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TMI Blog2023 (2) TMI 1027X X X X Extracts X X X X X X X X Extracts X X X X ..... re this Tribunal and the issue with regard to nonconsideration of assessee's claim in respect of certified emission reductions was remitted to Ld. AO and to consider the case of assessee in the light of judgment in M/s My Home Power Ltd. Vs. DCIT, 151 TTJ 616. The ld. AO after taking into consideration the submissions of assessee was of view that sale of certified Emission Reduction/ Carbon credit constitutes profit and gains of the business and taking into consideration the manufacturing process of assessee held the Carbon credit to be trading receipts. Ld. AO also relied the action of Ld. Tax Authorities in the case of assessee for assessment year 2006-07. The Ld. CIT(A) in the impugned order had sustained the addition. 3. The assessee is in appeal raising following grounds :- "General Ground 1. The Ld. Commissioner of income-tax Appeals ('CIT(A)') has erred in law and on facts, and in the circumstances of the appellant's case in not holding receipts from the sale of Carbon Emission Reductions (CER) Certificates / Carbon Credits amounting to Rs. 2,67,71,10,198/- as capital receipts not liable for tax on wholly illegal, erroneous and untenable ground. 2. That Ld. CIT(A) h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 due to "world concern". It has been made available assuming character of transferable right or entitlement only due to world concern. The source of carbon credit 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nses. It is a nature of entitlement to reduce carbon emission, however, there is no cost of acquisition or cost of production to get this entitlement. Carbon credit is not in the nature of profit or in the nature of income." "25. Further, as per guidance note on accounting for Selfgenerated Certified Emission Reductions (CERs) issued by the Institute of Chartered Accountants of India (ICAI) in June, 2009 states that CERs should be recognised in books when those are created 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-9 to recognise revenue in respect of sale of CERs." 26. Thus, sale of carbon credits is to be considered as capitalreceipt. This ground is allowed." 5.1 The above order of the Hyderabad Bench has been confirmed by the Hon'ble High Court of Andhara Pradesh. Next, the judgment of Hon'ble H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edits is capital in nature." 5.3 Coming to the judgments relied upon by the AO and the Ld. CIT(A) and which have been further relied by the Ld. DR, we are of opinion that such cases do not support the case of revenue. As pointed out by the Ld. AR,the orderof the Cochin Bench of the Tribunal in the case of Apollo Tyres Ltd.{[2014] 47 taxmann.com 416 (Cochin Trib.)}had already been analyzed by the Hon'ble Allahabad High Court in the case of L.H. Sugar Factory Pvt. Ltd. (supra) which held it 'not to be good in law'. The other order of the ITAT Ahmedabad Bench in the case of Kalpataru Power Transmission Ltd.{[2016] 68 taxmann.com 237 (Ahm. Trib.)}has been overruled by the later judgment of same bench of Ahmedabad Bench of the Tribunal in the same case of Kalpataru Power Transmission Ltd.[2019-TIOL-1424-ITAT-AHM].In view of the fact that case laws relied upon by the revenue have already been overruled by higher court or by the same court in later judgment, we are not inclined to consider those judgments while adjudicating the issue under consideration. 5.4 We also borrow some reasoning from the fact that Ministry of Finance has inserted a specific provision in form of section 115B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urpose of computation under Section 115JB of the Income Tax Act, 1961. For the aforesaid reason, we hold that the interest and power subsidy under the schemes in question would have to be excluded while computing book profit under Section 115 JB of the Income Tax Act, 1961." 6.5 Further ITAT, Lucknow Bench, in case of L.H. Sugar Factory Ltd. (ITA No. 717 & 418/LKW/2013 and others), held as under: - "4. We have considered the rival submissions. We find that the issue indispute as per Ground No. 1 of appeal is regarding nature of receipt onaccount of sale of carbon credit and in the case of CIT Vs. My Home PowerLtd. (Supra) also, the dispute before Hon'ble Andhra Pradesh High Courtwas this as to whether the amount received by the assessee on transfer ofcarbon credit is capital receipt or Revenue receipt. It was held by Hon'bleAndhra Pradesh High Court in that case that carbon credit is not anoffshoot of business but an offshoot of environmental concerns and noassets is generated in the course of business but it is generated due toenvironmental concerns and therefore, it was held that the Tribunal hascorrectly held that this is a capital receipt and it cannot be business receipt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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