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TMI Blog2021 (3) TMI 1130X X X X Extracts X X X X X X X X Extracts X X X X ..... would submit that the assessees were under utter confusion as to under which provision of the Act, they should make a claim for deduction and having left with no other option, had been making the claim under Section 80IA of the Act and merely because the assessee due to uncertainty in the legal position, had made a claim under Section 80IA of the Act that cannot be a reason to deny a benefit granted in favour of the assessee. The submission, made by Mr.V.S.Jayakumar, learned counsel for the appellant, in this regard, is well found and accepted. - Decided in favour of assessee. - Tax Case Appeal No.149 of 2021 - - - Dated:- 16-2-2021 - Honourable Mr.Justice T.S.Sivagnanam And Honourable Ms.Justice R.N.Manjula For the Appellant : Mr.Karthik Ranganathan, SC For the Respondent : Mr.R.Vijayaraghavan for M/s.Subbaraya Aiyer Padmanabhan JUDGMENT T.S.SIVAGNANAM, J. This appeal has been filed by the Revenue under Section 260A of the Income Tax Act, 1961 ('the Act' for brevity) challenging the order dated 12.10.2017 in I.T.A.No.1321/Mds/2017 on the file of the Income Tax Appellate Tribunal, Chennai, 'D' Bench ('the Tribunal' for brevity) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the benefit of these orders. However, we do not concur with this proposition of the learned CIT, because the Full Bench of the Hon ble Punjab Haryana High Court in the case of Aruna Luthra reported in 254 ITR 76 has held that a Court decide a dispute between the parties. The case can involve decision on facts. It can also involve a decision on point of law. Both may have bearing on the ultimate result of the case. When a Court interprets a provision, it decides as to what is the meaning and effect of the words used by the Legislature, it is the declaration regarding the statute. In other words the judgment declares as to what the legislature had said at the time of promulgation of the law, the declaration is.........., this was the law, this is the law, this is how the provision shall be construed. Therefore, he cannot plead that the view taken by the Tribunal and upheld by the Hon ble Andhra Pradesh High Court could be considered as if applicable from the date of the decision. In the decision only the position of the law as to how receipts from sale of carbon credits are to be treated, has been explained. One of the argument raised by the DR was that at this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n has also referred to the decision of the Apex Court with regard to power under Section 263 of the Income Tax Act, 1961 (hereinafter referred to as the Act ) of the revisional authority. 4. In our view, the principal question, which may arise is, as to whether by sale of carbon credit capital receipt is generated or a profit out of the business activity of the assessee. More or less, in a similar case, the Apex Court had an occasion to consider such an issue in the case of Commissioner of Income Tax v. Maheshwari Devi Jute Mills Ltd. [(1965) 57 ITR 36 (SC)], wherein the question came up for consideration before the Apex Court as to whether by sale of loom-hours, the amount received could be termed as capital receipt or the income out of business. In the said decision, the Apex Court held that the amount received out of sale of loom-hours can be termed as capital receipt and not income out of business. 5. Subsequently, in a later decision of the Apex Court, a question came up for consideration in the case of M/s. Empire Jute Co. Ltd. v. Commissioner of Income Tax [(1980) 4 SCC 25] the question which arose before the Apex Court was, if loom-hours are purchased by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in determining whether the payment is revenue or capital disbursement qua the prayer. It was felicitously pointed out by Macnaghten, J. in Racecourse Betting Control Board v. Wildthat a payment may be a revenue payment from the point of view of the payer and a capital payment from the point of view of the receiver and vice versa . Therefore, the decision in Maheshwari Devi Jute Mills case cannot be regarded as an authority for the proposition that payment made by an assessee for purchase of loom hours would be capital expenditure. Whether it is capital expenditure or revenue expenditure would have to be determined having regard to the nature of the transaction and other relevant factors. Thereafter, the Apex Court while considering the test to find out as to whether a particular expenditure can be termed as capital or revenue expenditure observed at paragraph Nos. 8 and 9 as under: 8. The decided cases have, from time to time, evolved various tests for distinguishing between capital and revenue expenditure but no test is paramount or conclusive. There is no all embracing formula which can provide a ready solution to the problem; no touchstone has been devised. Every ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t case, it does not yield a conclusion in favour of the Revenue. Here, by purchase of loom hours no new asset has been created. There is no addition to or expansion of the profit-making apparatus of the assessee. The income-earning machine remains what it was prior to the purchase of loom hours. The assessee is merely enabled to operate the profit-making structure for a longer number of hours. And this advantage is clearly not of an enduring nature. It is limited in its duration to six months and, moreover, the additional working hours per week transferred to the assessee have to be utilised during the week and cannot be carried forward to the next week. It is, therefore, not possible to say that any advantage of enduring benefit in the capital field was acquired by the assessee in purchasing loom hours and the test of enduring benefit cannot help the Revenue. 