DCIT, Circle-2(1), Hyderabad, Hyderabad V. Indur Green Power Pvt Ltd., Hyd, Hyderabad

ITA 505/HYD/2015

• Counselvise Citation: 50522514 RSA 2015
• Duration Of Justice: 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 01-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P SOMASEKHAR REDDY
• Assessee Lawyers: V RAGHAVENDRA RAO
• Keywords: Business income; Capital receipt

Judgement Text

ITA NOS.505 AND 506 OF 2015 INDUR GREEN POWER LTD H YDERABAD. PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER & SHRI SAKTIJIT DEY JUDICIAL MEMBER ITA NOS.505 & 506/HYD/2015 (ASSESSMENT YEAR: 2008-09 & 2009-10) DY. COMMISSIONER OF INCOME TAX, CIRCLE 2(1) HYDERABAD PAN-AAACI8813 L VS. M/S INDUR GREEN POWER PRIVATE LIMITED HYDERABAD PAN: AAACI 8813 L (APPELLANT) (RESPONDENT) FOR REVENUE : SHRI P. SOMASEKHAR REDDY, DR FOR ASSESSEE : SHRI V. RAGHAVENDRA RAO DATE OF HEARING : 15.07.2015 DATE OF PRONOUNCEMENT : 22 .07.2015 O R D E R PER SAKTIJIT DEY, J.M. THESE APPEALS ARE BY THE DEPARTMENT AGAINST TWO SE PARATE ORDERS, BOTH DATED 25.2.2015 OF THE LD CIT (A)-II H YDERABAD, PERTAINING TO A.YS 2008-09 AND 2009-10. THE SOLITAR Y COMMON ISSUE ARISING IN BOTH THE APPEALS OF THE DEPARTMENT IS IN RELATION TO THE DECISION OF THE LD CIT (A) ACCEPTING ASSESSE ES CLAIM THAT CONSIDERATION RECEIVED ON SALE OF CERC (CARBON CRED IT EMMISSION REDUCTION CERTIFICATE) IS CAPITAL RECEIPT , HENCE NOT TAXABLE. 2. BRIEFLY, THE FACTS ARE ASSESSEE IS A COMPANY ENG AGED IN GENERATION OF POWER THROUGH BIOMASS. FOR THIS PURPO SE ASSESSEE HAS ESTABLISHED BIOMASS PROJECT IN NIZAMABAD DISTRI CT OF ANDHRA ITA NOS.505 AND 506 OF 2015 INDUR GREEN POWER LTD H YDERABAD. PAGE 2 OF 5 PRADESH. FOR BOTH THE A.YS UNDER CONSIDERATION, ASS ESSEE HAS RECEIVED CARBON CREDIT FROM THE ACTIVITY OF GENERAT ING POWER THROUGH BIOMASS. THE CARBON CREDIT RECEIVED BY THE ASSESSEE WERE SOLD TO A FOREIGN COMPANY M/S CARBON ESTATE SE RVICES SWEDEN AB, STOCKHOLM, SWEDEN AND ASSESSEE RECEIVED AMOUNTS OF RS.2,80,39,592 AND RS.3,95,92,111 RESPECTIVELY F OR THE A.YS 2008-09 AND 2009-10. THE AMOUNTS SO RECEIVED WERE I NCLUDED IN THE PROFITS FROM ELIGIBLE BUSINESS FOR THE PURPOSE OF CLAIMING DEDUCTION U/S 80IA OF THE ACT. IN COURSE OF THE ASS ESSMENT PROCEEDINGS, AO AFTER NOTICING THE FACT THAT ASSESS EE HAS CONSIDERED THE AMOUNTS RECEIVED TOWARDS CARBON CRED IT AS PART OF THE PROFIT OF ELIGIBLE BUSINESS, OPINED THAT RECEIP TS FROM SALE OF CARBON CREDITS CANNOT BE