT. THE PRODUCERS OF SUCH CARBON CREDIT CAN SELL THEM TO OTHER ASSESSES WHO HAVE CAPPED EMISSION COMMITMENT UNDER THE KY OTO PROTOCOL. THUS THE CARBON CREDIT CAN ALSO BE SAID TO BE A GRANT AS 12 ITA NO.216/BLPR/2011, ITA NO. 109/BLPR/2011 ITA NO. 71/BLPR/2012 CO NOS. 139, 136 & 137/BLPR/2015. INTERNATIONAL AGENCY GRANTS THE SAME. CARBON CREDIT HENCE EMANATES OUT OF SUCH TECHNOLOGY AND PLAN T AND MACHINERY WHICH CONTRIBUTE TO REDUCTION OF GREEN HOUSE GASES. THUS THESE CARBON CREDITS ARE ALSO MEANT TO PROMOTE SUCH INVESTMENT WHICH ARE A DMITTEDLY CAPITAL IN NATURE. HENCE SEEN FROM THIS ANGLE ALSO THE CARBON CREDIT IS A CAPITAL RECEIPT. 1 5 . IN THE RESULT, THE CROSS OBJECTION IS ALLOWED. 1 6 . NOW THE ISSUE RAISED IN REVENUES APPEAL WAS THAT WHETHER THE LEARNED CIT(APPEALS) IS CORRECT OR NOT IN DELETING THE DISALLOWANCE OF CLAIM U/S 80IA WITH RESPECT TO THE RECEIPT ON ACCOUNT OF CARBON CREDIT SALE. WE FIND THAT AS WE HAVE ALREADY HELD THAT THE RECEIPT ON ACCOUNT OF CARBON CREDI T SALE IS A CAPITAL RECEIPT AND HENCE THE SAME IS NOT LIABLE TO TAX. THE ADJUDICATION OF ISSUE RAISED BY THE REVENUE IS ONLY OF ACADEMIC INTEREST. ACCORDINGLY WE ARE NOT ENGAGING UNDER THE SAME. HENCE THIS GROUND RAISED BY THE REVENUE IS DISMISSED AS INFRU CTUOUS. 1 7 . ONE MORE GROUND HAS BEEN RAISED BY THE REVENUE IN ITA NO. 109/BLPR/2011 AS TO WHETHER THE CIT(APPEALS) WAS JUSTIFIED IN DELETING THE DISALLOWANCE OF RS.2,29,285/ - ON ACCOUNT OF INTEREST INCOME CLAIMED AS DEDUCTION U/S 80IA. 1 8 . HAVING HEARD BO TH THE COUNSEL AND PERUSING THE RECORDS, WE FIND THAT THIS GROUND RAISED BY THE REVENUE DOES NOT SURVIVE IN THE LIGHT OF ASSESSEES RAISING THE CROSS OBJECTION THAT CARBON CREDIT S ALE IS A CAPITAL RECEIPT AND OUR ADJUDICATING THE SAME IN ASSESSEES FAVOU R. HENCE THIS GROUND IS ALSO DISMISSED AS INFRUCTUOUS. 13 ITA NO.216/BLPR/2011, ITA NO. 109/BLPR/2011 ITA NO. 71/BLPR/2012 CO NOS. 139, 136 & 137/BLPR/2015. 1 9 . IN THE RESULT, THE CROSS OBJECTIONS BY THE ASSESSES STAND ALLOWED AND THE REVENUES APPEALS STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF OCT., 2015. SD/ - SD/ - (MUKUL K. SHRAWAT) ( SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER. NAGPUR, DATED: 30 TH OCT., 2015. COPY FORWARDED TO : 1. VANDANA ISPAT LTD., VANDANA BUILDING, , M.G. ROAD, RAIPUR. 2. SHREE NAKODA ISPAT LTD. NEAR RAILWAY CROSSING, MOWA, RAIPUR. 3. A.C.I.T. 1(1)/1(2), RA IPUR. 4. C.I.T., CONCERNED 5. CIT(APPEALS) , RAIPUR . 6. D.R., ITAT, RAIPUR. 7. GUARD FILE TRUE COPY. BY ORDER WAKODE ASSISTANT REGISTRAR, ITAT, NAGPUR