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TMI Blog2022 (4) TMI 94X X X X Extracts X X X X X X X X Extracts X X X X ..... stries Ltd [ 2016 (3) TMI 873 - ITAT KOLKATA] wherein similar propositions as canvassed by the assessee was accepted after considering decision of Special Bench in the case of Raintree Commodities [ 2010 (7) TMI 794 - ITAT HYDERABAD] - Decided against revenue. - ITA No. 350/Bang/2020 - - - Dated:- 17-3-2022 - N.V. Vasudevan, Vice President and B.R. Baskaran, Member (A) For the Appellant : Sankar Ganesh K., JCIT (DR) For the Respondents : Ravi Tulsiyan, CA ORDER Per N. V. Vasudevan , Vice President This is an appeal by the Revenue against order dated 26.11.2019 of CIT(A), Bengaluru - 6, relating to Assessment Year 2011-12. The grounds of appeal raised by the Revenue reads as follows: 1. The order of the CIT (Appeals) is opposed to law and the facts and circumstances of the case. 2. On the facts and circumstances of the case, Whether the Ld. CIT(A) has erred in considering the fact that the Carbon Credit Receipts are Capital Receipts? 3. On the facts and circumstances of the case, Whether the Ld. CIT(A) erred in directing the AO to exclude the Carbon Credit receipts for the purpose of section 115JB? 4. For these and such other grounds th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sser quantity of gases than the assigned quantity. The certificate is not dependent on production. In fact, the UNFCCC does not provide any funds to the industry. It only certifies that the industry emitted a particular quantity of gases as against the permissible quantity. Therefore, carbon credit is in the nature of an entitlement received to improve world atmosphere and environment reducing carbon, heat and gas emissions. 5. The assessee contended that the amount shown as 'Sale of Carbon Credit' does not represent any income in the process or during the course of business, inasmuch as carbon credit is not an offshoot of business but an offshoot of environmental concerns and not generated or created due to carrying on of business but it had accrued due to improvement in world atmosphere and environment by reducing carbon, heat, gas emissions etc. Due to that, the assessee gets privilege in nature of transfer of carbon credits. Thus, amount received for carbon credits has no element of profit or gain and it cannot be subjected to tax in any manner under any head of income. Carbon credit is entitlement or accretion of capital and hence income earned on sale of these cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee under the Kyoto Protocol and because of international understanding. Thus. the assessees who have surplus carbon credits can sell them to other assessees to have capped emission commitment under the Kyoto Protocol. Transferable carbon credit is not a result or incidence of one's business and it is a credit for reducing emissions. The persons having carbon credits get benefit by selling the same to a person who needs carbon credits. to overcome one's negative point carbon credit. The amount received is not received for producing and/or selling any product. hi-product or for rendering any service for carrying on the business. In 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 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 receiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT v. My Home Power Ltd. [2014] 46 taxmann.com 314/225 Taxman 8 (Mag.)/365 ITR 82, 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 business of power generation. The Carbon Credit is not even directly linked with power generation. On the sale of excess Carbon Credits the income was received and hence as correctly held by the Tribunal it is capital receipt and it cannot be business receipt or income. In the circumstances, we do not find any element of law in this appeal. The aforesaid shows that the Andhra Pradesh High Court has confirmed the view of the Tribunal 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. It was also found that the carbon credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s: 23. From the perusal of aforesaid decisions, at the outset, it may appear that on similar nature of issues there are divergent views of various benches of the Tribunal, however, one common point/ratio permeating through all the decisions, which can be deduced by us is that, if an assessee company is in receipt of a 'capital receipt' which is not chargeable to tax at all, that is, it does not fall within any of the charging section or can be classified under any heads of income under the Income Tax Act, then same cannot be treated as part of net profit as per Profit Loss account or reckoned as 'working result' of the company of the relevant previous year and consequently, cannot be held to be taxable as 'book profit' under MAT in terms of section 115JB. Accordingly, our conclusion remains the same that the capital surplus on account of waiver of dues neither is neither taxable nor can be included in computation of book profit u/s. 115JB. 11. The Tribunal in holding as above referred to decision of ITAT, Lucknow Bench, in the case of ACIT Vs. L H Sugar Factory Ltd., ITA No. 417/LKW/2013, order dated 09.02.2016 and CIT Vs. Benami Industries Ltd., ..... X X X X Extracts X X X X X X X X Extracts X X X X
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