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TMI Blog2021 (10) TMI 416X X X X Extracts X X X X X X X X Extracts X X X X ..... iso, this right has been statutorily recognized. That as regards, whether such proviso would apply to past periods or not, the judgment of the Hon‟ble Madras High Court (supra.) which is still operational and it has been held that the said proviso was only clarificatory in nature and would thus apply to pending cases covering past periods also. Thus, Grounds raised in appeal by the assessee are allowed. - ITA No. 2182/PUN/2017 - - - Dated:- 7-10-2021 - Shri R.S.Syal, VP And Shri Partha Sarathi Chaudhury, JM For the Assessee : Shri Nikhil Pathak For the Revenue : Shri Deepak Garg ORDER PER BENCH : This appeal preferred by the assessee emanates from the order of the Ld. CIT(Appeals)-2, Pune dated 20.07.2017 for the assessment year 2014-15 as per the following grounds of appeal on record: 1.The learned CIT(A) erred in holding that the4 income on sale of Certified Emission Reduction/ Carbon Credit was taxable as profits and gains of the assessee and thereby, erred in confirming the addition of ₹ 5,62,56,822/- in the hands of the assessee. 2. The learned CIT(A) failed to appreciate that the amount received by the assessee on sale of Ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Grounds No. 1 to 4 , the facts are that the Assessing Officer during the assessment proceedings, noticed from the Audit Report that during the year, the assessee had received net amount of ₹ 5,62,56,822/- on sale of carbon credit. However, the said amount was not offered to tax and the assessee treated the same as capital receipt. However, this contention of the assessee was not accepted by the Assessing Officer and he treated the entire amount realized from transfer of CERs/RECs as business receipt and added the same to the total income of the assessee. The Assessing Officer has discussed this issue from Para 4 onwards in his order and has given detailed reasoning for his decision. 6. The Ld. CIT(Appeals) from Para 4.2 onwards of his order has analyzed this issue. He observed that the assessee has treated the CERs as entitlement or privilege generated in the course of business activity and treated the same as capital receipt. The assessee is also into generation of electricity and in the process of generation of power, reduced the emission of carbon dioxide in the atmosphere. Therefore, the CERs/Carbon Credit was given to the assessee under the United Nations Framework ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court in the case of Commissioner of Income Tax v/s. Subhash Kabini Power Corporation Ltd. reported in (2016) 385 ITR 592 (Karn) and followed by Allahabad High Court and Rajasthan High Court, (Allahabad High Court decision is in the case of Principal Commissioner of Income Tax v/s. L Sugar Factory Pvt. Ltd reported in (2017) 392 ITR 568 (All). In view of the consistent view of different High Courts in the country, the Hon‟ble Jurisdictional High Court has held as follows: 5 In view of such consistent view of the different High Courts in the country, we see no reason to take a different stand. No question of law arises in these Appeals. Hence not entertained. The Income Tax Appeals are dismissed. 9. Per contra, the Ld. DR placed strong reliance on the orders of the Subordinate Authorities but principally conceded that this issue has already been decided in favour of the assessee by the Hon‟ble Jurisdictional High Court (supra). 10. We further find that this decision of the Hon‟ble Jurisdictional High Court was even followed by the Pune Bench of the Tribunal in ITA No.2181/PUN/2017 for the assessment year 2014-15 in the case of Malpani Tea Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the case and in law, the Hon'ble ITAT, is correct in holding that there is no cost of acquisition or cost of production to get entitlement for the Carbon Credits, without appreciating that generation of Carbon Credits is intricately linked to the machinery and processes employed in the production process by the assessee? 4 Though two questions are framed, singular issue is whether the receipts of the Assessee arising out of sale of carbon credit is to be considered as capital receipt and therefore not liable to tax. This issue is considered by the several High Courts starting from the judgment of Andhra Pradesh High Court in the case of Commissioner of Income Tax v/s. My Home Power Ltd reported in (2014) 365 ITR 82 (AP) holding the receipts to be capital in nature. This was further elaborated by the Division Bench of Karnataka High Court in the case of Commissioner of Income Tax v/s. Subhash Kabini Power Corporation Ltd. reported in (2016) 385 ITR 592 (Karn) and followed by lgc 2 of 3 (16) itxa- 1820.16ors.doc Allahabad High Court and Rajasthan High Court, (Allahabad High Court decision is in the case of Principal Commissioner of Income Tax v/s. L Sugar Factory Pvt. Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said proviso is inserted in the Act w.e.f. 01.04.2016 and hence, it could not be applied for the year under consideration i.e. assessment year 2014-15. The Assessing Officer analyzed the CBDT Circular No.19 of 2015 dated 27.11.2015 which was the legislative intention behind the amendment of inserting the proviso to Section 32 of the Act w.e.f. 01.04.2016. The Assessing Officer accordingly held that as per the circular (supra.), the proviso inserted in the Act w.e.f. 01.04.2016 will be applicable from assessment years 2016-17 and subsequent assessment years. The claim of additional depreciation for the assessment year 2014-15 was rejected and the amount was added to the total income of the assessee. 