TMI Blog2017 (10) TMI 1458X X X X Extracts X X X X X X X X Extracts X X X X ..... the other two decisions of Chennai Tribunal in Sri Velayudhaswamy Spinning Mills (P.) Ltd. Vs. DCIT [ 2015 (4) TMI 132 - ITAT CHENNAI] and Ambika Cotton Mills Ltd. Vs.DCIT [ 2016 (9) TMI 394 - ITAT CHENNAI] where also it has been held that receipt on account of Carbon Credit is capital in nature neither chargeable to tax under the head Business Income nor liable to tax under the head Capital Gains. Provision for Mines Closure - Deduction in respect of Mines Closure Expenses - the said expenditure was not even debited in the books of accounts and is also not an ascertained liability - ITAT allowed the deduction - HELD THAT:- It is not reflected in the books of accounts without taking closure of a mining is a statutory liability and the same is for the subsequent year reflected, therefore, in view of the decision rendered by the tribunal BHARAT EARTH MOVERS VERSUS COMMISSIONER OF INCOME-TAX [ 2000 (8) TMI 4 - SUPREME COURT] we are of the opinion that the tribunal has not committed any error. - D.B. Income Tax Appeal No. 151/2016 - - - Dated:- 13-10-2017 - MR. JUSTICE K.S. JHAVERI AND MR. JUSTICE DINESH CHANDRA SOMANI For the Appellant : Mr. Anuroop Singhi w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he company from the sale of Certified Emission Reduction (CER) pertaining to Carbon Credit shown as capital receipt. 29. In view of the decision rendered by the Supreme Court in Vodafone International (supra), it has to be taken as capital account and it cannot be taxed under the Income Tax Act since it was taxable under direct tax and the Tribunal has given the finding which reads as under:- We have heard the rival submissions and perused the evidence on record. We find that the Appellate Tribunal in My Home Power Ltd. Vs. DCIT (supra), have, after detailed examination, concluded that the receipts from Carbon credit are capital in nature. We are inclined to follow the said decision and the other two decisions of Chennai Tribunal in Sri Velayudhaswamy Spinning Mills (P.) Ltd. Vs. DCIT(Supra) and Ambika Cotton Mills Ltd. Vs.DCIT (supra) where also it has been held that receipt on account of Carbon Credit is capital in nature neither chargeable to tax under the head Business Income nor liable to tax under the head Capital Gains. Our above view is also supported by the decision of Supreme Court in the case of Vodafone International Holdings Vs. UOI (supra) where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... F INCOME TAX (09.08.2000 SC), 245 ITR 0428 wherein it has been observed as under: 6. Applying the above-said settled principles to the facts of the case at hand we are satisfied that provision made by the appellant company for meeting the liability incurred by it under the leave encashment scheme proportionate with the entitlement earned by employees of the company, inclusive of the officers and the staff, subject to the ceiling on accumulation as applicable on the relevant date is entitled to deduction out of the gross receipts for the accounting year during which the provision is made for the liability. The liability is not a contingent liability. The High Court was not right in taking the view to the contrary. 5.2 He contended that in view of decision in Bharat Earth Movers where the matter was taken before the Karnataka High Court, the amount was reflected in the books of accounts whereas the same was not reflected in the books of accounts in the present case and tribunal has committed serious error in allowing the same. 5.3 Counsel for the respondent has relied upon following observations made by the tribunal:- I have gone through the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2010-11 2,49,04,000/- 2011-12 4,69,61,000/- 2012-13 7,96,71,000/- Total 15,15,36,000/- During the assessment proceedings, the assessee has claimed the liability towards mines closure plan amounting to ₹ 2,49,04,000/- for the A.Y. 2010-11 (subject matter of present appeal). The AO as well as the ld. CIT (A) has rejected the claim of the assessee for the reasons mentioned herein above. It is submitted by the ld. A/R for the assessee, that the amount of ₹ 2,49,04,000/- for the year under consideration is required to beallowed as the said amount is required to be deposited in the screw account of the of the scheduled bank and is required to be spent in accordance with the guidelines laid down by the Ministry of Coal. The ld. A/R for the assessee relied upon the judgment of Hon ble Supreme Court in the matter of Kedarnath Jute Mfg Co.Ltd., 82 ITR 363 (SC). The ld. A/R of the assessee has submitted that the view of the ld. CIT (A) is incorrect as there is no provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ministry of Coal, therefore, in our view the liability is not a contingent liability and is required to be made provision in presenti and is required to be spent in a future date. The judgment referred by the ld. A/R for the assessee in the matter of Kedarnath Jute Mfg Co. Ltd. (supra) and also in the matter of Rotork Controls India Pvt Ltd. (supra) are squarely applicable to the facts and circumstances of the case. 30.4. When the above principles are applied to the facts of the present case it can be noted that in terms of guidelines dt.27.08.2009 issued by Government of India, Ministry of Coal even the existing mines who are operating without the approval of mine closure plan are required to obtain a mine closure plan approved as per these guidelines. As per these guidelines mine closure plan will have two components i.e. progressive or concurrent mine closure plan and final mine closure plan. The assessee has been operating lignite mines at Hiral, Nagor and Sonari. As a result of the mine closure plans issued by the Government of India the assessee has an present obligation to provide for the expenditure which it have to fund on closure of the mines and thus it has a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amounts to the accounts of the customers and made payments to the State Govt. Those payments ' were, of course, made in the subsequent years, but that will not make any difference because it is the accrual of the liability under the mercantile system of accounting which would decide the question of its deduction. Reference may be made to the decision o the Supreme Court in Kedarnath Jute Mfg. Co. Ltd. v. CIT MANU/SC/0438/1971 : [1971]82ITR363(SC) . In that case, the assesseecompany followed the mercantile system of accounting and incurred a liability on account of sales tax, determined by the sales tax authorities to be payable, on the sales made by it during the calendar year 1954, being the previous year relevant to the assessment year 1955-56. The sales tax demand was raised pending the Income Tax assessment for that year. The ITO rejected the assessee's claim for a deduction of that amount on two grounds : firstly, that the assessee had contested the sales tax liability in appeals and, secondly, that it had made no provision in its books with regard to the payment of that amount. The appeals to higher authorities or courts taken by the assessee, contesting its liab ..... X X X X Extracts X X X X X X X X Extracts X X X X
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