THE COMMISSIONER OF INCOME-TAX V. M/S AMBUTHIRTHA POWER PVT LTD

ITA/425/2014

AI Insights

The case involves an appeal by the Commissioner of Income Tax and the Income-Tax Officer against M/s. Ambuthirtha Power Pvt. Ltd., concerning the taxability of income from the sale of carbon credits for the assessment year 2009-10. The primary legal question was whether the income from the sale of carbon credits should be treated as capital receipts or revenue receipts. The Income Tax Appellate Tribunal had previously ruled in favor of the assessee, treating the income as capital receipts. The Revenue challenged this decision in the High Court, which ultimately dismissed the appeal, referencing a similar case (Subhash Kabini Corporation Ltd.) where it was held that such income is to be treated as capital receipts.

• Counselvise Citation: [2020] 140 COUNSELVISE.COM (IT) 741708 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 05-10-2020
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax-III \/ Subhash Kabini Corporation Ltd. 385 ITR 592(KAR)
• Laws Referred To: Income Tax Act 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: T NARAYANA
• Assessee Lawyers: K V ARAVIND
• Keywords: Capital Receipts; Carbon credit; Certified Emission Reductions; Income tax appeal
• Section: 260A; 28(iv)

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 5TH DAY OF OCTOBER 2020 PRESENT THE HON’BLE MR.JUSTICE ALOK ARADHE AND THE HON’BLE MR.JUSTICE H.T.NARENDRA PRASAD I.T.A NO.425/2014 BETWEEN: 1. THE COMMISSIONER OF INCOME TAX., C.R.BUILDING QUEENS ROAD, BANGALORE. 2. THE INCOME-TAX OFFICER WARD-11(1) RASHTROTHANA BHAVAN NRUPATHUNGA ROAD, BANGALORE. …. APPELLANTS (BY SRI.K.V.ARAVIND ADV.) AND M/S. AMBUTHIRTHA POWER PVT. LTD., NO.137, 7TH FLOOR H.M.G. AMBASSADOR BUILDING RESIDENCY ROAD BANGALORE-560 025. …RESPONDENT (BY SRI.T.SURYA NARAYANA, ADV.) 2 THIS ITA IS FILED UNDER SECTION 260(A) OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED: 16.05.2014 PASSED IN ITA NO.465/BANG/2013, FOR THE ASSESSMENT YEAR 2009-10. PRAYING THIS HON’BLE COURT TO: I) FORMULATE THE SUBSTANTIAL QUESTION OF LAW STATED ABOVE. II) ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME-TAX APPELLATE TRIBUNAL, BANGALORE IN ITA NO.465/BANG/2013 DATED:16.05.2014 AND CONFIRM THE ORDER OF TE APPELLATE COMMISSIONER CONFIRMING THE ORDER PASSED BY THE INCOME TAX OFFICER, WARD-11(1) BANGALORE. THIS ITA COMING ON FOR HEARING, THIS DAY, ALOK ARADHE J., DELIVERED THE FOLLOWING: JUDGMENT Mr.K.V.Aravind, learned counsel for the Revenue. Mr.T.Suryanarayana, learned counsel for the assessee. 2. This appeal under Section 260A of the Income Tax Act, 1961 has been filed by the Revenue. The subject matter pertains to the Assessment year 3 2009-10. The appeal was admitted by a Bench of this Court vide order dated 30.3.2015 on following substantial questions of law: 1. Whether the Tribunal was correct in holding that the sale of carbon credit is to be considered as capital receipts thereby allowing the alternative ground without appreciating that the assessee and its return of income had admitted that the income from sale of carbon credits is taxable u/s.28(iv) as the carbon credits was issued on net electricity generated which is traceable to its manufacturing activity and the receipts were inseparable from the business of generation of power?. 2. Whether the Tribunal was correct in allowing the alternative plea of the assessee that the consideration received on sale of carbon credits was a capital received without appreciating that certified emission reductions (CERs) are not awarded as a subsidy but granted as an incentive for use of alternative fuel which is 4 a revenue item, that they are not granted against or impairment of profit-making apparatus; that it is not awarded for transfer of any capital asset nor granted as subsidy or compensation for partly meeting the cost of the plant and machinery and that according to AS-9 Certified Emission Reductions(CERs) are considered as inventories and valued accordingly by the industry?” 3. At the outset, when the matter was taken up today, the learned counsel for the assessee pointed out that the substantial questions of law involved in this appeal have already been answered by the Bench of this Court in the case of Commissioner of Income Tax-III –v- Subhash Kabini Corporation Ltd. 385 ITR 592(KAR) decided on 29.3.2016. The aforesaid legal position could not be disputed by the learned counsel for the Revenue. 5 4. We have considered the submissions made on both sides. In view of the law laid down by this Court in Subhash Kabini Corporation Ltd. (supra) and for the reasons assigned therein, the substantial questions of law framed by this court are answered against the Revenue and in favour of the assessee. 5. In the result, we find no merit in the appeal. The same fails and is hereby dismissed. Sd/- JUDGE Sd/- JUDGE DM/- "