P.K.Ganeshwar, CHENNAI V. DCIT, Tiruppur

ITA 1583/CHNY/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9774 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-04-2016
• Appeal Filed By: Assessee
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 09-07-2015
• Court: TRIBUNAL
• Assessee Lawyers: R KUMAR
• Keywords: Question of law; Capital receipt

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : CHENNAI , ! ' # , $ %& ' [ BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD , JUDICIAL MEMBER ] ./ I.T.A.NO.1583/MDS/2015 / ASSESSMENT YEAR : 2009-10 SHRI P.K.GANESHWAR 21, POLLACHI ROAD PALLADAM 641 664 VS. THE DY. COMMISSIONER OF INCOME-TAX CIRCLE 1 TIRUPUR [PAN ADFPG 6476 N ] ( () / APPELLANT) ( #*() /RESPONDENT) / APPELLANT BY : SHRI R.KUMAR, ADVOCATE /RESPONDENT BY : SHRI AJITH KUMAR VERMA, CIT / DATE OF HEARING : 31 - 3 - 2016 / DATE OF PRONOUNCEMENT : 01 - 0 4 - 2016 + / O R D E R PER CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-3, COIMBA TORE, DATED 29.5.2015 FOR THE ASSESSMENT YEAR 2009-10. 2. THE ONLY ISSUE INVOLVED IN THIS APPEAL IS WHETHER T HE INCOME RECEIVED FROM SALE OF CARBON CREDIT IS REVENUE OR C APITAL IN NATURE. ITA NO. 1583/15 :- 2 -: 3. THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT THE I SSUE HAS BEEN DECIDED IN THE ASSESSEES OWN CASE FOR THE AS SESSMENT YEAR 2010-11 BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL I N I.T.A.NO.2091/MDS/2013 DATED 17.7.2014. A COPY OF T HE ORDER IS PLACED ON RECORD. 4. THE LD. DR STRONGLY PLACED RELIANCE ON THE ORDERS O F THE LOWER AUTHORITIES. 5. WE HAVE PERUSED THE ORDER OF THE CO-ORDINATE BENCH IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2010-11. W E FIND THAT THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE T HAT CARBON CREDIT RECEIPTS HAVE TO BE TREATED AS CAPITAL IN NATURE. WHILE HOLDING SO, THE TRIBUNAL HAS OBSERVED AS UNDER: 5. IN LOWER APPELLATE PROCEEDINGS, THE ASSESSEE CONTENDED THAT HIS TOTAL CARBON CREDIT RECEIPTS REA DING ` 1,18,78,061/- COMPRISED OF ` 72,94,322/- IN PRECEDING ASSESSMENT YEAR 2009-10 AND ` 45,83,739/- IN THE IMPUGNED ASSESSMENT YEAR. HE RAISED AN ALTERNATIVE PRAYER T HAT ONLY IN VIEW OF DEDUCTION CLAIM U/S 80IA, THE SAID CAR BON CREDIT RECEIPTS HAD BEEN OFFERED AS REVENUE RECEIPTS. H E SOUGHT TO CANCEL HIS ACTION OF OFFERING THE CARBON CREDIT RECEIPTS AS INCOME AS WELL AS DEDUCTION CLAIM U/S 80IA IN VIEW OF THE DECISION OF THE CHENNAI 'TRIBUNAL' IN AMBIKA COTTO N MILLS LTD(SUPRA). WE FIND THAT THE CIT(A) HAS REJECTED THE SAME AS UNDER: 7.0 CARBON CREDIT THE ASSESSING OFFICER DISALL OWED AN AMOUNT OF RS. 45,83,739/- BEING CARBON CREDIT. HOWEVER, A PERUSAL OF THE ASSESSMENT ORDER