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2015 (12) TMI 1323 - ITAT CHENNAI

2015 (12) TMI 1323 - ITAT CHENNAI - TMI - Clean development mechanism (CDM) receipts - whether are not subsidies but trading receipt? - Held that:- Commissioner of Income Tax (Appeals) allowed the claim of the assessee holding that clean development mechanism would constitute capital receipt in the hands of the assessee following the decision of the co-ordinate Bench in assessee's own case for the assessment year 2009-10. Thus we hold that carbon credit receipts are capital in nature and thus, w .....

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ent made for fees for technical services? - Held that:- Supreme Court in the case of GE India Technology Centre Private Limited Vs CIT (2010 (9) TMI 7 - SUPREME COURT OF INDIA) wherein held that the assessee is not liable to deduct TDS when nonresident provided service outside India. It was held that when the services are provided outside India, the commission payments made to non-resident cannot be treated as income deemed to accrue or arise in India, therefore the provisions of section 195 has .....

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pplicable. Hence, the Assessing Officer is correctly directed to delete the addition made u/s 40(a)(ia} for non-deduction of TDS in respect of commission payments to non-resident.- Decided in favour of assessee.

Entitlement for deduction under section 80IA on windmills - Held that:- All the business undertakings are wind mills and they have claimed the benefit of deduction under Section 80IA of the Income Tax Act for the assessment years in question and for the subsequent years as we .....

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a Sumanth, Adv ORDER Per Challa Nagendra Prasad, JM This appeal is filed by the Revenue against the order of the Commissioner of Income Tax (Appeals)-I, Coimbatore dated 27.08.2013 for the assessment year 2010-11. 2. The first issue in the appeal of the Revenue is that Commissioner of Income Tax (Appeals) erred in considering that clean development mechanism (CDM) receipts are not subsidies but trading receipt. 3. Counsel for the assessee submits that this issue has been decided by the Tribunal .....

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ioner of Income Tax (Appeals) allowed the claim of the assessee hodling that clean development mechanism would constitute capital receipt in the hands of the assessee following the decision of the co-ordinate Bench in assessee's own case for the assessment year 2009-10. The co-ordinate Bench while deciding the nature of receipt i.e whether capital or revenue held as under:- "We have heard both parties and perused the relevant findings as well as case law cited (supra). The first content .....

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f ITAT, Hyderabad (supra) wherein it has been held as under: "24. 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 earned for carbon credits can, at best, be regarded as a capital receipt and cannot be taxed as a revenue receipt. It is not generated or created due to carrying on business but it is accrued .....

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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 have surplus carbon credits can sell them to other assessees to have capped emis .....

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ntitlement 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 out of those allotted to the assessee under an agreement for control of production was capital receipt and not income. Being so, the consideration received by the assessee is similar to co .....

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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 r .....

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009 states that CERs should be recognised in books when those are create d 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 should be accounted as per AS-2 (Valuation of inventories) at a cost or market price, whichever is lower. Since CERs are recognised as inventories, the generating assessee should apply AS- .....

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assessment year 2009-10, we hold that carbon credit receipts are capital in nature and thus, we uphold the order of the Commissioner of Income Tax (Appeals) and reject the grounds raised by the Revenue on this issue. 7. The next issue in the grounds of appeal of the Revenue is that Commissioner of Income Tax (Appeals) failed to consider foreign commission payment was made only for the purpose of managing sales of the assessee outside India by means of engaging agents and as per the provisions of .....

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ales commission paid to foreign agents is in the nature of fees for technical services as it was paid for managerial services. It was the contention of the assessee that sales commission paid to foreign agent is not taxable in India therefore provisions of section 195 have no application. On appeal, the Commissioner of Income Tax (Appeals) deleted the disallowance following the decision of the jurisdictional High Court in the case of ITO Vs. Faizan Shoes (34 Taxmann.com 79) and the decision of H .....

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ions relied on. This issue has been considered by the Commissioner of Income Tax (Appeals) with reference to the contentions of the assessee as well as the Assessing Officer and by following the jurisdictional High Court decision in the case of ITO Vs. Faizan Shoes (supra) deleted the disallowance observing as under:- "6. Ground No.3: This ground of appeal is against the action of the Assessing Officer in making addition u/s 40(a)(ia) for nondeduction of TDS in respect of commission paid to .....

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/s 40(a)(ia) is contrary to the decision of the Hon'ble Supreme Court in the case of GE India Technology Centre Private Limited Vs CIT (2007) 327 ITR 456 wherein the Hon'ble Apex Court has held that to invoke the provisions of Section 195 of the Act, the income should be chargeable to tax in India. Further, the issue of disallowance u/s 40(a)(ia) for non-deduction of TDS in respect of foreign commission agents is covered under recent jurisdictional ITAT decision Income tax Officer Vs Fai .....

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vices u/s 9(1)(vi) and further when the services are provided outside India, the commission payments made to non-resident, cannot be treated as income deemed to accrue or arise in India and provision of Section 195 has no application. The Hon'ble ITAT also stated that the case is squarely covered by the decision of the Supreme Court in the case of GE India Technology Centre Private Limited Vs CIT (2007) 327 ITR 456 wherein the Hon'ble Supreme Court held that the assessee is not liable to .....

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llant are not chargeable to tax in India and therefore the provisions of Section 195 are not applicable. In the case of appellant, the facts are similar and the decision of the Hon'ble Supreme Court and also the jurisdictional Tribunal decision referred to above is squarely applicable. Hence, the Assessing Officer is directed to delete the addition made u/s 40(a)(ia} for non-deduction of TDS in respect of commission payments to non-resident. This ground of appeal is allowed." 12. On goi .....

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or deduction under section 80IA of the Act on windmills. The assessee in the return of income claimed deduction under section 80IA of the Act in respect of installation of windmill by following the decision of jurisdictional High Court in the case of Sri Velayudhasamy Spinning Mills Pvt.Ltd. (231 CTR 368). However, the Assessing Officer disallowed the claim of the assessee for the reason that the decision of the jurisdictional High Court has not become final and the Department has preferred SLP .....

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