TaxTMI 
TaxTMI 
TaxTMI 
2015 (1) TMI 646
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....eceipts from the sale of carbon credit is capital in nature and thus neither in the nature of the income chargeable to tax nor in the nature of business profit/income arising from business, therefore, no prejudice caused to the Revenue and accordingly the order u/s 263 is into sustainable. 3. The brief facts of the case are that the assessee has filed its return of income for assessment year 2009-10 on 30.09.2009 declaring an income of Rs. 22,89,820/-. This return was revised on 31.3.2011 wherein income was declared at Rs. 22,66,320/-. According to the assessee, a mistake in the computation of total income crept in pertaining to the brought forward losses set off against the taxable income, therefore, it has to revise the return. The Assessing Officer had issued notice u/s 143(2) dated 23.08.2010 and 142(1) dated 1.6.2011. The assessee is in the line of power generation business. It has undertaken project during the year under consideration for a hydel power project at Kabini Dam, Heggadadevanakote, Mysore district allotted by the Govt. of Karnataka. The assessee has claimed deduction u/s 80IA of the I.T. Act at Rs. 7,66,87,094/-. The Assessing Officer after considering the issue ....
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....IT reported in 151 TTJ 616 (Supra). This order has been followed by the ITAT Chennai in the case of Ambica Cotton Mills Ltd vs. DCIT reported in 27 ITR 44. It has been further followed by ITAT Chennai in the case of Velayudhaswamy Spinning Mills (P) Ltd vs. DCIT (2013) 27 ITR (Trib.) 106. Further both these orders have been followed in the case of Shree Cement Ltd vs. ACIT (ITAT Jaipur). The learned Counsel for the assessee placed on record copies of these orders. He further contended that the Hon'ble Andhra Pradesh High Court has upheld the order in the case of My Home Power Ltd and it is reported in 2014 (6)TMI/82. On the strength of these orders, he contended that the assessee has raised an additional ground of appeal, pleading therein that receipt from the sale of carbon credit being capital in nature would not form part of the total income, therefore, there is no prejudice to the Revenue. For buttressing his contention that this ground ought to be taken into consideration, he relied upon the judgment of the Hon'ble Supreme Court in the case of NTPC vs. DCIT reported in 229 ITR 383, wherein it has been held that the Tribunal has jurisdiction, as to examine the question ....
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....contentions and gone through the record carefully. Before embarking upon an inquiry about the facts available on record and how to construe them, we deem it pertinent to take note of the fundamental principles for judging the action of the CIT taken u/s 263. The ITAT in the case of M/s Khatiza S. Oomerbhoy Vs. ITO, Mumbai reported in 101 TTJ 1095, analyzed in details various authoritative pronouncements including the decision of the Hon'ble Supreme Court in the case of Malabar Industries Co. vs. CIT 243 ITR 83 and propounded the following broader tests: (i) The CIT must record satisfaction that the order of the AO is erroneous and prejudicial to the interest of the Revenue. Both the conditions must be fulfilled. (ii) Sec. 263 cannot be invoked to correct each and every type of mistake or error committed by the AO and it was only when an order is erroneous that the section will be attracted. (iii) An incorrect assumption of facts or an incorrect application of law will suffice the requirement of order being erroneous. (iv) If the order is passed without application of mind, such order will fall under....
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....On 22-11-2000 the assessee executed a sale deed in favour of the purchaser for a consideration of Rs. 1,38,00,000/-. The assessee received a sum of Rs. 40,00,000/- at the time of agreement. The total cost of construction was Rs. 1,04,30,425/-. Thereafter, the assessee purchased another property at Koramangala. The Assessing Officer computed the income from the long term capital gains at Rs. 22,17,940/- for the sale of the property. However, the assessee was exempted from paying tax since the fund was utilized fully towards purchase of another property at Koramangala. The Commissioner of Income Tax issued notice under Section 263 of the Act stating that the Assessing Officer was not justified in treating the sale as long term capital gain and according to him, it should have been treated as short term capital gain. The assessee filed his reply to the show cause notice. Thereafter, the Commissioner proceeded to pass the order setting aside the order of assessment on the ground that it is prejudicial to the interest of the revenue. Aggrieved by the said order, the assessee preferred an appeal to the Tribunal. The Tribunal went into the factual aspects and took note of the legal positi....
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....ded for fresh consideration. This is not the way, the revisional authority should exercise their power under Section 263 of the Act. The order of revisional authority should indicate the error committed by the Assessing Authority and consequential prejudice caused to the revenue because of the erroneous order. Unless these two conditions exist, the revisional authority does not get jurisdiction to pass any order under Section 263 of the Act. Once these two conditions are set out in the order, then it is open to the revisional authority to consider the case on merits and pass final order or in its view, requires some adjudication or enquiry, the matter can be remanded to Assessing Authority. But such remand should be only after setting out the facts which show erroneous nature of the order and the consequential prejudice to the revenue which confer jurisdiction on the revisional authority. Seen from that angle, in the impugned order though we could make out what is the error committed by the revisional authority, certainly there is no iota of evidence to show how it is prejudicial to the interest of the revenue. On the contrary, in the reply to the notice, the as....
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....T Hyderabad Bench worth to note, it read 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 revenue receipt. It is not generated or created due to carrying on business but it is accrued due to "world concern". It has been made available assuming character of transferable right or entitlement only due to world concern. The source of carbon credit is world concern and environment. Due to that the assessee gets a privilege in the nature of transfer of carbon credits. Thus, the 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. It is not liable for tax for the assessment year under consideration in terms of sections 2(24), 28, 45 and 56 of the Income-tax Act, 1961. Carbon credits are made available to the assessee on account of saving of energy consumption ....
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....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) issued by the Institute of Chartered Accountants of India (ICAI) in June, 2009 states that CERs should be recognised in books when those are created by UNFCCC and/or unconditionally available to the generating entity. CERs are inventories of the generating entities as they are generated and held for the purpose of sale in ordinary course. Even though CERs are intangible assets those should be accounted as per AS-2 (Valuation of inventories) at a cost or market price, whichever is lower. Since CERs are recognised as inventories, the generating assessee should apply AS-9 to recognise revenue in respect of sale of CERs. 26. Thus, sale of carbon credits is to be considered as capital receipt. This ground is allowed. 27. As we have decid....