2014 (9) TMI 922

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..... Decided in favour of assessee.
Dr. O.K. NARAYANAN & SHRI VIKAS AWASTHY, JJ. For the Appellant : Shri N.Vijay Kumar, C.A., For the Respondent : Shri C.V.Panavana Kumar, JCIT ORDER Vikas Awasthy (Judicial Member).- The appeal has been filed by the assessee against the order of the Commissioner of Income-tax (Appeals)-II, Coimbatore, dated December 11, 2013 relevant to the assessment year 2009-10. The only issue in appeal is: whether the amount of ₹ 2,59,64,391 received by the assessee on account of clean development mechanism (CDM) is capital or revenue receipt ? 2. The assessee is engaged in the business of spinning cotton yarn and generation of electricity through wind electrical generators. The assessee in its return of inco .....

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..... the orders of the authorities below and examined the decisions on which both sides have placed reliance. The Hyderabad Bench of the Tribunal in the case of My Home Power Ltd. v. Deputy CIT reported as [2013] 21 ITR (Trib) 186 (Hyd) has held carbon credit as capital receipts. The relevant extract of the findings of the co-ordinate Bench are as under (page 202) : "We have heard both parties and perused the material on record. 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 .....

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..... business. In our opinion, carbon credit is entitlement or accretion of capital and hence income earned on sale of these credits is capital receipt. For this proposition, we place reliance on the judgment of the Supreme Court in the case of CIT v. Maheshwari Devi Jute Mills Ltd. [1965] 57 ITR 36 (SC) wherein it is held that transfer of surplus loom hours to other mill out of those allotted to the assessee under an agreement for control of production was capital receipt and not income. Being so, the consideration received by the assessee is similar to consideration received by transferring of loom hours. The Supreme Court considered this fact and observed that taxability of payment received for sale of loom hours by the assessee is on account .....

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