2014 (9) TMI 922

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..... 2,59,64,391 received by the assessee on account of clean development mechanism (CDM) is capital or revenue receipt ? 2. The assessee is engaged in the business of spinning cotton yarn and generation of electricity through wind electrical generators. The assessee in its return of income for the assessment year 2009-10 claimed clean development mechanism receipts as capital receipts. The Assessing Officer in scrutiny assessment held clean development mechanism receipts to be revenue receipts under the head "Income from business and profession". The assessee, carried the issue in appeal before the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals), vide impugned order, upheld the findings of the Assessing Offic....

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....  "We have heard both 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 f....

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.... 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 received by transferring of loom hours. The Supreme Court considered this fact and observed that taxability of payment received for sale of loom hours by the assessee is on account of exploitation of capital asset and it is capital receipt and not an income. Similarly, in the present case the assessee 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 opi....