9. Another test which is often applied is the one based on distinction between fixed and circulating capital. This test was applied by Lord Haldane in the leading case of John Smith Son v. Moore where the learned law Lord drew the distinction between fixed capital and circulation capital in words which have almost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re. On the same analogy payment made for purchase of loom hours which would enable the assessee to operate the profit-making structure for a longer number of hours than those permitted under the working time agreement would also be part of the cost of performing the income-earning operations and hence revenue in character. Accordingly, the payment made for purchase of loom-hours by Jute Mill Company was held to be Revenue expenditure. 6. At this stage, we may also refer to the decision of the Andhra Pradesh High Court, which has been relied upon by the Tribunal in the impugned order. More or less, identical question was raised and the Andhra Pradesh High Court in the case of Commissioner of Income Tax-IV v. My Home Power Ltd. [(2014) 46 Taxmann.com 314 (Andhra Pradesh), at paragraph No. 3 observed thus: 3. We have considered the aforesaid submission and we are unable to accept the same, as the learned Tribunal has factually found that 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. We agree with this factual analysis as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disclosure of their entire financial. If any query is raised by the Assessing Officer, the assessee is bound to answer. Thereafter, it is the Assessing Officer, who has to apply the law and complete the assessment. It has been held that it is not for the assessee to assist the Assessing Officer to complete the assessment in a particular manner or to supply a draft assessment order to the Assessing Officer. At this juncture, it is beneficial to refer to the decision in the case of CIT vs. India Express (Madurai) Pvt. Ltd., [(1983) 104 ITR 705 (Madras)]. The reference to the High Court was to decide the scope of the appellate jurisdiction of the Income Tax Tribunal. 32.The Hon'ble Division Bench refers to three decisions of the Hon'ble Supreme Court in the case of Hukumchand Mills Ltd. vs. CIT [(1967) 63 ITR 232 (SC)]; CIT vs. Mahalakshmi Textile Mills Ltd., [(1967) 66 ITR 710]; and CIT vs. Nelliappan [(1967) 66 ITR 722 (SC)] wherein, the observations made by the Hon'ble Supreme Court were referred to, which are quoted hereunder:- In hearing an appeal, the Tribunal may give leave to the assessee to urge grounds not set forth in the memorandum of appeal, and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y like the Tribunal, is to address its mind to the factual and legal basis of an assessment for the purpose of properly adjusting the taxpayer's liability to make it accord with the legal provisions governing his assessment. Since be-all and end-all of the statutory provisions, especially those relating to the administration and management of income tax is to ascertain the taxpayer's liability correctly to the last pie, if it were possible, the various provisions relating to Appeal, Second Appeal, Reference and the like can hardly be equated to a lis or dispute as arises between two parties in a civil litigation. 36.It was further pointed out that although the income-tax statute makes the Department or its officers figure as parties in the appeal proceedings, they are not in the strict sense what are called by American writers as parties to adversary proceedings. This is so because, the very object of the appeal is not to decide a point raised as a dispute, but any point which goes into the adjustment of the taxpayer's liability. In that sense, a view prevails, even in England, that the authorities sitting in an appeal in tax case, cannot be regarded as decidi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , but would pin the assessee to his claim made under Section 80IA of the Act and accordingly, negatives it. This finding of the Tribunal is wholly erroneous and perverse. The Tribunal was expected to apply the law and take a decision in the matter and if the CIT(A) or the Assessing Officer had failed to apply the law, then the Tribunal was bound to apply the law. This is so because, in the light of the decisions referred above, the receipt by way of sale of carbon credit has been held to be capital receipt. Therefore, it is of a little consequence as to the claim made by the assessee under Section 80IA of the Act or in other words, the question of taking a decision as to whether the deduction is admissible under Section 80IA of the Act is a non-issue. If the receipt from the sale of carbon credit is a capital receipt, then it will go out of the purview of the gross total income as defined under Section 80B(5) of the Act, which expression is found in Section 80IA of the Act. Thus, if the receipts by sale of carbon credit will not fall within the definition of total income, the same cannot be included under Section 80IA of the Act. Therefore, even if the assessee has m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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