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2022 (1) TMI 992 - ITAT CHENNAIAmount receivable on account of CER’s (Carbon Emission Reduction) - Revenue or capital receipt - Disallowance of amount claimed as provision relating to CDM (Clean Development Mechanism) income in earlier year written back - assessee credited CDM revenue account and debited CDM revenue receivable account and booked income in that year - assessee has earned Carbon Credits in earlier years on the basis of wind-mill power generated during FYs 2007-08, 2008-09 & 2009-10 - HELD THAT:- CDM revenue receivable account was shown on asset side as amount receivable which would have liquidated upon sale of Carbon Credits by the assessee - unfortunately CER market crashed in 2012 and as a result, these credits could not be realized and the assessee had to forgo the credits ultimately. Accordingly, the income after adjusting exchange difference was reversed by reducing the opening balance of Accumulated Profit & Loss Account and the claim was made in the computation of income. The said accounting treatment was in accordance 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 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 that the CER receipts would be capital receipts and therefore, any loss arising therefrom would be capital loss only and hence not allowable. The said observation over-look the fact that despite being capital receipts, the assessee has offered the same to tax in earlier years. The assessee’s action of offering the income to tax, in our opinion, would entitle him to claim the expenditure if ultimately the receipts could not be realized by the assessee. The same is based on the principal of equity and natural justice. Therefore, on the given facts and circumstances, we would hold that the claim made by the assessee was an allowable deduction. The Ld. AO is directed to grant the deduction as claimed by the assessee. Resultantly, the appeal stand allowed. Interest disallowance u/s 36(1)(iii) - CIT-A deleted the addition - HELD THAT:- It is admitted position that the tax effect of quantum addition under dispute by revenue is less than the prescribed monetary limit of ₹ 50 Lacs and therefore, the appeal is not maintainable in terms of low tax effect circular issued by CBDT vide Circular No. 17/2019 dated 08/08/2019 [F.No.279/Misc. 142/2007-TTJ(Pt.). This recent circular further enhances the monetary limit fixed in earlier Circular No.3 of 2018 dated 11/07/2018 issued by CBDT as amended on 20/08/2018. Hence, the appeal stand dismissed with a liberty to revenue to seek recall of the appeal, if at a later stage, it is found that the matter is covered by any exceptions provided in any of the circular or in case the tax effect in any of the appeals exceeds the prescribed monetary limit. The appeal stands dismissed.
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