2015 (12) TMI 820

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..... M) is capital or revenue receipt. 2. The assessee is in the business of manufacture of yarn and electricity generation through wind electrical generators. The assessee in its return of income for the assessment year 2009-10 claimed CDM receipts as capital receipts. The Assessing Officer in scrutiny assessment held CDM receipts to be revenue receipts under the head "Income from business & profession". The assessee, carried the issue in appeal before CIT(Appeals). The CIT(Appeals), vide impugned order, upheld the findings of A.O. on the issue. Aggrieved by the order of First Appellate Authority, the assessee has come in appeal before the Tribunal. 3. Shri N. Vijay Kumar, CA, appearing on behalf of assessee, submitted that Hyderabad Bench of .....

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..... is world concern and environment. Due to that the assessee gets a privilege in the nature of transfer of carbon credits. Thus, the amount received 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 to the assessee under the Kyoto Protocol and because of international understanding. Thus, the assessees who .....

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..... e, 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 generated in the course of business but it is generated due to environmental concerns. Credit for reducing carbon emission or greenhouse effect can be transferred to another party in need of reduction of carbon emission. It does not increase profit in any manner and does not need any expenses. It is a nature of entitlement to reduce carbon emission, however, .....

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