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2022 (1) TMI 992

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....3) of the Act on 10.03.2016. The ground raised by the assessee read as under: - 1. The order of CIT(A) No.ITA No.53/CIT(A)-1/2016-17 dated 29.06.2018 is against law and fact of the case. 2. The CIT(A) erred in confirming the disallowance of the claim of Rs. 2,96,62,698/- being the amount claimed as provision relating to CDM (Clean Development Mechanism) income in earlier year written back. 3. The CIT(A) erred in holding the amount receivable on account of CER's (Carbon Emission Reduction) is capital in nature and therefore the subsequent write back cannot result in an allowable deduction. 2. Having heard rival submissions and after considering the orders of lower authorities, our adjudication would be as given in succeeding paragraph....

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....ject and based on certificates issue by these third parties, the UNFCCC (United Nations Framework Convention on Climate Change) issue CERs for the projects registered under the Clean Development mechanism Cycle (CDM). The CERs issued could be traded at prevailing market prices. On the basis of wind mill power generated by assessee during FYs 2007-08, 2008-09 & 2009-10, the assessee booked income of Rs. 305.59 Lacs in AY 2010-11. The assessee credited CDM revenue account and debited CDM revenue receivable account. However, subsequently, CER market crashed in 2012 and as a result, the assessee did not make efforts to get CERs certified by UNFCCC. Therefore, the income booked during AY 2010-11 was reversed during the year which was claimed in ....

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....orrected as part of transition provisions, the only requirement was to being on record the CERs already earned by making an entry in the Reserve account and not in the Profit & Loss Account. The guidance note did not contain any stipulation as contended by the assessee and did not provide for reversing any income that have been booked in the past. Further, income from CERs were held to be capital receipts as per various judicial decisions as enumerated in the impugned order. The provisions of Section 115BBG was introduced only w.e.f. AY 2018-19 to bring to tax such receipts. Further, the guidance notes issued by ICAI did not determine the chargeability of tax in respect of CERs under the Act. The assessee may have booked CERs in the past as....

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....ce with the applicable accounting standards. Logically also, when the provision was created in earlier years, the same was by way of credit to Profit & Loss account. Accordingly, when the same has been reversed, the same has been adjusted from the accumulated balance of Profit & Loss Account. Thus, it was a case when a provision of income was made in the books of account which was offered to tax. However, the income could ultimately be not realized and accordingly, the same has been claimed as deduction. On the given facts, we concur with the submissions of Ld. AR that the provisions of Sec.36(1)(vii) r.w.s. 36(2) were not applicable since it was not the case of bad debts. The Ld. CIT(A) has denied the claim of the assessee by observing tha....