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Dy. Commissioner of Income Tax, Circle-16 (1) , Hyderabad Versus M/s. NSL Renewable Power (P) Ltd.,

2015 (10) TMI 1867 - ITAT HYDERABAD

Deduction u/s. 80IA - Exemption claimed on the sale of carbon credits in assessee's power division - Held that:- Assessee is not entitled for deduction u/s. 80-IA(1), but the said amounts are to be treated as a capital receipts not taxable as income as held by CIT(A) relying on The Commissioner of Income Tax – IV, Hyderabad Versus M/s. My Home Power Ltd. [2014 (6) TMI 82 - ANDHRA PRADESH HIGH COURT] - Decided against revenue. - I.T.A Nos. 1584 & 1585/HYD/2014 - Dated:- 24-6-2015 - SHRI B. RAMAKO .....

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ee is a company in which public are not substantially interested and is engaged in the production of seeds and wind power. In the impugned assessment years, assessee has shown incomes from sale of carbon credits or Certified Emission Reductions (CER) in the company's power division totaling to ₹ 6,47,02,202/- as income in AY. 2008-09 and ₹ 8,85,56,891/- in AY. 2009-10. The above amounts were claimed as deduction u/s. 80IA of the Income Tax Act [Act]. Ld. Assessing Officer (Ld. AO .....

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ns for assessee, held that assessee is not entitled for deduction u/s. 80-IA(1), but the said amounts are to be treated as a capital receipts not taxable as income. The CIT(A) followed the decision of the ITAT Hyderabad Bench in the case of My Home Power Ltd., Vs. DCIT in ITA No. 1114/Hyd/2009 dt. 02-11-2012. His order in AY. 2008-09 is extracted for the sake of record: "4.3. I have carefully considered the submissions of the appellant and the assessment order. The appellant contended that .....

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or deduction u/s. 80IA in view of the decision of the ITAT, Hyderabad mentioned above but the same is to be treated as a capital receipt in view of the said decision. Extract of the operative portion of the decision of the ITAT is reproduced hereunder: "We have heard both the parties and perused the material on record. Carbon credit is in the nature of "an entitlement" received to improve world atmosphere and environment reducing carbon, heat and gas emissions. The entitlement ear .....

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eceived for carbon credits has no element of profit or gain and it cannot be subjected to tax in any manner under any head of income. It is not liable for tax for the assessment year under consideration in terms of sections 2(24), 28, 45 and 56 of the Income-tax Act, 1961. Carbon credits are made available to the assessee on account of saving of energy consumption and not because of its business. Further, in our opinion, carbon credits cannot be considered as a bi-product. It is a credit given t .....

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edit. 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 of these credits is capital receipt. For this proposition, we place reliance on the judgement of the Supreme Court in the case of CIT vs. Maheshwari Devi Jute Mills Ltd. (57 ITR 36) wherein held that transfer of surplus loom hours to other mill o .....

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e transferred the carbon credits like loom hours to some other concerns for certain consideration. Therefore, the receipt of such consideration cannot be considered as business income and it is a capital receipt. Accordingly, we are of the opinion that the consideration received on account of carbon credits cannot be considered as income as taxable in the assessment year under consideration. Carbon credit is not an offshoot of business but an offshoot of environmental concerns. No asset is gener .....

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