Sri Ganapathy Murugan Spinning Mills Pvt Ltd., Somanur V. DCIT, Tiruppur

CO 44/CHNY/2014

• Counselvise Citation: [2015] 124 COUNSELVISE.COM (IT) 7416 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 7 month(s) 26 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 31-12-2015
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 14-12-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 05-05-2014
• Court: TRIBUNAL
• Department Lawyers: N VIJAY KUMAR
• Assessee Lawyers: SHRI P RADHAKRISHNAN
• Keywords: Capital receipt

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI , . ! ' , # '$ BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ./ ITA NO. 580/MDS/2014 AND C.O.NO.44/MDS/2014 (IN ITA NO.580/MDS/14) / ASSESSMENT YEAR : 2009-10 THE DEPUTY COMMISSIONER OF INCOME-TAX, COMPANY CIRCLE, TIRUPPUR. APPELLANT) V. M/S. SRI GANAPATHI MURUGAN SPINNING MILLS (P) LTD., 89-B POWER HOUSE ROAD, SOMANUR. PAN AAECS2342C RESPONDENT/CROSS-OBJECTOR) / APPELLANT BY : SHRI SHRI P. RADHAKRISHNAN, JCIT / RESPONDENT BY : SHRI N. VIJAY KUMAR, CA ! / DATE OF HEARING : 14.12.2015 '# ! / DATE OF PRONOUNCEMENT : 31.12.2015 % / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THE APPEAL BY THE REVENUE ASSESSEE AND THE CROSS OBJECTION BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE - - ITA 580 & CO 44/14 2 COMMISSIONER OF INCOME-TAX(APPEALS) DATED 17.12.201 3 FOR THE ASSESSMENT YEAR 2009-10. 2. THE ONLY GROUND IN ASSESSEES APPEAL IS WITH REG ARD TO TREATMENT OF CARBON CREDIT RECEIPTS. 3. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. SIMILAR ISSUE WAS CONSIDERED BY THE TRI BUNAL IN THE CASE OF M/S. ARUN TEXTILES PVT. LTD. IN ITA NO.2174 /MDS/2014 DATED 19.6.2015, WHEREIN IT WAS HELD AS UNDER: 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN OUR OPINION, CARBON CREDIT IS IN THE NATURE OF AN ENTITLEMENT RECEIVED TO IMPROVE WORL D ATMOSPHERE AND ENVIRONMENT REDUCING CARBON, HEAT AN D GAS EMISSIONS. THE ENTITLEMENT EARNED FOR CARBON CREDITS CAN, AT BEST, BE REGARDED AS A CAPITAL RECE IPT AND CANNOT BE TAXED AS A REVENUE RECEIPT. IT IS NOT GE NERATED OR CREATED DUE TO CARRYING ON BUSINESS BUT IT IS AC CRUED DUE TO WORLD CONCERN. IT HAS BEEN MADE AVAILABLE ASSUMING CHARACTER OF TRANSFERABLE RIGHT OR ENTITLE MENT ONLY DUE TO WORLD CONCERN. THE SOURCE OF CARBON CR EDIT 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 CARB ON CREDITS HAS NO ELEMENT OF PROFIT OR GAIN AND IT CAN NOT BE SUBJECTED TO TAX IN ANY MANNER UNDER ANY HEAD OF INCOME. IT IS NOT LIABLE FOR TAX FOR THE ASSESSMEN T YEAR UNDER CONSIDERATION IN TERMS OF SECTIONS 2(24), 28, 45 AND 56 OF THE INCOME-TAX ACT, 1961. CARBON CREDITS 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 T O THE ASSESSEE UNDER THE KYOTO PROTOCOL AND BECAUSE OF - - ITA 580 & CO 44/14 3 INTERNATIONAL UNDERSTANDING. THUS, THE ASSESSEES