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2017 (3) TMI 1902 - HC - Income TaxCharacterization of receipts - income from sale of Certified Emission Reductions (CERs) - capital receipts or Revenue receipts - Whether Tribunal has erred in law and in facts treating the income from sale of Certified Emission Reductions (CERs) as revenue receipt excisable to taxation instead of treating them as capital receipt? - as alleged taxing event had not taken place during the current year, the Tribunal ought not to have proceeded further to examine the taxability in a future year - HELD THAT:- We are of the opinion that as such the Tribunal has materially erred in proceeding further to examine the taxability of the income from sale of CERs in future year. It is not in dispute that so far as the year under consideration for which the appeal was before the learned Tribunal has confirmed the order passed by the learned CIT(A) deleting the addition by observing that no such income has been received by the assessee in the year under consideration as there was neither any sale nor transfer of the carbon receipts in favour of any foreign companies during the year under consideration. Therefore, as such the issue before the learned Tribunal was as such academic. Therefore, keeping the said question open to be considered in accordance with law in the year in which the income is derived from sale of CERs, Tribunal ought to have disposed of the appeal. At this stage it is required to be noted that even the learned Tribunal has in the impugned order has specifically observed that the learned Tribunal is making observations on the aforesaid issue to show their understanding on the issue and that they have briefly touched the issue. In any case the learned Tribunal ought not to have decided the issue which as such was academic before it. While quashing and setting aside the observations made by the learned Tribunal with respect to the income derived from carbon receipts and/or on sale of CERs, we hold the question in favour of the assessee and against the Revenue by keeping the said question open to be considered in accordance with law in the year in which the income from sale of CERs is received. Under the circumstances, we hereby set aside the observations made by the learned Tribunal with respect to the income from sale of CERs, made in the impugned judgment and order, however keeping the said question open to be considered in accordance with law and in the year in which the income from sale of CERs is accrued / received. Disallowance u/s 14A - Appeal ADMITTED to consider the following substantial question of law. “Whether ITAT has erred in reversing the order of CIT(A) and confirming the order of the AO to the extent of confirming disallowance under Rule 8D r.w.s. 14A?”
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