AND THE SUBMISSION S OF THE ASSESSEE WOULD INDICATE THAT THE ASSESSEE HAS ADMIT TED AN AMOUNT OF RS.1,18,78,061/- AS REVENUE RECEIPTS IN T HEIR RETURN OF INCOME AS UNDER: ITA NO. 1583/15 :- 3 -: RECEIPTS IN ASSESSMENT YEAR 2009-10 RS. 72,94,3 22 RECEIPTS IN ASSESSMENT YEAR 2010-11 RS. 45,83,7 39 -------------------- RS.1,18,78,061 THE TOTAL AMOUNT OF THE SAID AMOUNTS WERE TAKEN AS REVENUE RECEIPTS FOR THE YEAR UNDER CONSIDERATION AND THE A SSESSEE'S CLAIM OF 80LA RELIEF FOR THE AMOUNT OF RS. 1,18,78, 061/-. IN APPEAL CLAIMED THAT THESE ARE CAPITAL RECEIPTS AS P ER THE ORDER OF THE ITAT 'C' BENCH CHENNAI IN THE CASE OF M/S. A MBILKA COTTON MILLS LIMITED. 7.1 IN VIEW OF THE FACT THAT THE ASSESSEE HAS AL READY ADMITTED THESE AMOUNTS AS REVENUE RECEIPTS, THE ASSESSEE CAN NOT CHALLENGE THE SAME IN APPEAL TO TREAT THE SAME AS C APITAL RECEIPTS. 7.2 THE ASSESSEE HAS ADMITTED RECEIPTS FROM TRADIN G OF CARBON CREDIT AS REVENUE IN NATURE AND INCLUDED THE M FOR COMPUTATION UNDER SECTION 80IA. IT IS CLEARLY SPELT OUT IN THE SECTION 80LA THAT PROFITS AND GAINS DERIVED BY UNDE RTAKING OR ENTERPRISE FROM ANY BUSINESS REFERRED TO IN SUB SECTION (4) IS ELIGIBLE FOR QUANTIFYING THE DEDUCTION. 7.3 THE QUALIFYING WORD USED IS DERIVED , AND RECEIPTS FROM TRADING OF CARBON CREDITS CANNOT BE CONSIDERED AS D ERIVED FROM THE GENERATION OF ELECTRICITY FROM WIND TURBIN E GENERATORS. THEY CAN AT BEST BE CONSIDERED AS ATTRI BUTABLE TO THE BUSINESS OF GENERATION OF ELECTRICITY FROM WTG S FOR THE REASON THAT THE ENERGY GENERATED BY NON-CONVENT IONAL MEANS WHICH INCLUDES WTGS GO TO REDUCE BURNING OF F OSSIL FUELS WHICH IN TURN RESULT IN CLEAN DEVELOPMENT MEC HANISM. THEREFORE CARBON CREDITS ARE DIRECTLY PROPORTIONATE TO THE REDUCTION IN THE AMOUNT OF CARBON-DIOXIDE AND OTHER GREEN HOUSE GASES BY USING NON-CONVENTIONAL MEANS BUT ARE NOT REVENUE DERIVED FROM GENERATION OF ELECTRICITY FROM WTGS. 7.4 IT HAS BEEN HELD IN THE CASE OF CIT V STERLI NG FOODS 237 ITR 579 (SC) THAT THE WORD DERIVED RESTRICTS TH E QUALIFYING PROFITS TO THE PROFITS ARISING DIRECTLY FROM THE PARTICULAR ACTIVITY. 7.5 HENCE CONSIDERING THE FACTS OF THE CASE AND THE DECISION OF THE HONORABLE SUPREME COURT IN STERLING FOODS, REVENUE FROM SALE OF CARBON CREDITS CANNOT BE TREAT ED AS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA. HOWEVER, CONSIDERING THE FACTS AND CIRCUMSTANCES IT INDICATE THAT THE RECEIPTS FROM SALE OF CARBON CREDIT CANNOT BE TRE ATED AS ITA NO. 1583/15 :- 4 -: DERIVED FROM THE UNDERTAKING AND ALSO THE APEX COUR T DECISION IN THE CASE OF STERLING FOODS REITERATED I N LIBERTY INDIA VS. COMMISSIONER OF INCOME TAX (317 ITR 218) THE CLAIM OF THE 80LA CANNOT STAND THE TEST OF LAW AND HENCE DISALLOWED. 