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2016 (9) TMI 394 - ITAT CHENNAI

2016 (9) TMI 394 - ITAT CHENNAI - TMI - Deduction allowable u/s-80IA - receipts arising from sale of carbon credits - Held that:- The income from sale of carbon credits is ‘capital’ in nature and the said income is not eligible for deduction u/s 80IA of the Act - I.T.A. No.479/Mds/2015 - Dated:- 28-7-2016 - SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER For The Appellant : Shri. M. Koteswar Rao, CIT. For The Respondent : Dr. Anita Sumanth, Advocate ORDER PER G. .....

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ding receipt. The assessee's power generation from the windmill compared to the Conventional power generation has no emission of C02. This attribute was given an economic value by the issuance of Certified Emission Reduction (CER) by the United Nations Framework Convention on Climate Change (UNFCCC). These CERs are traded in the various climate exchanges or through private quotes to the Annex I countries or the organizations in the Annex I countries. 3. The learned CIT(A) has erred to consid .....

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ration of 1 year. Before issuing the CERs by the CDM Executive Board, every year power generation data is verified by the Designated Operational Entity (DOE) and a certificate mentioning amount of C02 emission reduced and eligible CERs are issued. Thus the CERs are indirectly quantified upon the actual power generated by the windmills per annum. Thus the income received by selling the CERs is revenue in nature than Capital in nature. The CDM receipts are also not grant towards Capital goods or t .....

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the CDM receipts are neither subsidies nor capital receipts but incomes from selling of intangible goods called CERs in the market and are taxable as business income under the provisions of Section 28(iv). 7. The learned Commissioner of Income tax(Appeals), Coimbatore has erred in holding that the assessee is entitled for deduction u/s-80IA. 8. The learned Commissioner of Income tax-I, Coimbatore has erred to consider that the department has filed a Special Leave Petition (SLP) before the Hon&# .....

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r the provisions of the section-80IA( 5) the eligible undertaking should be treated as only source of income for computing the quantum of deduction allowable u/s-80IA. 11. The learned Commissioner of Income tax-I, Coimbatore, should have taken note of the fact that the Sec-80IA(5) begins with a non-obstante clause; and, therefore, the restriction therein, shall prevail in computing and allowing the deduction u/s-80IA . 3. After hearing both the parties, we are of the opinion that similar issue c .....

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sessee contended that his total carbon credit receipts reading ₹ 1,18,78,061/- comprised of ₹ 72,94,322/- in preceding assessment year 2009-10 and ₹ 45,83,739/- in the impugned assessment year. He raised an alternative prayer that only in view of deduction claim u/s 80IA, the said carbon credit receipts had been offered as revenue receipts. He sought to cancel his action of offering the carbon credit receipts as income as well as deduction claim u/s 80IA in view of the decision .....

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22 Receipts in assessment year 2010-11 ₹ 45,83,739 Rs.1,18,78,061 The total amount of the said amounts were taken as revenue receipts for the year under consideration and the assessee's claim of 80lA relief for the amount of ₹ 1,18,78,061/-. In appeal claimed that these are capital receipts as per the order of the ITAT "C" Bench Chennai in the case of M/s. Ambilka Cotton Mills Limited. 7.1 In view of the fact that the assessee has already admitted these amounts as reven .....

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trading of carbon credits cannot be considered as derived from the generation of electricity from wind turbine generators. They can at best be considered as attributable to the business of generation of electricity from WTGS for the reason that the energy generated by nonconventional means which includes WTGS go to reduce burning of fossil fuels which in turn result in clean development mechanism. Therefore carbon credits are directly proportionate to the reduction in the amount of carbon-dioxid .....

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or deduction under section 80IA. However, considering the facts and circumstances it indicate that the receipts from sale of carbon credit cannot be treated as derived from the undertaking and also the apex court decision in the case of Sterling foods reiterated in Liberty India Vs. Commissioner of Income Tax (317 ITR 218) the claim of the 80lA cannot stand the test of law and hence disallowed. 7.6 Regarding the quantum of relief the Assessing Officer may examine whether receipts from 2009- 10 i .....

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