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TMI Blog2022 (3) TMI 653X X X X Extracts X X X X X X X X Extracts X X X X ..... al by the assessee is arising out of the order of the Commissioner of Income Tax (Appeals)-1, Madurai in ITA No.45/2017-18; dated 20.02.2019. The Assessment was framed by the Deputy Commissioner of Income Tax, Circle -1, Dindigul for the Assessment Year 2010 2011 u/s.143(3) r.w.s. u/s.147 of the Income Tax Act, 1961 (hereinafter the Act ) vide his order dated 30.06.2017. 2. The first issue in this appeal of Assessee s is against the order of the Commissioner of Income Tax (Appeals) confirming the action of the Assessing Officer in reopening of assessment, despite the fact that the reopening was beyond four years and that the original assessment was completed u/s.143(3) of the Act and further there is no failure pointed out by the Assessing Officer in the reasons recorded in regard to the full and true disclosure made by the Assessee for the relevant Assessment Year. 3. The second issue in this appeal of the Assessee is as regards to the deduction claimed on account of the carbon credit of receipts u/s.80IA of the Act. 4. We will deal with the first issue on merits as regards to the claim of deduction of carbon credit receipt u/s.80IA of the Act. 5. We noted that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 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 stage, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 manufacturing mills, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the payment is revenue or capital disbursement qua the prayer. It was felicitously pointed out by Macnaghten, J. in Racecourse Betting Control Board v. Wild that 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 case has to be dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 acquired the status of a def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt 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 the assessee is carrying on the bu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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