9911796707
TMI Blog2021 (7) TMI 397X X X X Extracts X X X X X X X X Extracts X X X X ..... d Power Project in Tamil Nadu, India, coordinated by Tamil Nadu Spinning Mills Association and received a sum of Rs. 4,07,53,169/- towards Clean Development Mechanism (CDM) receipts. These receipts were included in the Profit and Loss Account in the annual report of the Company pertaining to the Assessment Year 2009-10. In the total income statement, while computing total income of the assessee, the CDM receipts were not included in the total income for the taxation by treating the CDM receipts as capital receipts. The Assessing Officer, during the course of the assessment, did not accept any contention of the assessee. The Assessing Officer treated the CDM receipts as revenue receipts and completed the assessment on 09.03.2011 under Section 143(3). Aggrieved by the order passed by the Assessing Officer, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals) and the Appellate Authority, dismissed the appeal. Challenging the same, the assessee filed an appeal before the Income Tax Appellate Tribunal and the Tribunal allowed the appeal, observing that the CDM receipts should be treated as only capital receipts and not as business receipts or revenue receipt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The operative portion of the judgment reads as follows:- "11.The decision has been upheld by the Hon'ble Andhra Pradesh High Court. This decision has been subsequently followed by the ITAT Chennai and Jaipur Benches. There is no decision either from the Hon'ble Supreme Court or from the Hon'ble jurisdictional High Court. These decisions indicate that sale of carbon credit would result capital receipt which is not taxable. When we confronted the learned DR with regard to this position, it was contended that the position as on the day when the assessment order was passed, is to be seen and on that day these orders were not available. Therefore, the assessee cannot claim 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 u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t order is not prejudicial to the interests of the Revenue. In view of the above discussion, we allow the appeal of the assessee and quash the impugned order of the learned CIT passed u/s 263 of the Income Tax Act." The aforesaid shows that, so far as the question as to whether, the income by sale of carbon credit could be termed as capital receipt or profit, is concerned, the Tribunal has considered the decision of the Hyderabad Bench and it has further taken note of the fact that decision of the Tribunal of Hyderabad Bench was carried before the Andhra Pradesh High Court and the said decision was not interfered with. The Tribunal, in its decision 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 Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipt and hence not taxable. It was contended on behalf of the Revenue, relying on this decision, that just as the amount realised for sale of loom hours was held to be capital receipt, so also the amount paid for purchase of loom hours must be held to be of capital nature. But this argument suffers from a double fallacy. 5. In the first place it is not a universally true proposition that what may be capital receipt in the hands of the payee must necessarily be capital expenditure in relation to the payer. The fact that a certain payment constitutes income or capital receipt in the hands of the recipient is not material 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 expenditur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this test. If the advantage consists merely in facilitating the assessee's trading operations or enabling the management and conduct of the assessee's business to be carried on more efficiently or more profitably while leaving the fixed capital untouched, the expenditure would be on revenue account, even though the advantage may endure for an indefinite future. The test of enduring benefit is therefore not a certain or conclusive test and it cannot be applied blindly and mechanically without regard to the particular facts and circumstances of a given case. But even if this test were applied in the present 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 profitmaking 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 profitmaking 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not compel the conclusion that the payment for purchase of loom hours was in the nature of capital expenditure." After making the aforesaid observation, at paragraph No. 10, the Apex Court, on the basis of the facts of the said case concluded as under: "Similarly, if payment has to be made for securing additional power every week, such payment would also be part of the cost of operating the profit-making structure and hence in the nature of revenue expenditure, even though the effect of acquiring additional power would be to augment the productivity of the profit-making structure. 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 loomhours 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, ide ..... X X X X Extracts X X X X X X X X Extracts X X X X
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