TaxTMI 
TaxTMI 
2013 (8) TMI 935
X X X X Extracts X X X X
X X X X Extracts X X X X
..... 2. Revenue through its five grounds, has raised two issues. First is regarding the directions of the CIT(Appeals) to allow the claim of expenditure of Rs. 2,69,27,870/- on Compact Drafting System as revenue outgo. Second issue is regarding allowance of claim under Section 80-IA of Income-tax Act, 1961 (in short 'the Act') considering the initial assessment year to be the first year of the claim and not the year of commencement of business. As against this, assessee is aggrieved that CIT(Appeals) confirmed the disallowance of its claim of Carbon Credit of Rs. 2,98,75,451/- as capital receipt, and its claim on expenditure incurred for carding machines. 3. Shri Anirudh Rai, appearing for the Revenue, in support of the first issue, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s own case in I.T.A. No. 1848/Mds/2011 dated 20.1.2012, wherein claim of the assessee on Compact Drafting System was allowed as revenue expenditure. Tribunal had giving this finding after considering the decision of Hon'ble Apex Court in the case of Mangayarkarasi Mills Ltd. (supra). Therefore, we do not find any reason to interfere with the order of CIT(Appeals) which followed the decision of co-ordinate Bench of this Tribunal (supra). Insofar as expenditure of carding machines is concerned, the CIT(Appeals), in our opinion, rightly followed the decision of Hon'ble Apex Court in the case of Mangayarkarasi Mills Ltd. (supra) and held that it gave enduring benefit to the assessee and was a capital outgo. 6. Ground Nos.2 and 4 of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n as Clean Development Mechanism of Rs. 2,98,75,451/- was considered as revenue in nature by the lower authorities. Issue regarding nature of Carbon Emission Credits had come up before this Tribunal in the case of Sri Velayudhaswamy Spinning Mills (P) Ltd. (supra) in I.T.A. No. 582/Mds/2013 dated 12th June, 2013, copy of which has been placed at paper-book pages 48 to 54. It was held by this Tribunal at paras 5 and 6 of its order, as under:- "5. We have heard submissions made by the representatives of both the sides and have gone through the orders of the authorities below. We have also examined the judgments/orders relied upon by the representatives of both the sides. We find that the case of the assessee is squarely covered by the order....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es who have surplus carbon credits can sell them to other assessees to have capped emission commitment under the Kyoto Protocol. Transferable carbon credit is not a result or incidence of one's business and it is a credit for reducing emissions. The persons having carbon credits get benefit by selling the same to a person who needs carbon credits to overcome one's negative point carbon credit. The amount received is not received for producing and/or selling any product, bi-product or for rendering any service for carrying on the business. In our opinion, carbon credit is entitlement or accretion of capital and hence income earned on sale of these credits is capital receipt. For this proposition, we place reliance on the judgement of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ver, 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 AS2 (Valuation of inventories) at a cost or market price, whichever is low....