M/S AJANTA PRIVATE LIMITED vs. DEPUTY COMMISSIONER OF INCOME TAX,
What did the High Court hold?
The High Court held that the Tribunal had erred in law by concluding that the income earned on the sale of carbon credits was a revenue receipt. The Court noted that it had previously, following judgments of the Karnataka High Court in CIT v. Subhash Kabini Power Corporation and the Andhra Pradesh High Court in Commissioner of Income-tax v. My Home Power Limited, held the issue against the Revenue. Furthermore, in a related case, PR Commissioner of Income Tax Vadodara-1 v. Alembic Limited, the High Court had observed that receipts from carbon credits were in the nature of revenue receipts. The High Court allowed the Tax Appeal, answering the substantial question of law in favour of the assessee and reversing the judgment of the Tribunal to the extent of the taxability of the carbon credit income. The appeal was disposed of.
What were the facts?
The assessee, M/s Ajanta Private Limited, filed an appeal before the Gujarat High Court challenging a judgment of the Income Tax Appellate Tribunal (ITAT). The ITAT had held that an amount of Rs. 1,24,51,176 earned by the assessee on the sale of carbon credits was a revenue receipt and thus exigible to tax. The assessee contended that the ITAT had taken a different view in earlier years for the same assessee, which was binding. The revenue's position was that the income was taxable as a revenue receipt. The High Court noted that it had previously dealt with similar issues.
What were the issues?
1. Whether, on the facts and circumstances of the case, the Tribunal has substantially erred in law in concluding that an amount of Rs. 1,24,51,176 earned on sale of carbon credits is a revenue receipt exigible to tax? Assessee's contentions: - The Tribunal erred in its decision as it had taken a different view in earlier years for the same assessee, creating a binding precedent. - The Tribunal's decision ignored the principle of judicial comity and the law of precedence. Revenue's contentions: - The revenue argued that the income earned from trading in surplus carbon credits is a revenue receipt and therefore liable to be taxed. (This is inferred from the Tribunal's holding and the High Court's subsequent reversal of that holding). The judgment also refers to previous High Court decisions in CIT v. Subhash Kabini Power Corporation reported in (2016) 385 ITR 592 (Karn) and Commissioner of Income-tax v. My Home Power Limited reported in (2014) 365 ITR 82 (AP), which held the issue against the Revenue, and a decision of the same High Court in PR Commissioner of Income Tax Vadodara-1 v. Alembic Limited (Tax Appeal No. 553/2017 and connected matter, Order dated 28.8.2017).
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Cause title — parties, addresses and appearances
ORAL ORDER (PER : HONOURABLE MR.JUSTICE AKIL KURESHI)
This appeal is filed by the appellant challenging judgment of the Income Tax Appellate Tribunal. We frame the following substantial question of law : “Whether on the facts and circumstances of the case, the Tribunal has substantially erred in law in concluding that an amount of Rs.1,24,51,176/ earned on sale of carbon credits is a revenue receipt exigible to tax?
Issue pertains to taxability of the income earned by the assessee through trading in surplus carbon credits. The Tribunal by the impugned judgment held that such income is in the nature of revenue receipt and therefore, liable to be taxed. The grievance of the assessee is that the Tribunal in case of this very same assessee in earlier years, had taken a different view, upon which, the department had filed appeal before the High Court. C/TAXAP/683/2017 ORDER Ignoring such a binding precedent, the Tribunal in the present case had taken a contrary view. Apart from the principle of judicial comity and law of precedence, we notice that this Court has in the past, following the judgments of of Karnataka High Court in case of CIT v. Subhash Kabini Power Corporation reported in (2016) 385 ITR 592(Karn) and Andhra Pradesh High Court in case of Commissioner of Incometax v. My Home Power Limited reported in (2014) 365 ITR 82(AP) held the issue against the Revenue. In case of PR Commissioner of Income Tax Vadodara1 v. Alembic Limited (Tax Appeal No. 553/2017 and connected matter, Order dated 28.8.2017), following observations were made :
“6. The last surviving question pertains to the treatment that the assessee's income from trading of carbon credits should be given. The Tribunal held that receipts should be in the nature of capital receipts and therefore, would not invite tax. This issue has been examined by two High Courts. The Karnataka High Court in case of CIT v. Subhash Kabini Power Corporation Ltd. reported in (2016) 385 ITR 592 (Karn) and Andhra Pradesh High Court in case of Commissioner of Incometax v. My Home Power Limited reported in (2014) 365 ITR 82 (AP) have held that receipts of carbon credit are in nature of revenue receipts. Following the decision of said two High Courts, this question is also not considered.”
In the result, Tax Appeal is allowed. The question is answered in favour of the assessee. Judgment of the Tribunal to the above extent is reversed. Tax Appeal is disposed of. (AKIL KURESHI, J.) (B.N. KARIA, J.) raghu
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