W HO HAVE SURPLUS CARBON CREDITS CAN SELL THEM TO OTHER ASSESSEES TO HAVE CAPPED EMISSION COMMITMENT UNDER THE KYOTO 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 ONES BUSINESS AND IT IS A C REDIT FOR REDUCING EMISSIONS. THE PERSONS HAVING CARBON CRED ITS GET BENEFIT BY SELLING THE SAME TO A PERSON WHO NEE DS CARBON CREDITS TO OVERCOME ONES 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 ACCRET ION OF CAPITAL AND HENCE INCOME EARNED ON SALE OF THESE CR EDITS IS CAPITAL RECEIPT. THE SAME VIEW IS SUPPORTED BY THE FOLLOWING JUDICIAL PRECEDENTS, WHICH ARE RELIED ON BY THE LD. AR: 1. CIT V. MY HOME POWER LTD. (2014)[365 ITR 82](AP) 2. MY HOME POWER LTD. V. DCIT (2013)[21 ITR(TRIB) 1 86] (HYD) 3. AMBIKA COTTON MILLS LTD. V. DCIT (2013) [27 ITR (TRIB) 44] (CHENNAI) 4. DCIT V. SALONA COTSPIN LTD. IN ITA NO.426/MDS/20 13 FOR AY 2009-10 5. SRI VELAYUDHASWAMY SPINNING MILLS (P) LTD. V. DC IT IN ITA NO.582/MDS/2013 FOR AY 2009-10 6. SRI MATHA SPINNING MILLS PVT. LTD. V. DCIT IN IT A NO.617/MDS/ 2013 FOR AY 2009-10 7. SUDHAN SPINNING MILLS PVT. LTD. V. JCIT IN ITA NO. 616/MDS/2013 FOR AY 2009-10 8. PRABHU SPINNING MILLS (P) LTD. & ANR. V. DCIT I N ITA NOS. 651 & 652?MDS/2013 FOR AY 2009-10 9. VEDHA SPINNING MILLS (P) LTD. V. DCIT IN ITA NO .630/MDS/ 2013 FOR AY 2009-10 - - ITA 580 & CO 44/14 4 10.ADISANKARA SPINNING MILLS (P) LTD. V. DCIT IN ITA NO. 631/MDS/2013 FOR AY 2009-10 11.SRI SHANMUGAVEL MILLS (P) LTD. V. DCIT IN ITA NO. 619/MDS/2013 FOR AY 2009-10 12.ARUN TEXTILES PVT. LTD. V. ACIT IN ITA NO.268/ MDS/2014 FOR AY 2009-10 13.INDIA DYEING MILLS PVT. LTD. V. ACIT IN ITA NO .498/MDS/2014 FOR AY 2009-10 14.DCIT V. SREE RAYALASEEMA GREEN ENERGY LTD. (20 14) [36 ITR (TRIB) 627] (HYD) 15. EASTMAN SPINNING MILLS (P) LTD. V. DCIT IN IT A NO. 1428/ MDS/2014 FOR AY 2009-10 5. IN VIEW OF THE ABOVE, WE ARE INCLINED TO HOLD TH AT THE RECEIPT FROM SALE OF CARBON CREDITS HAS TO BE CONSI DERED AS CAPITAL RECEIPT AND ACCORDINGLY, IT IS NOT TAXABLE. THUS, THERE IS NO QUESTION OF CONSIDERING THE SAME FOR DEDUCTIO N U/S.80IA OF THE ACT. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. IN VIEW OF THE ABOVE DECISION OF THE TRIBUNAL, WE D ISMISS THE GROUND OF APPEAL TAKEN BY THE REVENUE. 4. SINCE WE HAVE DISMISSED THE GROUND TAKEN BY THE REVENUE, THE CROSS OBJECTION HAS BECOME INFRUCTUOUS AND THE SAME IS DISMISSED. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED AND THE CROSS OBJECTION OF THE ASSESSEE IS ALSO DIS MISSED - - ITA 580 & CO 44/14 5 AS INFRUCTUOUS. ORDER PRONOUNCED ON THURSDAY, THE 31 ST OF DEC., 2015 AT CHENNAI. SD/- SD/- ( $% & ) ( ' ( ) $ ) *%+,-,./01,2345,.62,+778,293 : ;< /JUDICIAL MEMBER ! ;<=>>70.?,.?@A1BA2 ': /CHENNAI, C; /DATED, THE 31 ST DEC., 2015. MPO* ;D EFGF /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. H3 /CIT(A) 4. H /CIT 5. FIJ K /DR 6. JLM /GF.