DCIT, CIR-7(2), KOLKATA, Kolkata V. M/s Salasar Streel & Power Ltd., Kolkata

ITA 506/KOL/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1723 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 3 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 29-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KALYAN NATH CIT SR DR REVEN
• Assessee Lawyers: S M SURANA
• Keywords: Capital receipt
• Section: 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA C BENCH, KOLKATA [BEFORE SRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER & SRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER] I.T.A. NO. 506/KOL/2015 ASSESSMENT YEAR : 2010-11 DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-7(2) KOLKATA.....APPELLANT P-7, CHOWRINGHEE SQUARE R. NO. 53 2 ND FLOOR KOLKATA 700 069 M/S. SALASAR STEEL & POWER LTD......RESPONDENT 1 ST FLOOR, BLOCK-C 3A, AUCKLAND PLACE ROOM NO. 5B, SHAKESPEAR SARANI KOLKATA 700 017 [PAN : AAHCS 2372 N] APPEARANCES BY: SHRI S.M. SURANA, ADVOCATE, APPEARING ON BEHALF OF THE ASSESSEE. SHRI KALYAN NATH, ADDL. CIT, SR. DR, APPEARING ON BEHALF OF THE REVENUE. DATE OF CONCLUDING THE HEARING : AUGUST 02, 2017 DATE OF PRONOUNCING THE ORDER : AUGUST 09, 2017 O R D E R PER J. SUDHAKAR REDDY :- THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-3, KOLKATA (HEREINAFTER THE LD. CIT(A)), DT. 16/02/2013, PASSED U/S 250 OF THE INCOME TAX ACT, 1961 (THE ACT), FOR THE ASSESSMENT YEAR 2010-11. 2. AFTER HEARING RIVAL SUBMISSIONS, WE FIND THAT THE LD. FIRST APPELLATE AUTHORITY, ON THE FIRST ISSUE OF APPORTIONMENT OF OTHER EXPENSES AND 2 I.T.A. NO. 506/KOL/2015 ASSESSMENT YEAR : 2010-11 M/S. SALASAR STEEL & POWER LTD INTEREST ON UNSECURED LOANS AND CASH CREDITS BETWEEN TWO UNITS OF THE ASSESSEE COMPANY, I.E. (A) SPONGE IRON & (B) GENERATION OF ELECTRICITY, PROPORTIONATELY BASED ON TURNOVER, INSTEAD OF 50-50 BASIS ADOPTED BY THE ASSESSING OFFICER. WHILE DOING SO, THE LD. FIRST APPELLATE AUTHORITY APPLIED THE RATIOS OF THE DECISION OF THE ITAT IN THE CASE OF RUIA STUD AND AGRICULTURAL FARMS ... VS 6 TH INCOME-TAX OFFICER 14 ITD 429 (MUM) & ACIT VS. WOCKHARD VETERINARY LTD., & KINVASARA INVESTMENT PVT. LTD. VS. JCIT 110 ITD 198. 2.1. THE LD. DR, COULD NOT SITE ANY CONTRARY DECISIONS, HENCE WE SEE NO REASON TO INTERFERE IN THE SAME. THUS, GROUND NO. 2 OF THE REVENUE IS DISMISSED. 3. GROUND NO. 4, 5 & 6, ARE ON THE ISSUE OF AS TO WHETHER CARBON CREDITS HAVE TO BE TAXED AS REVENUE RECEIPT WAS CAPITL RECEIPT. THE HONBLE MADRAS HIGH COURT IN THE CASE OF PRINCIPAL COMMISSIONER OF INCOME VS. M/S. ARUN TEXTILES PVT. LTD., ORDER DT. 29/08/2016 IN TAX CASE APPEAL NO. 606 OF 2016, AT PARA 6, HELD AS FOLLOWS :- 6. MATERIAL ON RECORD DISCLOSES THAT WHILE CONFIRMING THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS), THE INCOME TAX APPELLATE TRIBUNAL, AT PARAGRAPH NO.6 HAS HELD AS FOLLOWS: 'AFTER HEARING BOTH THE PARTIES, WE ARE OF THE OPINION THAT SIMILAR