Tribunal grants deduction for CDM income, dismisses interest disallowance appeal under section 36(1)(iii).

The tribunal allowed the assessee's appeal regarding the provision for Clean Development Mechanism (CDM) income, directing the Assessing Officer to grant the deduction claimed by the assessee. The tribunal also dismissed the Revenue's appeal on interest disallowance under section 36(1)(iii) due to the low tax effect, granting the Revenue the liberty to seek a recall if exceptions applied or if the tax effect exceeded the monetary limit.

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Issues:
1. Disallowance of provision for CDM income
2. Nature of CERs and claim for deduction
3. Interest disallowance under section 36(1)(iii)

Issue 1: Disallowance of provision for CDM income
The case involved cross-appeals for Assessment Year 2013-14 regarding the disallowance of a provision for Clean Development Mechanism (CDM) income. The Assessing Officer added back the provision to the income as the receivables were not written off in the books. The assessee argued that the provision write-back was in line with accounting guidance on Certified Emission Reductions (CERs). The assessee's contention was that the CER income booked in earlier years was reversed during the year and claimed as a deduction. The CIT(A) held that CERs were capital in nature and the subsequent write-back did not qualify as an allowable deduction. The tribunal disagreed, stating that the provision was offered to tax in earlier years, and the assessee should be allowed the deduction as the income could not be realized. The tribunal directed the Assessing Officer to grant the deduction as claimed by the assessee.

Issue 2: Nature of CERs and claim for deduction
The tribunal analyzed the nature of CERs earned by the assessee in previous years and the claim for deduction related to the reversal of CER income. The tribunal noted that despite CERs being capital receipts, the assessee had offered the income to tax in earlier years. Therefore, the tribunal held that the assessee was entitled to claim the deduction as the receipts could not be realized, based on principles of equity and natural justice. The tribunal directed the Assessing Officer to allow the deduction claimed by the assessee.

Issue 3: Interest disallowance under section 36(1)(iii)
The Revenue's appeal involved the computation of interest disallowance under section 36(1)(iii). The CIT(A) deleted the disallowance, and the Revenue appealed further. However, the tribunal dismissed the Revenue's appeal due to the tax effect being below the prescribed monetary limit set by CBDT circulars. The tribunal stated that the appeal was not maintainable under the low tax effect circular and dismissed it, granting the Revenue the liberty to seek a recall if exceptions applied or if the tax effect exceeded the monetary limit.

In conclusion, the tribunal allowed the assessee's appeal regarding the provision for CDM income and dismissed the Revenue's appeal on interest disallowance due to the low tax effect. The judgment provided detailed analysis on the nature of CERs, the claim for deduction, and the application of relevant tax provisions in the case.

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