2022 (3) TMI 149 - AT - Income Tax

Nature of receipt - Amount received towards carbon credit by excluding from the total income, as being in the nature of capital receipt - HELD THAT - We noted that during the course of assessment proceedings before the AO, the assessee claimed that it had received a sum during the year towards carbon credit under Clean Development Mechanism (CDM) and incurred expenditure by way of registration fee. The assessee claimed that the amount should be excluded from the total business proceeds as the receipt is in the nature of capital and not revenue. The AO assessed the same as business income. Aggrieved, assessee preferred appeal before CIT(A) and the CIT(A) also confirmed the action of the AO. Aggrieved, assessee is in appeal before the Tribunal. We noted that this issue is covered in the favour of the assessee by the decision of Hon ble High Court of Madras in the casea of S.P. Spinning Mills Pvt. Ltd. 2021 (1) TMI 1081 - MADRAS HIGH COURT CIT vs. Ambika Cotton Mills Ltd. 2021 (3) TMI 442 - MADRAS HIGH COURT and by the decision of Co-ordinate Bench of this Tribunal in assessee s own case for the assessment year 2013-14. As the issue is squarely covered in assessee s own case we consistently following the same allow this appeal of the assessee.

Summary

Issues:
Appeal against rejection of amount received towards carbon credit as capital receipt.

Analysis:
The appeal pertains to the rejection by the Commissioner of Income Tax (Appeals) of the assessee's claim regarding the amount received towards carbon credit, excluding it from total income as a capital receipt. The assessee argued that the receipt should be treated as capital, not revenue, which was not claimed before the Assessing Officer initially but during the assessment proceedings. The Assessing Officer treated the amount as business income, leading to the appeal before the CIT(A) and subsequently before the Tribunal.

Upon considering the facts and contentions, the Tribunal observed that the assessee received a substantial sum towards carbon credit and incurred registration fees. Citing relevant legal precedents, including decisions by the Hon'ble High Court of Madras and a Co-ordinate Bench of the Tribunal, it was established that the issue was in favor of the assessee. Notably, the Tribunal referred to the decision in the assessee's own case for the assessment year 2013-14, where a similar issue was decided in favor of the assessee. Consequently, the Tribunal allowed the appeal, following the consistent application of the legal principles established in prior judgments.

In conclusion, the Tribunal allowed the appeal filed by the assessee, emphasizing the consistent legal interpretation regarding the treatment of the amount received towards carbon credit as a capital receipt. The decision was pronounced in court on 25th February 2022 in Chennai, in favor of the assessee.