ITO, Ward-3(2), Hyderabad, Hyderabad V. Ravi Kiran Power Projects Pvt.Ltd., Hyd, Hyderabad

ITA 1415/HYD/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6654 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-04-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 16-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B KURMI NAIDU
• Assessee Lawyers: S RAMA RAO
• Keywords: Business income; Capital receipt; Revised return

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 1415/HYD/2015 ASSESSMENT YEAR: 2009-10 INCOME TAX OFFICER, WARD 3(2), HYDERABAD VS. RAVI KIRA POWER PROJECTS PVT. LTD., HYDERABAD PAN AACCR 3415 P APPELLANT RESPONDENT REVENUE BY: SRI B. KURMI NAIDU ASSESSEE BY: SRI S. RAMA RAO DATE OF HEARING: 15/03/2016 DATE OF PRONOUNCEMENT: 07/04/2016 O R D E R PER S. RIFAUR RAHMAN, AM: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE OR DER OF CIT(A) - 3, HYDERABAD DATED 16/09/2015 RELATES TO T HE AY 2009-10 WHEREIN THE REVENUE HAS RAISED THE FOLLOWIN G GROUNDS OF APPEAL: 1 THE LEARNED CIT (A) ERRED ON BOTH LAW AND FACTS O F THE CASE. 2 THE LEARNED CIT(A) ERRED IN LAW IN HOLDING THAT T HE RECEIPTS ON SALE OF CARBON CREDITS ARE CAPITAL RECE IPTS AND ARE NOT OF REVENUE IN NATURE AND THEREBY HOLDIN G THAT THE SAME IS NOT TAXABLE IN THE HANDS OF THE ASSESSE E. 3 THE LEARNED CIT(A) ERRED IN ALLOWING CHANGE OF NA TURE OF RECEIPT BY THE ASSESSEE IN THE ABSENCE OF ANY VA LID REVISED RETURN U/S 139(5). 4 THE LEARNED CIT(A) ERRED IN ALLOWING THE ADDITION AL GROUND RAISED BY THE ASSESSEE WITHOUT RECORDING SATISFACTION. I.T.A. NO. 1415/HYD/2015 M/S RAVI KIRAN POWER PROJECTS P. LTD. 2 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE COMPANY IS ENGAGED IN THE BUSINESS OF POWER GENERAT ION USING BIOMASS GAS FUEL. IT FILED RETURN OF INCOME O F NIL UNDER NORMAL PROVISIONS AND RS.1,67,47,490/- UNDER MAT PR OVISIONS. THE ASSESSEE HAD CLAIMED DEDUCTION U/S 80IA ON RS. 1,21,46,400/- BEING THE AMOUNT PERTAINING TO SALE O F CARBON CREDITS WHICH WAS CONSIDERED AS A BUSINESS RECEIPT BY ASSESSEE. 2.1 THE ASSESSEE IS IN THE BUSINESS OF GENERATION OF ELECTRICITY BY USING BIOMASS. BY USING BIOMASS AS F UEL, THE ASSESSEE EMITS LESS CARBON DIOXIDE FOR GENERATION O F A UNIT OF ELECTRICITY WHEN COMPARED TO THE UNITS USING FOSSIL FUELS LIKE COAL, DIESEL AND NAPTHA. AS PER UNITED NATIONS FRAM EWORK CONVENTION ON CLIMATE CHANGE (UNFCCC), KYOTO PROTOC OL, ANY COMPANY EMITTING LESSER QUANTITY OF GASES THAN THE ASSIGNED QUANTITY IS ELIGIBLE FOR VERIFIED EMISSION REDUCTION CERTIFICATES (VERS) POPULARLY KNOWN AS 'CARBON CRED ITS'. THE ASSESSEE WHO HAS SURPLUS CARBON CREDITS CAN SELL TH EM TO OTHERS. 2.2. THE ASSESSING OFFICER DENIED 80IA DEDUCTION ON INCOME FROM SALE OF CARBON CREDITS ON THE GROUND THAT SUCH INCOME IS NOT DERIVED FROM THE INDUSTRIAL UNDERTAKING AND IT HAS NO DIRECT NEXUS WITH THE BUSINESS OF THE ASSESSEE. THE ASSESS ING OFFICER RELIED ON THE FOLLOWING PRESIDENTS: 1. CIT V. STERLING FOODS [1999] 237 ITR 579 (SC) 2. CAMBAY ELECTRIC SUPPLY INDUSTRIAL CO. LTD V. CI T [1978] 113 ITR 84 (SC) 3. CIT V. MENON IMPEX P LTD [2003] 128 TAXMAN 11 (MAD) I.T.A. NO. 1415/HYD/2015 M/S RAVI KIRAN POWER PROJECTS P. LTD. 3 3. