ACIT, CHENNAI V. Wescare (India) Limited, CHENNAI

ITA 509/CHNY/2017

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 6646 (ITAT-CHENNAI)
• Duration Of Justice: 4 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-04-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 28-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S BHARATH
• Keywords: Reasonable cause; Capital receipt; Condonation of delay; Set aside
• Section: 80IA

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , A B ENCH, CHENNAI . , . , $ BEFORE SHRI V.DURGA RAO, JUDICIAL MEMBER AND SHRI G.MANJUNATHA, ACCOUNTANT MEMBER ./ I.T.A.NO.509/CHNY/2017 ( / ASSESSMENT YEAR: 2009-10) THE ASSISTANT COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-3(2), CHENNAI-34. VS M/S.WESCARE (INDIA) LTD. NOW AMALGAMATED WITH M/S.VAATA SMART LTD. 7, 11 TH AVENUE, ASHOK NAGAR CHENNAI-600 083. PAN: AADCC 3678E ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. S.BHARATH, CIT /RESPONDENT BY : MR. I.DINESH, ADVOCATE /DATE OF HEARING : 23.03.2021 /DATE OF PRONOUNCEMENT : 12 .04.2021 / O R D E R PER G.MANJUNATHA, AM: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF THE LEARNED CIT(A)-11, CHENNAI DATED 30.1 1.2016 AND PERTAINS TO ASSESSMENT YEAR 2009-10. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THE ORDER OF THE LEARNED CIT(A) IS CONTRARY TO LAW AND FACTS AND CIRCUMSTANCES OF THE CASE. 2.1 THE LD.CLT(A) ERRED IN ALLOWING THE ASSESSEES CLAIM OF TREATING THE RECEIPT ON SALE OF CARBON CREDIT AS CA PITAL RECEIPT THOUGH THE SAME IS A REVENUE RECEIPT. 2.2 THE LD.CIT(A) OUGHT TO HAVE CONSIDERED THE FOL LOWING FACTS WHILE DECIDING THE ISSUE. 2 ITA NO.509/CHNY/2017 (I) IT IS A COMPENSATION FOR INCURRING EXTRA COST I N USING ALTERNATE FUEL. (II) IT IS NOT AWARDED FOR IMPAIRMENT OR DESTRUCTIO N OF ANY CAPITAL STRUCTURE OR SOURCE OF INCOME OF THE ASSESSEE. (III) IT IS A BENEFIT GIVEN TO THE INDUSTRY FOR CAR RYING OUT BUSINESS BY USING ALTERNATE FUEL. (IV) IT SHOULD BE TAXABLE AS REVENUE RECEIPT UNDER SECTION 28(IV). (V) THE ENTITLEMENT TO CERTIFIED EMISSION REDUCTIO N IS AKIN TO IMPORT ENTITLEMENTS WHOSE SALE PROCEEDS ARE TAXABLE AS REVENUE RECEIPTS AND THEY ARE ALSO TRADA BLE IN STOCK EXCHANGE. 2.3 IT IS SUBMITTED THAT THE DECISION OF THE HONB LE HIGH COURT OF ANDHRA PRADESH RELIED ON BY THE CIT(A) IN THE CA SE OF MIS. MY HOME POWER LIMITED (365 ITR 82) IS NOT ACCEPTED BY THE DEPARTMENT AND SLP FILED IN THIS CASE AND OTHER GRO UP CASES ARE PENDING BEFORE THE HONBLE SUPREME COURT. 3. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCE D AT THE TIME OF BEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED CIT (A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFI CER RESTORED. 