COMMISSIONR OF INCOME TAX vs. M/S SREEPATHY PAPER & BOARDS

TCA/839/2015HC 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 submission by the Revenue's counsel that the appeal was not being pursued due to low tax effect, citing Circular No. 17/2019 of the CBDT which increased the monetary limit for pursuing appeals before the High Court to Rs. 1 Crore. The Court noted that the tax effect in this case was below the threshold limit. Consequently, the substantial questions of law framed were left open. The Revenue was granted liberty to mention the case for restoration if the tax effect was found to be above the threshold limit, to be heard and decided on merits. No costs were awarded.

What were the facts?

The Revenue, Commissioner of Income Tax, filed an appeal under Section 260A of the Income Tax Act, 1961, against an order dated 04.03.2015 passed by the Income Tax Appellate Tribunal (ITAT), Chennai 'C' Bench. The appeal pertains to Assessment Year 2010-11 and concerns M/s. Sreepathy Paper & Boards Pvt. Ltd. The core dispute revolves around the taxability of proceeds realized by the assessee from the sale of certified emission reduction credits earned through its wind energy operations under the Clean Development Mechanism. The ITAT had ruled in favour of the assessee, holding these proceeds to be capital receipts and not taxable.

What were the issues?

1. Whether, on the facts and 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). The Revenue contended that the ITAT erred in treating the proceeds as capital receipts. The assessee's arguments are not recorded as they did not appear. 2. Whether, in the facts and circumstances of the case and in law, the Appellate Tribunal is correct in holding that sale of carbon receipt and not liable for tax under any head of income under the Income Tax Act, 1961? (Question of law). The Revenue argued against the ITAT's finding that carbon receipts are not taxable. 3. Whether, in the facts and circumstances of the case and in law, the Income Tax Appellate Tribunal is correct in holding that there is no cost of acquisition or cost of production to get entitlement for the carbon credits, without appreciating that generation of carbon credits is intricately linked to the machinery and processes employed in the production process by the assessee? (Question of mixed law and fact). The Revenue's contention was that the ITAT failed to appreciate the link between carbon credit generation and the assessee's production processes, implying a cost of acquisition or production.

Which sections of the Income-tax Act were involved?

Section 260A

AI-generated summary — verify with the full judgment below

TCA.No.839 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.839 of 2015 Commissioner of Income Tax, No.63, Race Course Road, Coimbatore. ...Appellant Vs M/s.Sreepathy Paper & Boards Pvt. Ltd., 1680/31, Ramani Regency, Trichy Road, Ramanathapuram, Coimbatore. PAN: AAGCS7439C ...Respondent APPEAL under Section 260A of the Income Tax Act, 1961 against the order dated 04.03.2015 made in ITA.No.2136/MDS/2014 on the file of the Income Tax Appellate Tribunal, Chennai 'C' Bench for the assessment year 2010-11. For Appellant : Mr.T.R.Senthilkumar, SSC assisted by Ms.K.G.Usharani For Respondent : No appearance 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 appellant/revenue. 1/4 http://www.judis.nic.in TCA.No.839 of 2015 2.This appeal, filed by the Revenue under Section 260A of the Income Tax Act, 1961 is directed against the order dated 04.03.2015 made in ITA.No.2136/MDS/2014 on the file of the Income Tax Appellate Tribunal, Chennai 'C' Bench for the assessment year 2010-11. 3.The appeal was admitted on 29.09.2015 on the following substantial questions of law : “(i) Whether on the facts and 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? (ii) Whether in the facts and circumstances of the case and in law, the Appellate Tribunal is correct in holding that sale of carbon receipt and not liable for tax under any head of income under the Income Tax Act, 1961? and (ii) Whether in the facts and circumstances of the case and in law, the Income Tax Appellate Tribunal is correct in holding that there is no cost of acquisition or cost of production to get entitlement for the carbon credits, without appreciating that generation of carbon credits is intricately linked to the machinery and processes employed in the production process by the assessee?" 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 2/4 http://www.judis.nic.in TCA.No.839 of 2015 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 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 questions of law framed are 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.Sreepathy Paper & Boards Pvt. Ltd., 1680/31, Ramani Regency, Trichy Road, Ramanathapuram, Coimbatore. 2.The Income Tax Appellate Tribunal, Chennai 'C' Bench. 3/4 http://www.judis.nic.in TCA.No.839 of 2015 T.S.SIVAGNANAM,J. AND V.BHAVANI SUBBAROYAN,J. cse TCA.No.839 of 2015 27.08.2019 4/4 http://www.judis.nic.in

Recent GST High Court judgments

Search GST case law →