CONSIDERED TO BE PROFIT DE RIVED FROM ELIGIBLE BUSINESS. ACCORDINGLY, HE COMPLETED THE AS SESSMENT FOR BOTH THE A.YS BY REJECTING ASSESSEES CLAIM OF DEDU CTION U/S 80IA ON THE RECEIPTS FROM CARBON CREDIT. IN OTHER WORDS, HE REDUCED THE AMOUNTS RECEIVED TOWARDS SALE OF CARBON CREDIT FROM THE PROFITS OF BUSINESS WHILE COMPUTING THE ALLOWABLE D EDUCTION U/S 80IA OF THE ACT. BEING AGGRIEVED OF THE ASSESSMENT ORDER SO PASSED, ASSESSEE PREFERRED APPEALS BEFORE THE LD CI T (A). 3. BEFORE THE FIRST APPELLATE AUTHORITY ASSESSEE CH ANGED ITS STAND ALTOGETHER BY RAISING AN ISSUE TO THE EFFECT THAT AMOUNT RECEIVED FROM SALE OF CARBON CREDIT BEING A CAPITAL RECEIPT IS NOT AT ALL TAXABLE AT THE HANDS OF THE ASSESSEE. IN SUP PORT OF SUCH CONTENTION, ASSESSEE RELIED UPON A DECISION OF THE ITAT HYDERABAD BENCH IN CASE OF MY HOME POWER LTD. VS. D Y.CIT (151 TTJ 616). ASSESSEE ALSO BROUGHT TO THE NOTICE OF TH E LD CIT (A) THAT THE DECISION OF THE ITAT HYDERABAD BENCH HOLDI NG THE ITA NOS.505 AND 506 OF 2015 INDUR GREEN POWER LTD H YDERABAD. PAGE 3 OF 5 RECEIPT FROM SALE OF CARBON CREDIT AS CAPITAL RECEI PT HAS SUBSEQUENTLY BEEN AFFIRMED BY THE HON'BLE JURISDICT IONAL HIGH COURT WHILE DISMISSING REVENUES APPEAL ON THE ISSU E. LD CIT (A) ON THE BASIS OF SUBMISSIONS MADE BY THE ASSESSEE CA LLED FOR A REMAND REPORT FROM THE AO. AS OBSERVED BY THE LD CI T (A), THOUGH, THE AO ACCEPTED THE FACT THAT THE ITATS DE CISION HOLDING THE RECEIPT FROM CARBON CREDIT AS CAPITAL IN NATURE HAS BEEN AFFIRMED BY THE JURISDICTIONAL HIGH COURT AND HE AL SO OBSERVED THAT THE ISSUE MAY BE DECIDED FOLLOWING THE JUDICIA L DISCIPLINE BUT, AS NOTED BY THE LD CIT (A), ADDITIONAL CIT IN HIS FORWARDING NOTE STATED THAT THE DECISION OF THE ITAT HYDERABAD BENCH AND THE JURISDICTIONAL HIGH COURT ARE AGAINST THE PROVI SIONS OF DIRECT TAX CODE (DTC). LD CIT (A) AFTER CONSIDERING THE SU BMISSIONS OF THE ASSESSEE IN THE LIGHT OF THE JUDICIAL PRECEDENT S ON THE ISSUE AS WELL AS TAKING NOTE OF THE REPORT OF THE AO AS W ELL AS THE ADDITIONAL CIT HELD THAT AS THE DTC HAS NOT BEEN MA DE TO A LAW, THE PROVISIONS OF THE DTC ARE NOT APPLICABLE. THERE FORE, FOLLOWING THE PRINCIPLES OF JUDICIAL DISCIPLINES, LD CIT (A) HELD THAT THE RECEIPT FROM SALE OF CARBON CREDIT BEING CAPITAL IN NATURE CANNOT BE TAXED AT THE HANDS OF THE ASSESSEE. ACCORDINGLY HE ALLOWED ASSESSEES APPEAL FOR BOTH THE A.YS UNDER CONSIDERA TION. 4. BEING AGGRIEVED BY THE ORDER OF THE FIRST