7.6 REGARDING THE QUANTUM OF RELIEF THE ASSESSING OFFICER MAY EXAMINE WHETHER RECEIPTS FROM 2009-10 IS TO BE TAKEN IN THE RELEVANT YEAR AND NOT IN ASSESSMENT YEAR 201 0-11. 8.0 IN THE RESULT THE APPEAL IS PARTLY ALLOWED. THEREFORE, THE ASSESSEE IS IN APPEAL. 6. WE HAVE HEARD BOTH PARTIES AND GONE THROUGH THE CASE FILE. THERE IS NO DISPUTE ABOUT THE NATURE OF RECEIPTS AR ISING FROM SALE OF CARBON CREDITS AS THE DECISION OF THE HYDERABAD BENCH OF THE 'TRIBUNAL' IN MY HOME POWER LTD VS DCIT (SUPRA) HA S BEEN UPHELD BY THE HON'BLE ANDHRA PRADESH HIGH COURT VID E ORDER DATED 19.2.2014 HOLDING THEREIN THAT THE SAME ARE N OT AN OFFSHOOT OF BUSINESS BUT ARISE FROM ENVIRONMENTAL CONCERNS. THEIR LORDSHIPS HAVE ALSO OBSERVED THAT THESE CARB ON CREDITS ARE NOT DIRECTLY LINKED WITH POWER GENERATION. IN OTH ER WORDS, IT HAS BEEN HELD AS CAPITAL AND NOT A REVENUE RECE IPT. IT IS TO BE SEEN THAT THE CIT(A) APPLIES ESTOPPEL PRINCIPLE A GAINST THE ASSESSEE. THE ASSESSEE HAD DECLARED THE CARBON CR EDIT SALE RECEIPTS AS INCOME DUE TO THE FACT THAT IT IS OTHER WISE ENTITLED FOR SECTION 80IA DEDUCTION. IN THE LOWER APPELLATE PROC EEDINGS, IT HAD SOUGHT TO WITHDRAW THE SAID DECLARATION. THE C IT(A) HAS NOT QUOTED ANY SPECIFIC PROVISION BARRING SUCH AN A LTERNATIVE PLEA. IN THESE FACTS ONLY, WE OBSERVE THAT AS THE SUBSTANTIAL QUESTION OF LAW HAS BEEN SETTLED AGAINST THE REVENU E ABOUT NATURE OF THE RECEIPT, THE ASSESSEE IS ENTITLED F OR ACCEPTANCE OF ITS ALTERNATIVE CLAIM. SO, WE ACCEPT THE RELEVANT GROUNDS AND HOLD THAT CARBON CREDIT RECEIPTS HAVE TO BE TREA TED AS CAPITAL IN NATURE. SO FAR AS THE ASSESSEES ALTERNATIVE GROUND NO.7 IS CONCERNED THAT THE CIT(A) OUGHT TO HAVE GIVEN A SPE CIFIC DIRECTION TO THE ASSESSING OFFICER FOR EXCLUDING R ECEIPTS OF ` 72,94,322/- FROM SALE OF CARBON CREDITS PERTAINING TO ASSESSMENT YEAR 2009-10, THE ISSUE HAS ONLY BEEN RE STORED BACK. SO, WE LEAVE IT OPEN FOR THE LEARNED ASSESSI NG OFFICER TO ADJUDICATE UPON THE SAME AS PER LAW. ITA NO. 1583/15 :- 5 -: 6. FOLLOWING THE SAID ORDER OF THE TRIBUNAL, WE HOLD T HAT THE INCOME FROM SALE OF CARBON CREDITS IS CAPITAL IN NATURE AND THE SAID INCOME IS NOT ELIGIBLE FOR DEDUCTION U/S 80IA OF THE ACT. WE ORDER ACCORDINGLY. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PART LY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 ST APRIL, 2016, AT CHENNAI. SD/- SD/- ( !'# $ % ) (CHANDRA POOJARI) &' / ACCOUNTANT MEMBER # ( !) *+' & ) (CHALLA NAGENDRA PRASAD) + &' / JUDICIAL MEMBER !+ / CHENNAI ,& / DATED: 1 ST APRIL, 2016 RD &-## ./#0/ / COPY TO: # 1 . / APPELLANT 4. # 1 / CIT 2. / RESPONDENT 5. /2*# 3 / DR 3. # 1#(4 / CIT(A) 6. *5#6 / GF