3. WE FIND THAT APPEAL FILED BY THE REVENUE IS BA RRED BY LIMITATION OF 7 DAYS FOR WHICH NECESSARY PETITIO N FOR CONDONATION OF DELAY ALONG WITH AFFIDAVIT EXPLAIN ING THE REASONS FOR THE DELAY HAS BEEN FILED. THE LEARN ED DR SUBMITTED THAT THERE WAS A DELAY IN GETTING APPROVA L FOR FILING APPEAL, THE DEPARTMENT COULD NOT FILE APPEAL WITHIN THE TIME 3 ITA NO.509/CHNY/2017 ALLOWED UNDER THE ACT, THEREFORE DELAY MAY BE CONDO NED. HAVING HEARD BOTH SIDES AND CONSIDERED THE PETITION FILED BY THE REVENUE FOR CONDONATION OF DELAY, WE ARE OF THE CON SIDERED VIEW THAT REASONS GIVEN BY DEPARTMENT FOR NOT FI LING THE APPEAL WITHIN THE TIME ALLOWED UNDER THE ACT COME S UNDER REASONABLE CAUSE AS PROVIDED UNDER THE ACT FOR CO NDONATION OF DELAY AND HENCE, DELAY IN FILING OF ABOVE APPE AL IS CONDONED AND APPEAL FILED BY THE REVENUE IS ADMIT TED FOR ADJUDICATION. 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY IS ENGAGED IN THE BUSINESS OF POWER GENERATION THROUGH NON- CONVENTIONAL SOURCES I.E., WINDMILLS, FILED ITS RET URN OF INCOME FOR THE ASSESSMENT YEAR 2009-10 ON 07.10.2009 ADMITTING NIL INCOME. THE ASSESSMENT FOR THE IMPUGNED ASSESSMENT YEAR HAS BEEN COMPLETED U/S.143(3) OF THE ACT ON 30.12. 2011 BY DETERMINING TOTAL INCOME AT ` 24,10,36,209/- BY MAKING VARIOUS ADDITIONS INCLUDING ADDITIONS TOWARDS DIFFERENCE IN SALE OF WTGS, INTEREST ON DEBENTURES NOT PAID, LEASE DEPOS IT WRITTEN OFF OF SUNDRY DEBTORS, CESSATION OF LIABILITY TOWA RDS SUNDRY 4 ITA NO.509/CHNY/2017 CREDITORS AND INTEREST PAYABLE TO OBC DISALLOWED U /S.43B OF THE ACT. 5. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFOR E THE FIRST APPELLATE AUTHORITY. BEFORE THE LEARNED CIT(A), THE ASSESSEE HAS ALSO FILED ADDITIONAL GROUND OF APPEAL CHALLENG ING EXCLUSION OF CERS (CARBON CREDIT) FROM TAXATION ON THE GROU ND THAT SALE OF CERS IS CAPITAL RECEIPT AND NOT LIABLE FOR TAXA TION. THE LEARNED CIT(A), FOR THE DETAILED REASONS RECORDED IN HIS APPELLATE ORDER, ALLOWED ADDITIONAL GROUND FILED BY THE ASSESSEE AND DIRECTED THE ASSESSING OFFICER TO TREAT SALE O F CARBON CREDIT AS CAPITAL RECEIPT AND NOT LIABLE TO TAX. THE RELEV ANT FINDINGS OF THE LEARNED CIT(A) ARE AS UNDER:- 10. ADDITIONAL GROUND: TREATMENT OF SALE OF CERS C ARBON CREDIT) AS PITA1 RECEIPT AND NOT LIABLE FOR TAXATI ON, 10.1 APPELLANTS SUBMISSIONS BEFORE THE CIT(A): DURING APPEAL PROCEEDING, THE APPELLANT HAS MADE TH E FOLLOWING SUBMISSION WITH REGARD TO THE ADDITIONAL GROUND RAI SED: THE PETITIONER FILED ITS RETURN OF INCOME FOR THIS ASSESSMENT YEAR ON 07.10.2009. IN THE PROFIT & LOSS A/C OTHER INCOME OF ` 38,66,83,978/- HAD BEEN CREDITED. IN THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER CALLE D FOR DETAILS OF THIS VIDE HIS LETTER DATED 11.10.2011 (P AGE 53 OF ADDITIONAL PAPER BOOK). THE ASSESSEE, VIDE ITS REPL Y DATED 5 ITA NO.509/CHNY/2017 27.10.2011 (PAGE 54 OF ADDITIONAL PAPER BOOK), SUBM ITTED THE DETAILS. COMPRISED THEREIN IS A SUM OF RS. 14,10,48 ,426/- BEING THE REALISATION OF SALE OF CERS. 2. THE PETITIONER HAS NOW BEEN ADVISED THAT THE C ERS (CARBON CREDIT) IS A CAPITAL RECEIPT AND IS NOT LIABLE FOR TAXATION. THE PETITIONER HAS ALSO BEEN ADVISED THAT THE INCOME TA X APPELLATE TRIBUNAL, CHENNAI, IN THE CASE OF AMBIKO COTTON MIL LS VS. ACIT (61 SOT 31] AND ALSO THE ANDHRA PRADESH HIGH COURT IN CASE OF CIT VS. MY HOME POWER (315 ITR 82) HAVE UPHELD THE CLAIM. THE PETITIONER HENCE BEGS TO SUBMIT THE FOLLOWING A DDITIONAL GROUNDS OF APPEAL. THE PETITIONER FURTHER SUBMITS T HAT NO FRESH INVESTIGATION IS REQUIRED AND THE ADDITIONAL GROUND RAISED IS PURELY A LEGAL ISSUE. THE PETITIONER HENCE PRAYS TH AT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) BE PLE ASED TO ADMIT THE ADDITIONAL GROUND AND THUS RENDER JUSTICE . 