15. The Ld. CIT(Appeals) upheld the findings of the Assessing Officer vide Para 6.2 of his order wherein he has held, the Assessing Officer correctly held that prior to 01.04.2016, there was no provision in the Act to allow 50% of the additional depreciation in the subsequent assessment year. The new proviso in Section 32 of the Act has been inserted w.e.f.01.04.2016 and the same is only prospective in nature and not retrospective. The Ld. CIT(Appeals) relied on the decision of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d previous year. 7. In the context of such statutory provisions, the Revenue has raised the question - whether when 50% of the additional depreciation is claimed by the Assessee in a particular Assessment Year, since the acquisition and putting in to use of the assets in the previous Year was for less than 180 days, the Assessee can claim the remaining depreciation in the subsequent Assessment Year. Such a question came up for consideration before the Division Bench of Karnataka High Court in Commissioner of Income Tax v. Rittal India Pvt. Ltd. , reported in 380 ITR 423 . The Court, after referring to the statutory provisions, held and observed in para 8 as under:- 8:- The aforesaid two conditions, i.e., the undertaking acquiring new plant and machinery should be a new industrial undertaking, or that it should be claimed in one year, have been done away by substituting clause (iia) with effect from April 1, 2006. The grant of additional depreciation, under the aforesaid provision, is for the benefit of the assessee and with the purpose of encouraging industrialization, by either setting up a new industrial unit or by expanding the existing unit by purchase of new plant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arises in this appeal for determination by this court. After the said judgment of the Karnataka High Court in Rittal India Pvt. Ltd., (supra), legislation has also amended the statutory provisions by adding the third proviso to clause (ii) of sub-section 1 of Section 32 of the Act, which reads as under:- Provided also that where an asset referred to in clause (iia) or the first proviso to clause (iia), as the case may be, is acquired by the assessee during the previous year and is put to use for the purposes of business for a period of less than one hundred and eighty days in that previous year, and the deduction under this sub-section in respect of such asset is restricted to fifty per cent of the amount calculated at the percentage prescribed for an asset under clause (iia) for that previous year, then, the deduction for the balance fifty per cent of the amount calculated at the percentage prescribed for such asset under clause (iia) shall be allowed under this sub-section in the immediately succeeding previous year in respect of such asset. 8. The third proviso, thus, now recognizes the right of an Assessee to claim the remaining 50% depreciation in subsequent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich was used for 180 days or more. 11.3:- In our opinion, as indicated above, the amendment is clarificatory in nature and not prospective, as is sought to be contended by the Revenue. The memorandum cannot be read in the manner, in which, the Revenue has sought to read it, which is, that the amendment brought in would apply only prospectively. 11.4:- We are, clearly, of the view that the memorandum, which is sought to be relied upon by the Revenue, only clarifies as to how the unamended provision had to be read all along. 11.5:- In any event, in so far as the court is concerned, it has to go by the plain language of the unamended provision, and then, come to a conclusion in the matter. As alluded to above, our view, is that, upon a plain reading of the unamended provision, it could not be said that the assessee could not claim balance depreciation in the assessment year, which follows the assessment year, in which, the machinery had been bought and used, albeit, for less than 180 days. 9. It could be thus, to seen that the Karnataka High Court in Rittal India Pvt., Ltd., (supra) even without the aid of the statutory amendment held that remaining 50% unclaimed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear 2007-08 and accordingly, it was covered by the aforesaid judicial findings. 19. That while considering the view taken by these two Hon‟ble High Courts in the above referred judgments, it was held by the Hon‟ble Jurisdictional High Court that there is no justification in taking any different view and hence, no question of law arose. 20. The aforesaid decision of the Hon‟ble Jurisdictional High Court was also referred by the Pune Bench of the Tribunal in the case of Cummins India Limited Vs. DCIT, ITA No.685/PUN/2017 dated 22.11.2019 wherein the Tribunal on the issue has held as follows: ..In this judgment of the Hon ble Bombay High Court, there is reference made to the decision of the Hon ble Karnataka High Court in the case of Commissioner of Income Tax and another Vs. Rittal India Pvt. Ltd., 380 ITR 423 and the decision of the Hon ble Madras High Court in the case of in the case of Commissioner of Income Tax Vs. Shri T.P. Textiles Pvt. Ltd., 394 ITR 483 and in both these cases, it has been unanimously observed and held that the assessee can claim balance depreciation in the subsequent assessment year. The Hon ble Bombay High Court was of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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