TMI Blog2015 (10) TMI 2737X X X X Extracts X X X X X X X X Extracts X X X X ..... of claim u/s 80IA with respect to the receipt on account of carbon credit sale - Held that:- We find that as we have already held that the receipt on account of carbon credit sale is a capital receipt and hence the same is not liable to tax. The adjudication of issue raised by the Revenue is only of academic interest. Accordingly we are not engaging under the same. Hence this ground raised by the Revenue is dismissed as infructuous. - Assessee appeal allowed. - I.T. A. Nos. 109/BLPR/2011 & 71/BLPR/2012 & C.O. Nos. 136 & 137/BLPR/2015, I.T. A. No. 216/BLPR/2011 & C.O. No. 139/BLPR/2015 - - - Dated:- 30-10-2015 - Shri Mukul K. Shrawat And Shri Shamim Yahya, JJ. Department by : Shri Rajiv Varshney. Assessee by : Shri P.S. Bamb. And Shri P.C. Maloo. ORDER Shri Shamin Yahya, These appeals by the Revenue and cross objections by the assesses emanate out of separate orders of learned CIT(Appeals). Since the issues involved are common and connected and the appeals were heard together, these are being disposed of by this common order for the sake of convenience. 2. One common issue raised in appeals by the Revenue is as to whether the CIT(Appeals) was jus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this income as revenue receipt and sought deduction u/s 80IA. Hence learned D.R. pleaded that the assessee now cannot be allowed to take an altogether different stand and plead that the impugned receipt is a capital receipt. 7. We have carefully considered the submissions and perused the records. We find that the assessee has raised a cross objection pleading that the impugned receipts are capital receipts and not revenue receipts. The strength of this pleading is a decision of Hon ble High Court Andhra Pradesh delivered subsequent to the order of the authorities below. We find that in identical situation the ITAT, Mumbai Bench in the case of Ultratech Cement Ltd. vs. Addl. CIT (supra) has admitted similar additional ground placing reliance upon the Hon ble Apex Court decision in the case of National Thermal Power Co. Ltd. 229 ITR 383. We may gainfully refer to the said Hon ble Apex Court decision as under : Under section 254 of the Income-tax Act, 1961, the Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. The power of the Tribunal in dealing with appeals is thus expressed in the w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this, when delay is condoned, the highest that can happen is that a cause would be decided on merits after hearing the parties. 3. Every day s delay must be explained does not mean that a pedantic approach should be made. Why not every hour s delay, every second s delay? The doctrine must be applied in a rational, common sense and pragmatic manner. 4. When substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred, for the bother side cannot claim to have vested right in injustice being done because of non-deliberate delay. 5. There is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of mala fides. A litigant does not stand to benefit by resorting to delay. In fact, he runs a serious risk. 6. It must be grasped that the judiciary is respected not on account of its power to legalize injustice on technical grounds but because it is capable or removing injustice and is expected to do so. 9. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... simultaneously with the generation of power. The carbon credit so generated is also measured in terms of quantum of electricity produced. If no electricity is generated, carbon credit can not be generated. In case, the power is generated from various conventional raw material like coal, oil and gases which pollutes the atmosphere and generates green house gases, no carbon credit is earned. It is only the benefit arising in course of present technology of generation of power from flue gases. In view of above production process, I am of the, considered opinion, that generation/accrual of carbon credit is directly related with the generation of power. In this process, the carbon credit can not be earned in isolation with the power generation and, therefore, the process of earning carbon credit has direct nexus with generation of power meaning thereby, that the gain from sale of carbon credit is a gain derived by an undertaking engaged in the business of generation of power. 10. Now against the above order, Revenue has appealed and the assessee has filed the cross objection. In the cross objection it has been submitted that the receipt on account of sale of carbon credit is a capit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anner 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 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 car bon 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 of these credits is capital receipt. For this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e revenue in respect of sale of CERs 26. Thus sale of carbon credits is to be considered as capital receipt. This ground is allowed. The said decision of the Hon ble ITAT, Hyderabad was subject matter of adjudication by the Hon ble Andhra Pradesh High Court. The Hon ble High Court in its order reported in 365 ITR 82 has held as under : We have considered the aforesaid submission and we are unable to accept the same, as the learned Tribunal has factually found that 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. We agree with this factual analysis as the assessee is carrying on the business of power generation. The Carbon Credit is not even directly linked with power generation. On the sale of excess Carbon Credits the income was received and hence as correctly held by the Tribunal it is capital receipt and it cannot be business receipt or income. In the circumstances, we do not find any element of law in this appeal. From the above we find that Hon ble Andhra Pradesh High Court has considered the issue and have affirmed the Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sent case the flue gas flow from sponge iron rotary kiln is passed through burning chamber and waste heat recover boiler to produce steam. The steam so generated operate the turbine to generate electricity. This technology of generation of electricity results into reduction of green house gases. For this the producers are granted carbon credit. The producers of such carbon credit can sell them to other assesses who have capped emission commitment under the Kyoto Protocol. Thus the carbon credit can also be said to be a grant as international agency grants the same. Carbon credit hence emanates out of such technology and plant and machinery which contribute to reduction of green house gases. Thus these carbon credits are also meant to promote such investment which are admittedly capital in nature. Hence seen from this angle also the carbon credit is a capital receipt. 15. In the result, the cross objection is allowed. 16. Now the issue raised in Revenue s appeal was that whether the learned CIT(Appeals) is correct or not in deleting the disallowance of claim u/s 80IA with respect to the receipt on account of carbon credit sale. We find that as we have already held that the rec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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