2015 (1) TMI 1287 - AT - Income Tax

Sale of carbon credit - deduction under section 80IA - Held that - The income from sale of carbon credit is capital receipt. See My Home Power Ltd. Versus Deputy Commissioner of Income-tax Central Circle - 7 2012 (11) TMI 288 - ITAT HYDERABAD . Assessing Officer is directed to allow the deduction claimed by the assessee u/s.80IA

Summary

Issues:
1. Set off of losses from windmill business against profits for a specific assessment year.
2. Treatment of income from sale of carbon credits under section 80IA.

Analysis:

Issue 1: Set off of losses from windmill business
The first issue in the appeal relates to the set off of losses from windmill business against profits for a specific assessment year. The Revenue contended that losses from previous assessment years should only be set off against profits from the assessment year in question. The Commissioner of Income Tax (Appeals) allowed the claim of the assessee based on the decision of the jurisdictional High Court in a specific case. The Commissioner observed that the carbon credit income was incidental to the main income generated from the windmills, and hence, the deduction under section 80IA was justified. The Appellate Tribunal upheld the decision of the Commissioner, citing no valid reason to interfere with the findings.

Issue 2: Treatment of income from sale of carbon credits
The second issue revolved around the treatment of income from the sale of carbon credits under section 80IA. The Assessing Officer disallowed the deduction claimed by the assessee on the income from the sale of carbon credits, considering it as income attributable to business but not direct business income. The Commissioner of Income Tax (Appeals) accepted the alternative claim of the assessee that the sale of carbon credits constituted a capital receipt and was not taxable as it lacked elements of profit or gain. The Appellate Tribunal referred to a decision of the co-ordinate Bench and the judgment of the Hon'ble Andhra Pradesh High Court, which held that income from the sale of carbon credits was capital in nature. Therefore, the Tribunal sustained the order of the Commissioner, dismissing the appeal of the Revenue.

In conclusion, the Appellate Tribunal upheld the orders of the lower authorities on both issues, emphasizing the capital nature of income from the sale of carbon credits and the eligibility of the assessee for deduction under section 80IA based on the High Court's decision. The appeal of the Revenue was dismissed, and the order was pronounced in January 2015 at Chennai.