10.2 CIT(A)S RERNARKS AND DECISION: THE APPELLANT HAS MADE A FRESH CLAIM THROUGH A N ADDITIONAL GROUND AS MENTIONED ABOVE. IN VIEW OF THE DECISION OF APEX COURT IN THE CASE OF GOETZE INDIA LTD.( 2006) 284 I TR 323 (SC) AND OF HONBLE HIGH COURT OF MADRAS IN THE CASE OF RAMCO CEMENTS (2015) 373 ITR 146 (MAD), WHEREIN IT IS HEL D THAT THE APPELLATE AUTHORITY CAN ENTERTAIN A FRESH CLAIM, WH ICH WAS NOT MADE IN THE ORIGINAL RETURN OF INCOME, THE APPELLAN TS ADDITIONAL GROUND IS TAKEN UP FOR ADJUDICATION. 10.2.1 THE APPELLANT HAS CLAIMED THAT THE SALE OF CERS (CARBON CREDIT) IS A CAPITAL RECEIPT AND IS NOT LIA BLE FOR TAXATION BY RELYING ON THE DECISIONS AS MENTIONED ABOVE UNDE R PARA 10.1. IN THE CASES RELIED ON BY THE APPELLANT AS ME NTIONED ABOVE, IT IS CLEARLY HELD THAT THE SALE PROCEED OF CARBON CREDIT IS A CAPITAL RECEIPT AND IS NOT LIABLE FOR TAXATION. T HE RELEVANT PORTION OF THE ABOVE CASE LAWS ARE REPRODUCED HEREU NDER: A) AMBIKO COTTON MILLS VS. ACIT 161 SOT 31) 6 ITA NO.509/CHNY/2017 SECTION 4 OF THE INCOME-TAX ACT, 1961 - INCOME - CH ARGEABLE AS CAPITAL RECEIPT OR REVENUE RECEIPT] - ASSESSMENT YE AR 2009-10 - WHETHER RECEIPTS ON ACCOUNT OF SALE OF CARBON CREDI TS IS TO BE CONSIDERED AS CAPITAL RECEIPT - HELD, YES (PARA 13] -IN FAVOUR OF ASSESSEE. B) CIT VS. MY HOME POWER 365 ITR 82) SECTION 28(I) OF THE INCOME-TAX ACT, 1961 - BUSINES S INCOME - CHARGEABLE AS (CARBON CREDITS) - ASSESSMENT YEAR 20 07-08 ASSESSEE COMPANY WAS ENGAGED IN BUSINESS OF POWER GENERATION THROUGH BIOMASS POWER GENERATION UNIT - IT RECEIVED CARBON CREDITS, NAMELY, CARBON EMISSION REDUCTION C ERTIFICATES FOR ITS PROJECT ACTIVITY OF SWITCHING OFF FOSSIL, F UEL FROM NAPTHA AND DIESEL TO BIOMASS - IT TRANSFERRED SAID CARBON CRED ITS AND OFFERED RECEIPT FROM SAID TRANSFER AS CAPITAL RECEIPT - HOW EVER, ASSESSING OFFICER TREATED THE SAID RECEIPT AS BUSIN ESS INCOME AND BROUGHT THE SAME TO TAX - TRIBUNAL HELD THAT CA RBON CREDIT NOT BEING AN OFFSHOOT OF BUSINESS BUT AN OFFSHOOT O F ENVIRONMENTAL CONCERN AMOUNT RECEIVED ON THEIR TRAN SFER HAD NO ELEMENT OF PROFIT OR GAIN - WHETHER SINCE CARBON CREDIT WAS NOT EVEN INKED WITH POWER GENERATION TRIBUNAL WAS J USTIFIED IN ITS DECISION- HELD, YES [PARA 2] IN FAVOUR OF ASSES SEE. 10.2.2. IN VIEW OF THE ABOVE DECISIONS WHICH ARE DI RECTLY ON THE POINT IN FAVOUR OF ASSESSEE, THE APPELLANTS GROUND ON THIS ISSUE IS ALLOWED. 