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TMI Blog2016 (9) TMI 394X X X X Extracts X X X X X X X X Extracts X X X X ..... er of Income-tax (Appeals)-1, Coimbatore in ITA No.414/13-14, dated 24.12.2014 for the assessment year 2011- 2012 passed u/s.143(3) and 250 of the Income Tax Act, 1961 (herein after referred to as the Act ). 2. The Revenue has raised the following grounds of appeal:- 2. The learned CIT(A) has erred to consider that the Clean Development Mechanism (CDM) receipts are not Subsidies, but a trading receipt. The assessee's power generation from the windmill compared to the Conventional power generation has no emission of C02. This attribute was given an economic value by the issuance of Certified Emission Reduction (CER) by the United Nations Framework Convention on Climate Change (UNFCCC). These CERs are traded in the various clima ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mills. It was only after the Wind mills installed and production had been commenced that the incentives were to be given. 6. The learned CIT(A) has erred to consider that the CDM receipts are neither subsidies nor capital receipts but incomes from selling of intangible goods called CERs in the market and are taxable as business income under the provisions of Section 28(iv). 7. The learned Commissioner of Income tax(Appeals), Coimbatore has erred in holding that the assessee is entitled for deduction u/s-80IA. 8. The learned Commissioner of Income tax-I, Coimbatore has erred to consider that the department has filed a Special Leave Petition (SLP) before the Hon'ble Supreme Court of India which is pending for decision. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... total carbon credit receipts reading ₹ 1,18,78,061/- comprised of ₹ 72,94,322/- in preceding assessment year 2009-10 and ₹ 45,83,739/- in the impugned assessment year. He raised an alternative prayer that only in view of deduction claim u/s 80IA, the said carbon credit receipts had been offered as revenue receipts. He sought to cancel his action of offering the carbon credit receipts as income as well as deduction claim u/s 80IA in view of the decision of the Chennai 'tribunal' in Ambika Cotton Mills Ltd(supra). We find that the CIT(A) has rejected the same as under: 7.0 Carbon Credit The Assessing Officer disallowed an amount of ₹ 45,83,739/- being carbon credit. However, a perusal of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bine generators. They can at best be considered as attributable to the business of generation of electricity from WTGS for the reason that the energy generated by nonconventional means which includes WTGS go to reduce burning of fossil fuels which in turn result in clean development mechanism. Therefore carbon credits are directly proportionate to the reduction in the amount of carbon-dioxide and other green house gases by using nonconventional means but are not revenue derived from generation of electricity from WTGs. 7.4 It has been held in the case of CIT V Sterling Foods 237 ITR 579 (SC) that the word derived restricts the qualifying profits to the profits arising directly from the particular activity. 7.5 Hence considering ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nciple against the assessee. The assessee had declared the carbon credit sale receipts as income due to the fact that it is otherwise entitled for section 80IA deduction. In the lower appellate proceedings, it had sought to withdraw the said declaration. The CIT(A) has not quoted any specific provision barring such an alternative plea. In these facts only, we observe that as the substantial question of law has been settled against the Revenue about nature of the receipt, the assessee is entitled for acceptance of its alternative claim. So, we accept the relevant grounds and hold that carbon credit receipts have to be treated as capital in nature. So far as the assessee s alternative ground No.7 is concerned that the CIT(A) ought to have g ..... X X X X Extracts X X X X X X X X Extracts X X X X
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