2015 (10) TMI 1867

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....edits in assessee's power division. 2. Briefly stated, assessee is a company in which public are not substantially interested and is engaged in the production of seeds and wind power. In the impugned assessment years, assessee has shown incomes from sale of carbon credits or Certified Emission Reductions (CER) in the company's power division totaling to Rs. 6,47,02,202/- as income in AY. 2008-09 and Rs. 8,85,56,891/- in AY. 2009-10. The above amounts were claimed as deduction u/s. 80IA of the Income Tax Act [Act]. Ld. Assessing Officer (Ld. AO) did not allow the deduction on the reason that the income from sale of carbon credits has no direct nexus to the business of power generation and was never in the form of incentives like d....

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....the decision of the ITAT is reproduced hereunder: "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 cr....

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....oom 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 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,....