TaxTMI 
TaxTMI 
2021 (10) TMI 416
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....tified Emission Reduction/ Carbon Credit was a benefit derived during the course of the business of the assessee and therefore, the same was taxable u/s.28(iv) r.w.s.2(24)(vd). 4. The learned CIT(A) failed to appreciate that Certified Emission Reduction/ Carbon Credit was received by the assessee on account of environmental concerns and not arising out of the business carried out and hence, the same could not be treated as an income of the assessee u/s.28(iv) r.w.s. 2(24)(vd). 5. Without prejudice to the above grounds, the learned CIT(A) erred in holding that the income received on sale of Certified Emission Reduction/Carbon Credit was not derived from the Industrial Undertaking and hence, the deduction u/s.80IA was not allowable to the assessee. 6. The learned CIT(A) erred in confirming the disallowance of additional depreciation of Rs. 10,98,27,376/- being 50% of the claim of additional depreciation made by the assessee firm in respect of plant and machinery acquired and installed by it after 30th September, 2012 on the ground that the additional depreciation could be claimed only in the year of purchase and the same was not available in the subsequent ....
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....her held that this carbon credit also has a market in carbon trade exchange. When the carbon credit is an entitlement or privilege accrued to the assesse in the course of carrying of the business, it could not be said that such carbon credit is an accretion to capital asset. Thereafter, the Ld. CIT(Appeals) goes to uphold the findings of the Assessing Officer and taxing the income on such sale of carbon credit as revenue receipt. 7. At the time of hearing, the Ld. Counsel for the assessee brought to our notice the judgment of the Hon‟ble Jurisdictional High Court in the case of Pr. CIT Vs. M/s. Dodson Lindblom Hydro Power Pvt. Ltd. ITA No.1820 of 2016, ITA No.1821 of 2016 and ITA No.1840 of 2016 wherein the issue before the Hon‟ble High Court for adjudication was as follows: "3 Income Tax Appeal No.1820 of 2016 relates to Assessment Year 2007- 2008. Revenue has urged the following questions for our consideration:- (i) Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT, is correct in holding that sale of carbon credit is to be considered as Capital Receipt and not liable for tax under any head of income under I....
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....s is outside the scope of the chargeability of tax as the same constitutes "capital receipts‟. The relevant extract of the findings reads as follows: "3. Before us, at the outset, ld. Counsel for the assessee brought our attention to the ground nos.1 to 4 and submitted that all these grounds revolve around "the taxability of carbon credit receipts". The assessee has been argued before the revenue authorities and submitted that the same constitutes capital receipts and therefore it is taxable receipts. However, the revenue authorities rejected the assessee's contention and treated the same as taxable receipt. In this regard, ld. Counsel brought our attention to various decisions of the Tribunal where I am one of the party. Relying on the Hon'ble Andhra Pradesh High Court's judgement in the case of CIT vs. My Home Power Ltd. 46 taxmann.com 314 where the Hon'ble High Court already decided the issue in favour of the assessee holding that the carbon credit receipt are the capital receipts. In this regard, ld. Counsel brought our attention to para 3 to 7 of this judgement (supra). Further, ld. Counsel for the assessee mentioned that the said view of the Hon....
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....stion of law arises in these Appeals. Hence not entertained. The Income Tax Appeals are dismissed." 5. Considering the above binding judgement (supra) as well as the decision of the Co-ordinate Bench of the Tribunal in the case of M/s. Dodson Lindblom Hydro Power Pvt. Ltd. (supra), we find the issue stands covered and decided in favour of the assessee. Following the parity of reasoning, we are of the opinion that the said carbon credits is outside the scope of the chargeability of tax as the same constitutes "capital receipts". Thus, the ground nos.1 to 4 are allowed in favour of the assessee." 11. In view of the above, we are of the considered view, going by the similar set of facts and circumstances involved in the case before us, on same parity of reasoning and respectfully following the decision of the Hon‟ble Jurisdictional High Court (supra.), we allow Grounds No.1 to 4 raised in this appeal in favour of the assessee. 12. Grounds No. 6 and 7 pertains to the confirming of disallowance of additional depreciation of Rs. 10,98,27,376/- being 50% of the claim of additional depreciation made by the assessee firm in respect of the plant and machinery acquired an....
