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TMI Blog2019 (12) TMI 434X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant. V.P. Gupta, Adv. for the Respondent. ORDER 1. These two appeals by the Revenue and Cross Objection by the assessees are directed against two separate orders of ld. CIT(A), Alwar dated 07.01.2019 18.01.2019 for the assessment year 2010-11 2011-12 respectively. The Revenue has raised solitary common ground for both the years except quantum of addition/disallowance as under :- Revenue-s Ground (ITA No. 403/JP/2019) 'Appeal is filed on the following grounds against the order of ld. CIT(A), Alwar in appeal No. 353/2015-16 dated 09.08.2018 in the case of M/s Ginni Global Pvt. Ltd., SP-2/1A 2/2, RIICO Industrial Area, Neemrana, Disst. Alwar (PAN AAACG 3006H) for the A.Y. 2010-11:- 1. Whether on the facts and circumstances of the case, the ld. CIT(A), Alwar was justified in holding the income from sales of Carbon Emission Reduction Certificates (CERs)) of ₹ 1,53,30,540/- as 'capital receipt- without appreciating the facts that the same is revenue receipt and even the assessee has claimed benefit u/s80IA of the IT Act That the appellant craves leave to add, amend or alter the grounds of app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) has decided this issue in para 6.4 6.5 as under:- 6.4 I have considered the above mentioned facts of the case. The moot point here is whether the carbon credit receipts should be treated as capital receipts or revenue receipts. In this regard, the jurisdictional Rajasthan High Court in the case of Pr. CIT v. Rajasthan State Mines Minerals Ltd. ITA 151/2016 dated 13.102017 Merely an application of fund and not an expenditure? 3. Whether the Tribunal was justified in deleting the addition of ₹ 2,34,990/- made by disallowing the contribution to Social Welfare Activities u/s 37(1) of the Act, despite the fact that the same was not incurred exclusively for the purposes of business and hence not allowable? 4. Whether the Tribunal was justified in reversing the order of CIT(A) as well as Assessing Officer and holding the income from sale of Carbon Emission Reduction Certificates (CERs) of ₹ 36,24,742/- as capital income, ignoring that the same was specifically a revenue receipt and even the assessee hs claim benefit u/s 80IA of the Act? 5. Whether the Tribunal was justified in allowing deduction of ₹ 2,94,04,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of a mining is a statutory liability and the same is for the subsequent year reflected, therefore, in view of the decision rendered by the Tribunal, we are of the opinion that the Tribunal has not committed any error. 6.2 In that view of the matter, all the issue are answered in favour of the assessee and against the department. The appeal stand dismissed. Hon'ble Rajasthan High Court in the case of CIT v. Shree Cement Ltd. ITA No. 86/2014 dated 22/08/2017 has reiterated that the carbon credit receipt is capital receipt. The Hon'ble Supreme Court in the Vodafone case has sought to distinguish between DTC and Income Tax Act, 1961. The Income Tax Act, 1961 does not say about the taxability of carbon credit. Although now with the insertion of new section 115BBJ where the carbon credit has been brought income the tax net at the rate of 10% and this new section is applicable with effect from A.Y. 2018-19 but since this case particular pertains to A.Y. 2011-12 therefore the Hon'ble Rajasthan High Court judgment that the cardbon credit receipt is a capital receipt holds valid for A.Y. 2011-12. 6.5 I have taken into account the Hon'bleI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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. (57 ITR 36) wherein it was 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 in M/s. Perpetual Energy Systems Limited, Hyderabad that taxability of payment received for sale of loom hours by the assessee is on account of exploitation of capital asset and it is capital receipt and not an income. Similarly, in the present case the assessee transferred the carbon credits like loom hours to some other concerns for certain consideration. Therefore, 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 car ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 28. The issue No. 3 is with regard to sale proceeds received by the company from the sale of certified emission Reduction (CRE) pertaining to Carbon Credit shown as capital receipt. 29. In view of the decision rendered by the Supreme Court in Vodafone International (supra), it has to be taken as capital account and it cannot be taxed under the Income Tax Act since it was taxable under direct tax and the Tribunal has given the finding which reads as under:- We have heard the rival submissions and perused the evidence on record. We find that the Appellate Tribunal in My Home Power Ltd. v. DCIT (Supra), have, after detailed examination, concluded that the receipts from Carbon credit are capital in nature. We are inclined to follow the said decision and the other two decisions of Chennai Tribunal in Sri Velayudhaswamy Spinning Mills (P.) Ltd. v. DCIT (supra) and Ambika Cotton Mills ltd. v. DCIT (supra) where also it has been held that receipt on account of Carbon Credit is capital in nature neither chargeable to tax under the head business income nor liable to tax under the head capital gains. Our above view is also supported by the decision of Supreme Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s any arrangement or understanding or action in concert,- (A) whether or not such arrangement, understanding or action is formal or in writing; or (B) whether or not such arrangement, understanding or action is intended to be enforceable by legal proceedings; (ii) service means service of any description which is made available to potential users and includes the provision of services in connection with business of any industrial or commercial nature such as accounting, banking, communication, conveying of news or information, advertising, entertainment, amusement, education, financing, insurance, chit funds, real estate, construction, transport, storage, processing, supply of electrical or other energy, boarding and lodging; Thus, any sum received on account of carbon credit or protecting the environment is not included in the business income however, subsequently there is an amendment by Finance Act, 2017 whereby Section 115BBG has been inserted in the statute w.e.f 01.04.2018 which reads as under:- Following section 115BBG shall be inserted after section 115BBF by the Finance Act, 2017, w.e.f. 1-4-2018 : Tax on income fro ..... 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