TMI Blog2014 (5) TMI 553X X X X Extracts X X X X X X X X Extracts X X X X ..... linked with power generation - On the sale of excess Carbon Credits the income was received and it is capital receipt and it cannot be business receipt or income - the receipt on sale of carbon credits is a capital receipt and deleted the addition made by the AO – Decided against Revenue. - ITA Nos. 80 & 81/Hyd/2014 - - - Dated:- 7-5-2014 - Shri Chandra Poojari And Smt. Asha Vijayaraghavan,JJ. For the Petitioner : Shri Solgy Jose T. Kottaram For the Respondent : Shri P. Ravi Seshagiri Rao ORDER Per Chandra Poojari, A. M. Both these appeals preferred by the Revenue are directed against separate orders of CIT(A)-V, Hyderabad, dated 30/09/2013, for the assessment years 2008-09 2009- 10. As identical issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. 5. On appeal, before the CIT(A) the assessee submitted that the Hon ble ITAT in its own case for AY 2007-08 in ITA No. 1114/Hyd/2009 dated 02/11/2012 (27 Taxman.com) held that the income received on sale of carbon credits is capital in nature and, therefore, pleaded the income from sale of carbon credits is not taxable as it represents capital receipt. The CIT(A) after considering the submissions of the assessee followed the decision of the ITAT in assessee s own case for AY 2007-08 (supra) and held that the receipt on sale of carbon credits is a capital receipt, and hence, deleted the addition of Rs. 2,03,00,000/-. 6. Aggrieved, the revenue is in appeal before us. 7. We have heard both the parties, perused the record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee under the Kyoto Protocol and because of international understanding. Thus, the assessees who have surplus carbon credits can sell them to other assessees to have capped emission commitment under the Kyoto Protocol. Transferable carbon credit is not a result or incidence of one's business and it is a credit for reducing emissions. The persons having carbon credits get benefit by selling the same to a person who needs carbon credits to overcome one's negative point carbon credit. The amount received is not received for producing and/or selling any product, bi-product or for rendering any service for carrying on the business. In our opinion, carbon credit is entitlement or accretion of capital and hence income earned on sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner and does not need any expenses. It is a nature of entitlement to reduce carbon emission, however, there is no cost of acquisition or cost of production to get this entitlement. Carbon credit is not in the nature of profit or in the nature of income. 25. Further, as per guidance note on accounting for Selfgenerated Certified Emission Reductions (CERs) issued by the Institute of Chartered Accountants of India (ICAI) in June, 2009 states that CERs should be recognised in books when those are created by UNFCCC and/or unconditionally available to the generating entity. CERs are inventories of the generating entities as they are generated and held for the purpose of sale in ordinary course. Even though CERs are intangible assets those shou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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