ISSUE WAS CONSIDERED BY THIS TRIBUNAL IN ASSESSEE'S OWN CASE IN ITA 3 I.T.A. NO. 506/KOL/2015 ASSESSMENT YEAR : 2010-11 M/S. SALASAR STEEL & POWER LTD NO.2174/MDS/2015 DATED 19.06.2015 FOR THE ASSESSMENT YEAR 2010- 11, WHEREIN IT WAS OBSERVED 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 WORLD ATMOSPHERE AND ENVIRONMENT REDUCING CARBON, HEAT AND GAS EMISSIONS. THE ENTITLEMENT EARNED FOR CARBON 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 HAS 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 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 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 BUSINESS AND IT IS A CREDIT FOR REDUCING EMISSIONS. THE PERSONS HAVING CARBON CREDITS GET 4 I.T.A. NO. 506/KOL/2015 ASSESSMENT YEAR : 2010-11 M/S. SALASAR STEEL & POWER LTD BENEFIT BY SELLING THE SAME TO A PERSON WHO NEEDS CARBON CREDITS TO OVERCOME ONE'S NEGATIVE POINT CARBON 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. 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 [21 ITR (TRIB) 186] (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/2013 FOR AY 209-10. 5. SRI VELAYUDHASWAMY SPINNING MILLS (P) LTD. V. DCIT IN ITA NO.582/MDS/2013 FOR AY 2009-10. 6. SRI MATHA SPINNING MILLS PVT. LTD. V. DCIT IN ITA 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 IN 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. 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 (2014) [36 ITR (TRIB) 627] (HYD) 5 I.T.A. NO. 506/KOL/2015 ASSESSMENT YEAR : 2010-11 M/S. SALASAR STEEL & POWER LTD 15. EASTMAN SPINNING MILLS (P) LTD V. DCIT IN ITA NO.1428/MDS/2014 FOR AY 2009-10. 5. IN VIEW OF THE ABOVE, WE ARE INCLINED TO HOLD THAT THE RECEIPT FROM SALE OF CARBON CREDITS HAS TO BE CONSIDERED AS CAPITAL RECEIPT AND ACCORDINGLY, IT IS NOT TAXABLE. THUS, THERE IS NO QUESTION OF CONSIDERING THE SAME FOR DEDUCTION U/S. 80IA OF THE ACT.' 4. THE LD. DR COULD NOT CITE ANY CONTRARY DECISIONS. THUS WE UPHOLD THE FINDING OF THE LD. FIRST APPELLATE AUTHORITY ON THIS ISSUE BOTH ON THE ASPECT OF COMPUTATION OF INCOME UNDER THE NORMAL PROVISION OF THE INCOME TAX ACT, AS WELL AS COMPUTATION OF BOOK PROFITS U/S 115JB OF THE ACT AND DISMISS THIS APPEAL OF THE REVENUE. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. KOLKATA, THE 9 TH DAY OF AUGUST, 2017. SD/- SD/- [S.S. VISWANETHRA RAVI] [ J. SUDHAKAR REDDY ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 09.08.2017 {SC SPS} 6 I.T.A. NO. 506/KOL/2015 ASSESSMENT YEAR : 2010-11 M/S. SALASAR STEEL & POWER LTD COPY OF THE ORDER FORWARDED TO: 1. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-7(2) KOLKATA P-7, CHOWRINGHEE SQUARE R. NO. 53 2 ND FLOOR KOLKATA 700 069 2. M/S. SALASAR STEEL & POWER LTD 1 ST FLOOR, BLOCK-C 3A, AUCKLAND PLACE ROOM NO. 5B, SHAKESPEAR SARANI KOLKATA 700 017 3. CIT(A)- 4. CIT- , 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVATE SECRETARY HEAD OF OFFICE/ D.D.O. ITAT, KOLKATA BENCHES