TaxTMI 
TaxTMI 
2016 (2) TMI 512
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....s against the order of the CIT (A)-16, Mumbai dated 15.3.2010 for the assessment year 2007-2008. In this appeal, Revenue raised the following ground which reads as under: "On the facts and in the circumstances of the case and in law, the Ld CIT (A) erred in deleting the disallowances of claim u/s 80IA of the IT Act, 1961 amounting to Rs. 6,73,46,337/-, made by the AO in respect of the sale of Carbon Credit, without appreciating the facts and circumstances of the case and in law." 3. At the outset, Ld Counsel for the assessee submitted that the issue contested both by the assessee and the Revenue relates to the allowability of claim of deduction u/s 80IA of the Act in respect of the receipts earned by the assessee on sale of „carbon credits‟. Referring to the impugned order of the CIT (A), Ld Counsel for the assessee submitted that the assessee earned revenue from the sale of Carbon Emission Reductions (CERs) amounting to Rs. 6,73,46,337/-. Assessee claimed deduction in this regard u/s 80IA of the Act in respect of these receipts as these receipts are the integral part of the power generation project. CIT (A) granted the deduction relying on the judgment of t....
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....but it is generated due to environmental concerns". ITAT agree with this factual analysis as the assessee is carrying on the business of power generation. The Carbon Credit is not even directly linked with power generation. On the sale of excess carbon credits, the income was received and hence as correctly held by the Tribunal it is capital receipt and it cannot be business receipt or income. In the circumstances, we do not find any element of law in this appeal." 6. We have also perused the decision of the ITAT, Cochin Bench in the case of Arun Textiles (P) Ltd (supra), wherein the Tribunal extracted the relevant para from the above said judgment of the Hon‟ble High Court of Andhra Pradesh (supra) in para 6 of its order and held that such receipts fall in capital zone. For the sake of completeness of this order, relevant lines from para 6 of the said Tribunal‟s order dated 12.9.2014 are extracted as under: "6. Both sides heard. We have perused the orders of the authorities below and examined the decisions on which both sides have place reliance. The Hyderabad Bench of the Tribunal in the case of My Home Power Ltd (supra) has held carbon credit as capital r....
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....f the opinion that the consideration received on account of carbon credits cannot be considered as income taxable in the assessment year under consideration. ...............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." 7. The Hon‟ble Andhra Pradesh High Court in the appeal of the Revenue in ITTA No.60 of 2014 decided on February 19, 2014 My Home Power Ltd (supra) has upheld the view taken by the Hyderabad Bench in the case of My Home Power Ltd (supra)." 7. Therefore, considering the above, it is now settled proposition in law that in principle the receipts on sale of carbon credits should not brought into the „Profit & Loss Account‟ and it relates to the „balance sheet‟ item. Consequently, the question of making a claim u/s 80IA(4) of the Act, allowability of the same or otherwise becomes an academic exercise. In view of the above, the questions raised by the Revenue in its appeal and the cross objections raised by the assessee are required to be dismissed as academic. We order accordingly. C.O. No.128/M/2011 (By assessee) ....
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....tion u/s 80IA(4) of the Act in respect of the receipts earned on sale of carbon credits. On this issue, during the first appellate proceedings, unlike in the AY 2007-2008, CIT (A) directed the AO to exclude the said receipts on the ground that the same are not derived from the eligible undertaking. CIT (A) denied the benefit of deduction u/s 80IA(4) of the Act. Now, the allowability or otherwise of the claim of deduction was already discussed by us while dealing with the similar issue raised in the AY 2007-2008. After hearing both the parties and on perusal of the relevant orders and the cited judgment of the Hon‟ble High Court of Andhra Pradesh in the case of My Home Power Ltd (supra), we held that the receipts on sale of carbon credits is outside the scope of chargeability to tax as the same constitutes „capital receipt‟. For this, we relied on the said judgment of the High Court of Andhra Pradesh (supra). Therefore, the issue raised by the assessee in the Ground no.1 is required to be dismissed, in principle. 14. Before us, Ld Counsel for the assessee brought our attention to the additional ground, identically worded as in the AY 2007-2008, which was already....