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2023 (6) TMI 1025 - AT - Income TaxReceipts on sale of Renewable Energy Certificates REC ESCERTS - capital receipt or revenue receipt - DR placed that the claim of the assessee as not related to carbon credit, so, it is not covered u/s 115BBG or as exempted income - DR argued that the revenue had properly taken it as an income from business - HELD THAT - The assessee claimed the transfer value of REC/ESCs amounting to Rs. 17,77,26000/-in return under section 1115BBG and paid tax. During the time of assessment, the assessee amended the claim and treated the income as capital receipt. As relied on the orders My Home Power Ltd, 2014 (6) TMI 82 - ANDHRA PRADESH HIGH COURT and Maheshwari Devi Jute Mills Ltd. 1965 (4) TMI 10 - SUPREME COURT the income is offshoot from environmental concern not from offshoot of business concern. The nature is fully related to environmental health. We find that said income is capital in nature and not liable to tax under business income. Amendment of claim in assessment stage - The transfer value of REC/ESCs was duly claimed as capital receipt in assessment stage. As relying on case of Goetze (India) Ltd 2006 (3) TMI 75 - SUPREME COURT case of Ankit Metal Power Ltd 2019 (7) TMI 878 - CALCUTTA HIGH COURT Both the orders have not impinged the power of ITAT u/s 254 to allow the claim duly amended by assessee after filing the return. The revised claim made by the assessee during the time of assessment is duly accepted. We set aside the order of CIT(A) and restore the claim of assessee. Commission paid by the assessee was treated as bogus and added back u/s 69C - DRP issued the SCN for enhancement, through e-mail, for the first time on 27th June, 2022 and the assessee was allowed time up to 28.06.2022 to respond to the same and the order making enhancement was passed by the DRP on 29.06.2022 - grievance of the assessee is that the ld. DRP has acted beyond jurisdiction u/s 144C(8) - HELD THAT - After submission of requisite documents as evidence of transaction, the ld. DRP had not considered the same. Considering the submission of assessee the Tax Invoice, transaction through bank account and the TDS certificate are duly placed before the bench as proof of transaction with M/s Zylo International. DR has not made any objection about the assessee s submission and not able to submit any contrary judgment against the assessee. It is pertinent to mention the revenue was not able to submit any transaction with M/s Rolmex International Prop. Jaswant Singh with the assessee. The addition cannot be on basis of surmises and conjectures. See Umacharan Shaw Bros 1959 (5) TMI 11 - SUPREME COURT . In our considered view the addition amount is quashed.
Issues Involved:
1. Whether the income from the sale/transfer of Renewable Energy Certificates (RECs) and Energy Saving Certificates (ESCs) is capital in nature or business income. 2. Whether the claim regarding the nature of income can be amended during the assessment stage. 3. Whether the addition of commission paid to Zylo International under Section 69C was justified. Summary: Issue 1: Nature of Income from RECs/ESCs The assessee argued that the income earned from the sale/transfer of RECs and ESCs amounting to Rs. 17,77,26,000/- should be treated as capital receipt, not business income. The assessee initially claimed this income under Section 115BBG and paid tax at a special rate but later amended the claim during assessment proceedings, asserting that the income is capital in nature and exempt from tax. The Tribunal relied on precedents like My Home Power Ltd. and Maheshwari Devi Jute Mills Ltd., which held that such income is an offshoot of environmental concerns and not business activities. The Tribunal concluded that the income from RECs and ESCs is capital in nature and not liable to tax as business income. Issue 2: Amendment of Claim During Assessment The Tribunal addressed whether the assessee could amend its claim regarding the nature of income during the assessment stage. The Tribunal referenced the Supreme Court's decision in Goetze (India) Ltd., which allows the Income Tax Appellate Tribunal to entertain claims not raised before the Assessing Officer if the facts are on record. The Tribunal accepted the assessee's revised claim, treating the income from RECs and ESCs as capital receipts. Issue 3: Addition of Commission Paid Under Section 69C The assessee contested the addition of Rs. 4,57,32,318/- made by treating the commission paid to Zylo International as bogus under Section 69C. The Tribunal noted that the Dispute Resolution Panel (DRP) issued a show-cause notice for enhancement of income without providing adequate time for the assessee to respond. The Tribunal found that the assessee provided sufficient evidence, including tax invoices, bank statements, and TDS certificates, to substantiate the transaction with Zylo International. The Tribunal held that the addition was based on surmises and conjectures without any independent inquiry by the DRP. Consequently, the Tribunal quashed the addition of Rs. 4,57,32,318/- under Section 69C. Conclusion: The Tribunal allowed the appeal, concluding that the income from RECs and ESCs is capital in nature, the amended claim during assessment is valid, and the addition of commission under Section 69C is unjustified.
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