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TMI Blog2023 (2) TMI 1027X X X X Extracts X X X X X X X X Extracts X X X X ..... , CIT- DR ORDER Per Anubhav Sharma, JM : The appeal has been filed by the Assessee against order dated 26.03.2013 in Appeal No. 444/11-12 assessment year 2008-09 passed by Commissioner of Income Tax (appeals)-XII, New Delhi (hereinafter referred to as the First Appellate Authority or in short Ld. F.A.A. ) in regard to the appeal before it arising out of assessment order dated 29/12/2011 u/s 143(3) of the Income Tax Act, 1961 passed by the JCIT(OSD), Circle 9(1), New Delhi (hereinafter referred to as the Assessing Officer or AO ). 2. The facts in brief are that the assessment of assessee was completed on 29.12.2011 u/s 143(3) of the Act which was challenged by the assessee and the appellate order u/s 250 was passed on 08.07.2016 which was challenged both by the revenue and assessee before this Tribunal and the issue with regard to nonconsideration of assessee s claim in respect of certified emission reductions was remitted to Ld. AO and to consider the case of assessee in the light of judgment in M/s My Home Power Ltd. Vs. DCIT, 151 TTJ 616. The ld. AO after taking into consideration the submissions of assessee was of view that sale of certified Emission Redu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Carbon credits or CERs represent the privilege /entitlement given to the businesses for its efforts resulting in reductionof emission of greenhouse gases. Such CERs are tradable commodity and one party to Kyoto protocol is benefited by selling such entitlement to other parties to Kyoto protocol which are in deficit. During the year under consideration, the assessee has also received certain sum on account of sale of certain CERs entitlement to other parties. All such parties are foreign parties and the amount has been received in foreign currency. The question that we are really required to adjudicate upon is whether such money received by the assessee on sale of CERs/ carbon credits is taxable under Income-tax Act or not. The Hyderabad bench of the Tribunal in case of My Home Power Ltd (Supra) while dealing with the similar issue held as under: 24. We have heard both the parties and perused the material on record. Carbon credit is in the nature of an entitlement received to improve world atmosphere and environment reducing carbon, heat and gas emissions. The entitlement earned for carbon credits can, at best, be regarded as a capital receipt and cannot be taxed as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arly, in the present case the assesse transferred the carbon credits like loom hours to some other concerns for certain consideration. Therefore, the receipt of such consideration cannot be considered as business income and it is a capital receipt. Accordingly, we are of the opinion that the consideration received on account of carbon credits cannot be considered as income as taxable in the assessment year under consideration. Carbon credit is not an offshoot of business but an offshoot of environmental concerns. No asset is 17 ITA No.6693/Del/2018 SRF Ltd. vs. ACIT generated in the course of business but it is generated due to environmental concerns. Credit for reducing carbon emission or greenhouse effect can be transferred to another party in need of reduction of carbon emission. It does not increase profit in any manner and does not need any expenses. It is a nature of entitlement to reduce carbon emission, however, there is no cost of acquisition or cost of production to get this entitlement. Carbon credit is not in the nature of profit or in the nature of income. 25. Further, as per guidance note on accounting for Selfgenerated Certified Emission Reductions (CERs) iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SubhashKabini Power Corpn. Ltd. vs. CIT reported in (2015) 37 ITR (T)106 (Bang .Trib.) had held that once the Assessing Officer had allowed the assessee sclaim of deduction u/s 80-IA in respect of income derived from sale of carbon credits, such order was not amendable u/s 263 of the Act. This order of ITAT, Bangalore Bench was also upheld by the Hon ble Karnataka High Court. 6.1 Further, ITAT Hyderabad Bench in the case of CIT Vs. My Home Power Ltd. Hyderabad in ITA No. 1114/Hyd/2009 held that carbon credit receipts are capital in nature. This order of ITAT Hyderabad Bench was subsequently upheld by the Hon'ble Andhra Pradesh High Court in 365 ITR 82. 6.2 Accordingly, respectfully following the ratio of the settled judicial precedent as aforementioned, we allow the additional grounds raised by the assessee and hold that the income from sale of carbon credits is capital in nature. 5.3 Coming to the judgments relied upon by the AO and the Ld. CIT(A) and which have been further relied by the Ld. DR, we are of opinion that such cases do not support the case of revenue. As pointed out by the Ld. AR,the orderof the Cochin Bench of the Tribunal in the case of A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... delivered by the Hon ble High Court of Calcutta in case of Ankit Metal Power Ltd. [2019] 109 taxmann 93 (Cal) is worth mentioning. In Para no. 27, the Hon ble Court held that: 27. In this case since we have already held that in relevant assessment year 2010-11 the incentives 'Interest subsidy' and 'Power subsidy' is a 'capital receipt' and does not fall within the definition of 'Income' under Section 2(24) of Income Tax Act, 1961 and when a receipt is not on in the character of income it cannot form part of the book profit under Section 115JB of the Act, 1961. In the case of AppolloTyres Ltd. (supra) the income in question was taxable but was exempt under a specific provision of the Act as such it was to be included as a part of the book profit. But where a receipt is not in the nature of income at all it cannot be included in book profit for the purpose of computation under Section 115JB of the Income Tax Act, 1961. For the aforesaid reason, we hold that the interest and power subsidy under the schemes in question would have to be excluded while computing book profit under Section 115 JB of the Income Tax Act, 1961. 6.5 Further ITAT ..... 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