6. THE LEARNED DR SUBMITTED THAT THE LEARNED CIT( A) HAS ERRED IN ALLOWING THE CLAIM OF THE ASSESSEE REGARDI NG TREATMENT OF SALE OF CARBON CREDIT AS CAPITAL RECEIPT, WITHO UT APPRECIATING THE FACT THAT IT IS A COMPENSATION FOR INCURRING E XTRA COST IN USING ALTERNATE FUEL AND FURTHER, IT IS A BENEFIT GIVEN TO THE INDUSTRY FOR CARRYING OUT BUSINESS BY USING ALTERNA TE FUEL. THE DR FURTHER SUBMITTED THAT ENTITLEMENT TO CERTIFY EM ISSION 7 ITA NO.509/CHNY/2017 REDUCTION IS AKIN TO IMPORT ENTITLEMENTS, WHOSE SAL E PROCEEDS ARE TAXABLE AS REVENUE RECEIPTS AND THEY ARE ALSO T RADABLE IN STOCK EXCHANGE. THEREFORE, THE LEARNED CIT(A) HAS G ROSSLY ERRED IN DIRECTING THE ASSESSING OFFICER TO TREAT SALE OF CARBON CREDIT AS CAPITAL RECEIPT BY FOLLOWING THE DECISI ON OF THE HONBLE HIGH COURT OF ANDHRA PRADESH IN THE CASE O F M/S. MY HOME POWER LTD. (365 ITR 82), IGNORING THE FACT THA T DEPARTMENT HAS NOT ACCEPTED THE DECISION OF THE HON BLE HIGH COURT OF ANDHRA PRADESH AND FILED SLP BEFORE THE HO N'BLE SUPREME COURT, WHICH IS PENDING FOR CONSIDERATIO N. 7. THE LEARNED AR FOR THE ASSESSEE, ON THE OTHER HA ND, SUBMITTED THAT THE ISSUE IS SQUARELY COVERED IN FAV OUR OF THE ASSESSEE BY THE DECISION OF HON'BLE HIGH COURT OF M ADRAS IN THE CASE OF M/S. S.P. SPINNING MILLS PVT.LTD. VS. A CIT IN T.C.A NO.451 OF 2018 VIDE ORDER DATED 19.01.2021, WHERE T HE HONBLE HIGH COURT HELD THAT RECEIPT BY WAY OF SALE OF CARB ON CREDIT HAS BEEN HELD TO BE CAPITAL RECEIPT AND NOT LIABLE FOR TAXATION. 8. WE HAVE HEARD BOTH THE PARTIES, PERUSED MATERIAL S AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIES 8 ITA NO.509/CHNY/2017 BELOW. WE FIND THAT THE LEARNED CIT(A) HAS ALLOWED CLAIM OF THE ASSESSEE FOR EXCLUSION OF RECEIPT FROM SALE OF CERS (CARBON CREDIT) AS CAPITAL RECEIPT BY FOLLOWING THE DECISI ON OF THE HONBLE HIGH COURT OF ANDHRA PRADESH IN THE CASE O F M/S. MY HOME POWER LTD. (SUPRA), WHERE THE HONBLE HIGH COU RT HELD THAT CARBON CREDIT NOT BEING AN OFFSHOOT OF BUSINES S, BUT AN OFFSHOOT OF ENVIRONMENTAL CONCERN, AMOUNT RECEIVED ON TRANSFER HAD NO ELEMENT OF PROFIT OR GAIN. THE HON' BLE JURISDICTIONAL HIGH COURT OF MADRAS IN THE CASE OF AMBIKA COTTON MILLS VS ACIT (61 SOT 31) HAD CONSIDERED AN IDENTICAL ISSUE AND HELD THAT SALE OF CARBON CREDIT IS TO BE CONSIDERED AS CAPITAL RECEIPT. THE HON'BLE HIGH COURT OF MADRAS IN THE CASE OF M/S. S.P. SPINNING MILLS PVT.LTD. VS. ACIT (SUPR A) HAD ONCE AGAIN REITERATED ITS EARLIER FINDINGS IN THE CASE O F AMBIKA COTTON MILLS VS ACIT (SUPRA) AND HELD THAT RECEIPT BY WAY OF SALE OF CARBON CREDIT WILL NOT FALL WITHIN THE DEFINITION OF TOTAL INCOME AND THE SAME CANNOT BE INCLUDED U/S. 80IA OF THE A CT. THE SUM AND SUBSTANCE OF RATIOS OF THE HONBLE HIGH COU RTS ARE THAT RECEIPT BY WAY OF SALE OF CARBON CREDIT IS A CAPIT AL RECEIPT AND CANNOT BE INCLUDED IN TAXABLE INCOME. THE LEARNED C IT(A) AFTER 9 ITA NO.509/CHNY/2017 CONSIDERING RELEVANT FACTS AND ALSO BY FOLLOWING CE RTAIN JUDICIAL PRECEDENTS HAS RIGHTLY DIRECTED THE ASSESSING OFFI CER TO TREAT SALE OF CARBON CREDIT AS CAPITAL RECEIPT AND NOT LI ABLE FOR TAX. HENCE, WE ARE INCLINED TO UPHOLD THE FINDINGS OF LE ARNED CIT(A) AND DISMISS THE APPEAL FILED BY REVENUE. 9. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH APRIL, 2021 SD/- SD/- ( . ) ( . ) (V.DURGA RAO) (G.MANJUNATHA ) ' % / JUDICIAL MEMBER % / ACCOUNTANT MEMBER ' /CHENNAI, ( / DATED 12 TH APRIL, 2021 DS *+ ,+ /COPY TO: 1. APPELLANT 2. RESPONDENT 3. - () /CIT(A) 4. - /CIT 5. + 1 /DR 6. /GF .