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TMI Blog2013 (8) TMI 935X X X X Extracts X X X X X X X X Extracts X X X X ..... (3) TMI 860 - Madras High Court), for the purpose of claiming deduction under Section 80-IA, each unit has to be considered independently. Lower authorities fell in error in considering the Carbon Credit as revenue receipts. - I.T.A. No. 609/Mds/2013, I.T.A. No. 616/Mds/2013 - - - Dated:- 30-8-2013 - Abraham P. George (Accountant Member) And Challa Nagendra Prasad (Judicial Member) For the Petitioner : Anirudh Rai (CIT) For the Respondent : T. Banusekar (CA) ORDER Abraham P. George (Accountant Member) These are cross appeals filed by the Revenue and assessee respectively, directed against an order dated 30.1.2013 of Commissioner of Income Tax (Appeals)-II, Coimbatore. 2. Revenue through its five grounds, ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ystem and ₹ 1,72,40,931/- for purchase of eight carding machines. Assessing Officer disallowed both these claims. According to him, in view of the decision of Hon'ble Apex Court in the case of Mangayarkarasi Mills Ltd. (supra), such expenditure could only be considered as capital outgo. Ld. CIT(Appeals) on assessee s appeal allowed the claim of the assessee insofar as it related to Compact Drafting System, based on the decision of co-ordinate Bench of this Tribunal in I.T.A. No. 1848/Mds/2011. However, insofar as claim of carding machines was concerned, CIT(Appeals) held that it was rightly disallowed. We find that the CIT(Appeals) had followed the decision of co-ordinate Bench of this Tribunal in assessee's own case in I.T.A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal High Court in the case of Velayudhaswamy Spinning Mills (supra). 8. Ground Nos.5 and 6 of the Revenue stand dismissed. 9. Coming to the appeal of the assessee, its first grievance is that the Carbon Credit claimed as capital receipt was considered as revenue receipt. Learned A.R. submitted that the question as to the treatment of Carbon Credit had come up before co-ordinate Bench of this Tribunal in the case of Sri Velayudhaswamy Spinning Mills (P) Ltd. v. DCIT in I.T.A. No. 582/Mds/2013, and stood decided in favour of the assessee. 10. Per contra, learned D.R. strongly supported the orders of authorities below. 11. We have perused the orders and heard the rival submissions. Receipt of Carbon credits, otherwise known as Cle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carbon credit is world concern and environment. Due to the assessee gets a privilege in the nature of transfer of carbon credits. Thus, the amount received for carbon credits has no element of profit or gain and it cannot be subjected to tax in any manner under any head of income. It is not liable for tax for the assessment year under consideration in terms of sections 2(24), 28, 45 and 56 of the Income-tax Act, 1961. Carbon credits are made available to the assessee on account of saving of energy consumption and not because of its business. Further, in our opinion, carbon credits cannot be considered as a bi-product. It is a credit given to the assessee under the Kyoto Protocol and because of international understanding. Thus, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, the receipt of such consideration cannot be considered as business income and it is a capital receipt. Accordingly, we are of the opinion that the consideration received on account of carbon credits cannot be considered as income as taxable in the assessment year under consideration. Carbon credit is not an offshoot of business but an offshoot of environmental concerns. No asset is generated in the course of business but it is generated due to environmental concerns. Credit for reducing carbon emission or greenhouse effect can be transferred to another party in need of reduction of carbon emission. It does not increase profit in any manner and does not need any expenses. It is a nature of entitlement to reduce carbon emission, howev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bench, we hold that the CDM receipts are capital receipts. Accordingly, the order of the CIT(A) is set aside and the appeal of the assessee is allowed. 12. In these circumstances, we are of the opinion that the lower authorities fell in error in considering the Carbon Credit as revenue receipts. The addition made in this regard is cancelled. 13. The only other issue raised by the assessee is regarding replacement of machinery considered as capital outgo by the CIT(Appeals). 14. We have already dealt with this issue while dealing with ground Nos.2 and 3 of the Revenue. We have held that CIT(Appeals) was justified in not allowing the claim of replacement of carding machines. We do not find any reason to interfere with the order of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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