APPELL ATE AUTHORITY, THE REVENUE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIALS ON RECORD. BOTH THE LD COUNSELS AGREED BEFORE US TH AT THE ISSUE IN DISPUTE IS SQUARELY COVERED BY THE DECISION OF T HE ITAT HYDERABAD BENCH IN CASE OF MY HOME POWER LTD VS. DC IT ITA NOS.505 AND 506 OF 2015 INDUR GREEN POWER LTD H YDERABAD. PAGE 4 OF 5 (SUPRA) WHEREIN IT IS HELD THAT THE RECEIPT FROM SA LE OF CARBON CREDIT IS IN THE NATURE OF A CAPITAL RECEIPT. IT IS FURTHER OBSERVED THAT THE DEPARTMENTS APPEAL AGAINST THE AFORESAID DECISION OF THE ITAT HYDERABAD BENCH WAS DISMISSED BY THE HON'B LE JURISDICTIONAL HIGH COURT IN CASE OF CIT VS. MY HOM ES POWER LTD (365 ITR 82). THE HON'BLE HIGH COURT WHILE DISMISSI NG THE APPEAL HELD AS UNDER: 3 . WE HAVE CONSIDERED THE AFORESAID SUBMISSION AND WE ARE UNABLE TO ACCEPT THE SAME, AS THE LEARNED TRIBU NAL HAS FACTUALLY FOUND THAT 'CARBON CREDIT IS NOT AN OFFSH OOT 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 ANALYSIS AS THE ASSESSEE IS CARRYING O N 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 H ENCE AS CORRECTLY HELD BY THE TRIBUNAL IT IS CAPITAL REC EIPT AND IT CANNOT BE BUSINESS RECEIPT OR INCOME. IN THE CIRCUM STANCES, WE DO NOT FIND ANY ELEMENT OF LAW IN THIS APPEAL 6. THUS, AS CAN BE SEEN, THE ISSUE IN DISPUTE, WHET HER THE RECEIPT FROM SALE OF CARBON CREDIT IS A CAPITAL REC EIPT STANDS SETTLED IN FAVOUR OF THE ASSESSEE BY VIRTUE OF THE AFORESAID DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT. IN THE AFORESAID VIEW OF THE MATTER, LD CIT (A)S DECISION BEING IN CONSONANCE WITH THE PRINCIPLES LAID DOWN BY THE COORDINATE BENCH AS WELL AS THE HON'BLE JURISDICTIONAL HIGH COURT ON THIS ISSUE, DE SERVES TO BE UPHELD. ACCORDINGLY, WE DO SO BY DISMISSING THE GRO UNDS RAISED BY THE REVENUE IN BOTH THE APPEALS. ITA NOS.505 AND 506 OF 2015 INDUR GREEN POWER LTD H YDERABAD. PAGE 5 OF 5 7. IN THE RESULT, BOTH THE APPEALS OF THE REVE NUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND JULY, 2015. S D/ - S D/ - (P.M. JAGTAP) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 22 ND JULY, 2015. VNODAN/SPS COPY TO: 1. DY. COMMISSIONER OF INCOME TAX, CIRCLE 2(1) HYDERAB AD 2. M/S INDUR GREEN POWER PRIVATE LIMITED , NO.8-2-684/2/A NSL ICON, 4 TH FLOOR,PLOT NO.1 TO 4, ROAD NO.12, BANJARA HILLS, OPP: ICICI BANK, HYDERABAD 3. CIT(A) -2 HYDERABAD 4. PRINCIPAL COMMISSIONER OF INCOME TAX, 2 HYDERABAD 5. THE DR, ITAT, HYDERABAD 6. GUARD FILE BY ORDER