COMMISSIONER OF INCOME TAX vs. M/S.SUNRISE KNITTING MILLS

TCA/141/2015HC Madras27 August 2019Bench: Hon`ble Mr Justice T. S. SIVAGNANAM4 pages

AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the appeal filed by the Revenue. The dismissal was based on the Revenue's submission that the appeal was not being pursued due to a low tax effect, as per Circular No. 17/2019 issued by the Central Board of Direct Taxes, which increased the monetary limit for filing appeals before the High Court to Rs. 1 Crore. The substantial question of law framed at the time of admission was left open. The Court granted liberty to the Revenue to seek restoration of the appeal if the tax effect was found to be above the threshold limit fixed in the circular, allowing it to be heard and decided on merits. No costs were imposed.

What were the facts?

The Revenue, Commissioner of Income Tax, Tirupur Range, filed an appeal under Section 260A of the Income Tax Act, 1961, against an order dated August 22, 2014, passed by the Income Tax Appellate Tribunal (ITAT), Chennai 'B' Bench. The appeal pertained to the assessment year 2010-2011 and concerned the taxability of proceeds realized by the assessee, M/s. Sunrise Knitting Mills, from the sale of Certified Emission Reduction (CER) credits earned through its wind energy operations under the Clean Development Mechanism. The High Court admitted the appeal on a substantial question of law.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the proceeds realized by the assessee on sale of Certified Emission Reduction Credit, which the assessee had earned on the Clean Development Mechanism in its wind energy operations, is a capital receipt and not taxable? (Question of law and mixed fact and law, turning on the nature of the receipt under the Income Tax Act, 1961). Assessee's contentions: Not recorded. Revenue's contentions: The Revenue argued that the ITAT erred in treating the proceeds from the sale of CER credits as a capital receipt and not taxable income. The Revenue's appeal was admitted on this substantial question of law.

Which sections of the Income-tax Act were involved?

Section 260A

AI-generated summary — verify with the full judgment below

TCA.No.141 of 2015 In the High Court of Judicature at Madras Dated : 27.08.2019 Coram : The Honourable Mr.Justice T.S.SIVAGNANAM and The Honourable Mrs.Justice V.BHAVANI SUBBAROYAN Tax Case Appeal No.141 of 2015 Commissioner of Income Tax, Tirupur Range, Tirupur. ...Appellant Vs M/s.Sunrise Knitting Mills, 117, Kulivayal Thottam, Kullengoundenpudur, Tirupur - 641 607. PAN: AALFS4137P ...Respondent APPEAL under Section 260A of the Income Tax Act, 1961 against the order dated 22.08.2014 made in ITA.No.632/MDS/2014 on the file of the Income Tax Appellate Tribunal, Chennai 'B' Bench for the assessment year 2010-2011. For Appellant : Mr.T.R.Senthilkumar, SSC assisted by Ms.K.G.Usharani For Respondent : Mr.R.Kumar JUDGMENT (Judgment was delivered by T.S.Sivagnanam,J.) We have heard Mr.T.R.Senthilkumar, learned Senior Standing Counsel, assisted by Ms.K.G.Usharani, learned counsel appearing for the 1/4 http://www.judis.nic.in TCA.No.141 of 2015 appellant/revenue and Mr.R.Kumar, learned counsel appearing for the respondent/assessee. 2.This appeal, filed by the Revenue under Section 260A of the Income Tax Act, 1961 is directed against the order dated 22.08.2014 made in ITA.No.632/MDS/2014 on the file of the Income Tax Appellate Tribunal, Chennai 'B' Bench for the assessment year 2010-2011. 3.The appeal was admitted on 07.04.2015 on the following substantial question of law : “Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the proceeds realised by the assessee on sale of Certified Emission Reduction Credit, which the assessee had earned on the Clean Development Mechanism in its wind energy operations, is a capital receipt and not taxable?" 4.The learned Senior Standing Counsel for the appellant submits that the above appeal is not pursued by the Revenue on account of the low tax effect in terms of Circular No.17/2019 dated 08.8.2019 issued by the Central Board of Direct Taxes. By the said Circular, the monetary limit for filing or pursuing an appeal before the High Court has been increased to Rs.1 Crore. It 2/4 http://www.judis.nic.in TCA.No.141 of 2015 is further submitted that the tax effect in this case is less than the threshold limit. 5.In the light of the said submissions, the above tax case appeal is dismissed on account of the low tax effect. The substantial question of law framed is left open. In the event the tax effect is above the threshold limit fixed in the said circular, liberty is granted to the Revenue to make a mention to this Court to restore the appeal to be heard and decided on merits. No costs. (T.S.S.J.) (V.B.S.J.) 27.08.2019 cse Speaking (or) Non Speaking Order Index : Yes (or) No To 1.M/s.Sunrise Knitting Mills, 117, Kulivayal Thottam, Kullengoundenpudur, Tirupur - 641 607. 2.The Income Tax Appellate Tribunal, Chennai 'B' Bench. 3/4 http://www.judis.nic.in TCA.No.141 of 2015 T.S.SIVAGNANAM,J. AND V.BHAVANI SUBBAROYAN,J. cse TCA.No.141 of 2015 27.08.2019 4/4 http://www.judis.nic.in

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