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....r date when it is prospective in nature and not retrospective and therefore, the same cannot be applied to a prior period. That also in the CBDT Circular No.19 of 2015 (supra.) which was referred by the Assessing Officer in his order has also stated that the new proviso to Section 32(1)(ii) of the Act takes effect from 01.04.2016 and therefore, the same will apply from assessment year 2016-17 and subsequent assessment years. Accordingly, the addition made by the Assessing Officer was upheld. 16. In this regard, the Ld. Counsel for the assessee brought to our notice the decision of the Hon‟ble Jurisdictional High Court in the case of Pr. CIT Vs. M/s. Godrej Industries Ltd., Income Tax Appeal No. 511 of 2016 wherein the issue before the Hon‟ble High Court was as follows: "2. Revenue has challenged the Judgment of Income Tax Appellate Tribunal (the Tribunal) dated 1 June, 2015. Following question is presented for our consideration:- "Whether, on the facts and circumstances of the case and in law, the Tribunal is right in law in holding that the Assessee is entitled to 50% of the additional depreciation under Section 32(1)(iia) of the IT Act, 1961?" ....
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....per cent would be allowable, if the new plant and machinery so acquired is out to use for less than 180 days in a financial year. However, it nowhere restricts that the balance 10 per cent would not be allowed to be claimed by the assessee in the next assessment year. The language used in clause (iia) of the said section clearly provides that "a further sum equal to 20 per cent of the actual cost of such machinery or plant shall be allowed as deduction under clause (ii)". The word "shall" used in the said clause is very significant. The benefit which is to be granted is 20 per cent additional depreciation. By virtue of the proviso referred to above, only 10 per cent can be claimed in one year, if plant and machinery is put to use for less than 180 days in the said financial year. This would necessarily mean that the balance 10 per cent additional deduction can be availed of in the subsequent assessment year, otherwise the very purpose of insertion of clause (iia) would be defeated because it provides for 20 per cent deduction which shall be allowed. It has been consistently held by this Court, as well as the apex court, that the beneficial legislation, as in the p....
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....estricted to 50%. Such a situation as in the present case, was considered by the Division Bench of the Madras High Court in Commissioner of Income Tax v. Shri T.P. Textiles Pvt. Ltd., 394 ITR 483, the Court referred to the judgment of the Karnataka High Court in Rittal India Pvt. Ltd., (supra) as well as the addition of third proviso to clause (ii) of sub-section 1 of Section 32 of the Act and observed as under:- "10.1:- The plain language of section 32(1)(iia) read along with relevant proviso would have us come to the conclusion that, there is no limitation in the assessee claiming the balance 10 per cent of additional depreciation in the succeeding assessment year. 10.2:- As a matter of fact, with effect from April 1, 20916, the ambiguity, if any, in this regard, in the mind of the Assessing Officer, stands removed by virtue of the Legislature, incorporating in the Statute, the necessary clarificatory amendment. 10.3 .... .... .... .... .... .... .... 11:- We may only indicate that during the course of the arguments, our attention was drawn to the "Memorandum explaining the provisions in Finance Bill, 2015" whereby, the aforementioned amendment....
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....ear. Now the legislation has amended the provision by adding a proviso which, specifically recognizes the said right. The Madras High Court in Shri T.P. Textiles Pvt. Ltd., (supra) ruled that such proviso being clarificatory in nature, would apply to pending cases, covering past period also. 10. We have no reason to take view different from two High Courts, examining the situation at considerable length. In the result, no question of law arises." 18. The Hon‟ble Jurisdictional High Court observed that after the decision in the case of Rittal India Pvt. Ltd. (supra.) by the Hon‟ble Karnataka High Court, there has been legislative amendment wherein the third proviso to clause (ii) of sub section 1 of Section 32 of the Act had been added which is as follows: "Provided also that where an asset referred to in clause (iia) or the first proviso to clause (iia), as the case may be, is acquired by the assessee during the previous year and is put to use for the purposes of business for a period of less than one hundred and eighty days in that previous year, and the deduction under this sub-section in respect of such asset is restricted to fifty per cent of th....