THE PRINCIPAL COMMISSIONER OF INCOME-TAX, VADODARA-1 vs. GUJARAT FLUOROCHEMICALS LTD.

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TAXAP/334/2020HC GujaratGJHC24035338202020 January 2021Author: HONOURABLE MR. JUSTICE J.B.PARDIWALA,HONOURABLE MR. JUSTICE ILESH J. VORA2 pages

AI SummaryDismissed

What did the High Court hold?

The High Court held that the appeal filed by the Revenue fails and is dismissed. The Court referred to its previous decision in Tax Appeal No. 28 of 2019, concerning the same assessee and a similar issue, which was decided on June 17, 2019. In that prior decision, the Court had relied on the judgments of the Karnataka High Court in CIT v. Subhash Kabini Power Corporation Ltd. and the Andhra Pradesh High Court in CIT v. My Home Power Ltd. These High Courts had held that receipts from carbon credits are in the nature of revenue receipts. The High Court in the present case found that the proposed question of law was identical to the one decided in the earlier appeal. Therefore, following its own precedent and the decisions of other High Courts, the appeal was dismissed.

What were the facts?

The Revenue, Principal Commissioner of Income-tax, Vadodara-1, filed a Tax Appeal against an order of the Income Tax Appellate Tribunal (ITAT) dated October 10, 2019, concerning Assessment Year 2010-2011. The appeal challenges the ITAT's decision regarding the nature of income derived from the realization of carbon credits. The assessee is Gujarat Fluorochemicals Ltd. The procedural history involves the ITAT's order in M.A. No. 229/AHD/2019 in ITA/116/AHD/2016. The amount in dispute is not explicitly stated.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the learned ITAT erred in law and on facts in treating the income from realization of carbon credits as capital in nature, despite the assessee treating it as revenue income and offering it to tax, and in actuality, it is a revenue receipt? The Revenue's contention is that the income from carbon credits should be considered revenue receipt, and the ITAT erred in treating it as capital in nature. The Revenue argues that the assessee itself had treated this income as revenue and offered it to tax. The judgment does not record any specific arguments from the assessee's side, but implies the ITAT's finding was that the receipts were capital in nature.

Which sections of the Income-tax Act were involved?

Section 260A

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances

C/TAXAP/334/2020 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 334 of 2020 ========================================================= = THE PRINCIPAL COMMISSIONER OF INCOMETAX, VADODARA1 Versus GUJARAT FLUOROCHEMICALS LTD. ========================================================== Appearance: MR.VARUN K.PATEL(3802) for the Appellant(s) No. 1 for the Opponent(s) No. 1 ========================================================== CORAM: HONOURABLE MR. JUSTICE J.B.PARDIWALA and HONOURABLE MR. JUSTICE ILESH J. VORA Date : 20/01/2021

ORAL ORDER (PER : HONOURABLE MR. JUSTICE J.B.PARDIWALA

This Tax Appeal under Section 260A of the Income Tax Act, 1961 (for short “the Act, 1961”) is at the instance of the Revenue and is directed against the order passed by the Income Tax Appellate Tribunal dated 10.10.2019 in M.A. No.229/AHD/2019 in the ITA/116/AHD/2016 for the A.Y. 20102011. 2. The Revenue has proposed the following solitary question of law: “(a) Whether on the facts and in circumstance of the case, the learned ITAT has erred in law and on facts in treating the income from realization of carbon credits as capital in nature, despite the fact that the realization from carbon credits has been treated by the assessee itself as revenue income and offered to tax and in fact in actualities they are revenue receipt ?”

We have heard Mr. Varun K. Patel, the learned Sr. Standing Counsel appearing for the Revenue. C/TAXAP/334/2020 ORDER

The question of law as proposed was the very same question raised by the Revenue against the very same assessee in Tax Appeal No.28 of 2019 decided by this Court vide judgment dated 17.06.2019. The relevant observations are as under:

26.

The fifth question proposed by the revenue whether the income from the Carbon Credits is capital in nature. This issue is squarely covered by the following decisions: (1) M/s. Alembic Ltd. Tax Appeal No.553 & 554 of 2017 (2) CIT Vs. My Home Power Ltd. [2014] 46 Taxmann.com 314 (3) Subhash Kabini Power Corporation Ltd. (KHC) [2016] 69 Taxmann.com 394

27.

We quote the relevant observations made by this Court in the Alembic Limited (supra) as under:

“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 view of the aforesaid, this appeal fails and is hereby dismissed. (J. B. PARDIWALA, J) (ILESH J. VORA,J) SUCHIT

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