AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2026 (3) TMI 388
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....or short, "the Act"), dated 27/09/2022 for the Assessment Year (AY) 23/11/2021. The assessee firm has assailed the impugned order of the CIT(A) on the following grounds of appeal: "1. The order of the Ld. CIT (A) u/s 250 of the Act dt. 13/08/2025 for the AY 2020-21 is erroneous both on facts and in law to the extent the order is prejudicial to the interests of the appellant. 2. The Ld. CIT (A) erred in dismissing the grounds with regard to the issue of receipt of Rs. 1,78,24,800/- towards sale of RECs without considering the facts and circumstances of the case as also the settled position of law. 3. The Ld. CIT (A) ought to have appreciated that the assessee firm, during the year under consideration, had received ....
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....of the 9. The Ld. CIT (A) failed to appreciate the fact that, the underlying purpose of both Carbon Credits and RECs is the promotion of environmental protection and sustainability, accordingly to which any income earned from the sale of RECs is eligible to be taxed at the concessional rate of 10% u/s 115BBG of the Act, 1961. 10. The Ld. CIT (A) failed to appreciate that transferable RECs are not a result or incidence of regular business activity but are entitlements granted for reducing carbon emissions and therefore, treating such income as Profits and Gains of Business or Profession' is incorrect and bad in law. 11. The Ld. CIT (A) erred in upholding that the AO is opinion that such claim of additional deduction can....
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....ief under sections 90/91 of the Act; (ii) foreign bank account; and (iii) deduction from total income under Chapter VI-A of the Act. 3. During the course of the assessment proceedings, it was observed by the AO that the assessee firm was engaged in the business of software development, solar power and manufacturing of bio-mass briquettes. Also, the AO observed that the assessee firm was, inter alia, engaged in the business of generating power through renewable sources, and had, during the subject year, earned an income of Rs. 1,78,24,800/- from the sale of "Renewable Energy Certificates" (RECs). The assessee firm in its return of income had offered the income from the sale of RECs to tax under section 115BBG of the Act, i.e., at the conc....
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....as under: "115BBG. (1) Where the total income of an assessee includes any income by way of transfer of carbon credits, the income-tax payable shall be the aggregate of- (a) the amount of income-tax calculated on the income by way of transfer of carbon credits, at the rate of ten per cent; and (b) the amount of income-tax with which the assessee would have been chargeable had his total income been reduced by the amount of income referred to in clause (a). (2) Notwithstanding anything contained in this Act, no deduction in respect of any expenditure or allowance shall be allowed to the assessee under any provision of this Act in computing his income referred to in clause (a) of sub-section (1). Exp....
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....in the matter of taxation, particularly where a concessional tax rate is provided, the provisions must be strictly construed and cannot be extended to any other instrument because both relate broadly to environmental objectives. 12. As the Ld. AR in the course of the hearing of the appeal in his attempt to impress upon us that the RECs are to be given the same meaning as "carbon credits" defined in section 115BBG of the Act, had relied upon certain judicial pronouncements, viz., (i) Commissioner of Income Tax, Chennai vs. Ambika Cotton Mills Ltd (2021) 125 taxmann.com 206 (Madras); (ii) ACIT vs. M/s. Indsil Hydro Power & Manganese Ltd, ITA No.3491/Chny/2018, dated 09/08/2021; and (iii) Satia Industries Ltd vs. National Faceless Assessmen....
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....der consideration offered the income on sale of RECs to tax by disclosing them as revenue receipts, it cannot now be allowed to turn around and claim the same as capital receipts. Apart from that, we find that the aforesaid issue does not even otherwise emanate from the impugned order before us. In our view, as the definition of "carbon credit" as provided in the "Explanation" to section 115BBG of the Act contains a specific definition tied to the reduction of carbon dioxide emissions or emissions of its equivalent gases validated under UNFCC, while for RECs, being instruments issued under domestic electricity regulations and MWH do not satisfy that statutory regulation, therefore, the same by no means can be brought within the meaning of t....