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN AP PEAL BEFORE THE CIT(A) BY RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. THE ASSESSING OFFICER OUGHT TO HAVE ALLOWED THE DEDUCTION U/S 80IA ON INCOME EARNED FROM SALE OF C ERS. 2. THE ASSESSING OFFICER HAS ERRED BY IGNORING THE FACT THAT GENERATION OF CERS IS DIRECTLY LINKED WITH PRODUCTION OF POWER AND IS ELIGIBLE BUSINESS INCOM E FOR CLAIMING DEDUCTION U/S 80LA. 3.1 THE ASSESSEE ALSO RAISED THE FOLLOWING ADDITION AL GROUND BEFORE THE CIT(A): 'WITHOUT PREJUDICE TO THE GROUNDS ALREADY RAISED, M ONEY RECEIVED ON SALE OF CARBON CREDITS CONSTITUTE A CA PITAL RECEIPT AND THEREFORE DOES NOT FORM PART OF TOTAL INCOME AND IS THUS TO BE REDUCED FROM THE TOTAL INCOME ASSESSED. ' 4. THE CIT(A) FOLLOWING THE JUDGMENT OF THE HONBL E AP HIGH COURT IN THE CASE OF CIT V. MY HOME POWER LTD (2014) 365 ITR 82 HELD THAT AS THE RECEIPT FROM SALE OF CA RBON CREDITS WAS HELD TO BE CAPITAL RECEIPT, THE SAME WILL NOT F ORM PART OF P&L A/C. THEREFORE, THE ASSESSEE IS NOT ENTITLED FO R DEDUCTION U/S 80IA. ACCORDINGLY, HE DISMISSED GROUND NOS. 1 & 2 AND ALLOWED THE ADDITIONAL GROUND RAISED BY THE ASSESSE E. 5. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL FACTS ON RECORD AS WELL AS THE ORDERS OF R EVENUE AUTHORITIES. IN THE CASE OF MY HOME POWER LTD. (SUP RA), THE HONBLE HIGH COURT HELD AS FOLLOWS: 'WE HAVE CONSIDERED THE AFORESAID SUBMISSION AND W E ARE UNABLE TO ACCEPT THE SAME, AS THE LEARNED TRIB UNAL HAS FACTUALLY FOUND THAT 'CARBON CREDIT IS NOT OFF SHOOT OF BUSINESS BUT AN OFFSHOOT OF ENVIRONMENTAL CONCERNS' . WE AGREE WITH THIS FACTUAL ANALYSIS AS THE ASSESSEE IS CARRYING ON THE BUSINESS OF POWER GENERATION. THE C ARBON I.T.A. NO. 1415/HYD/2015 M/S RAVI KIRAN POWER PROJECTS P. LTD. 4 CREDIT IS NOT EVEN DIRECTLY LINKED WITH POWER GENER ATION. ON THE SALE OF EXCESS CARBON CREDITS THE INCOME WAS RECEIVED AND HENCE AS CORRECTLY HELD BY THE TRIBUNA L IT IS CAPITAL RECEIPT.' AS THE RECEIPT FROM SALE OF CARBON CREDITS WAS HELD TO BE CAPITAL RECEIPT BY THE HONBLE HIGH COURT, WE DO N OT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) IN ALLOWING TH E ADDITIONAL GROUND RAISED BY THE ASSESSEE. ACCORDINGLY, WE DISM ISS THE GROUNDS RAISED BY THE REVENUE UPHOLDING THE ORDER O F THE CIT(A) ON THIS ISSUE. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. PRONOUNCED IN THE OPEN COURT ON 7 TH APRIL, 2016 SD/- (P. MADHAVI DEVI) JUDICIAL MEMBER SD/- (S. RIFAUR RAHMAN) ACCOUNTANT MEMBER HYDERABAD, DATED 7 TH APRIL, 2016 KV COPY FORWARDED TO: 1. ITO, WARD 3(2), 7 TH FLOOR, B-BLOCK, IT TOWERS, AC GUARDS, MASAB TANK, HYDERABAD 500 034 2. M/S RAVI KIRAN POWER PROJECTS PVT. LTD., PLOT NO . 1071, ROAD NO. 44, JUBILEE HILLS, HYDERABAD 500 033. 3. CIT(A) - 3, HYDERABAD 4 PR. CIT - 3, HYDERABAD 5 THE DR, ITAT, HYDERABAD I.T.A. NO. 1415/HYD/2015 M/S RAVI KIRAN POWER PROJECTS P. LTD. 5 S.NO. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON SR.P.S./P.S 2. DRAFT PLACED BEFORE AUTHOR SR.P.S/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S./P.S 6. KEPT FOR PRONOUNCEMENT ON SR. P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER