DEFFREE ENGINEERING PRIVATE LIMITED,COIMBATORE vs. DCIT, COIMBATORE

A delay of 67 days has been noted in the appeal, the condonation of which has been sought by the assessee on the strength of condonation petition as supported by the affidavit of the director of the assessee company. It has been submitted that delay was not deliberate but it occurred due to circumstances beyond the control of the assessee. The order under consideration was received in the office of the assessee and the same was kept in files without intimating the concerned Chartered Accountant for appropriate action. Later on, when this fact was discovered, the appeal documents were prepared and filed through the counsel. Though Ld. DR opposed condonation of delay, however, after going through the contents of the affidavit, the bench deems it fit to condone the delay. Accordingly, the appeal is admitted and proceeded with for adjudication on merits.

The reason for revision is the observation of Ld. Pr. CIT that the assessee included Carbon Credits Sales Receipts (CER) of Rs.7.69 Lacs in its claim for deduction u/s 80-IA and the same was allowed by Ld. AO without verification. The deduction was contrary to law and the assessment was framed without making any inquiries, in this regard. Accordingly, the assessee was show-caused as to why the order be not revised u/s 263.

The assessee assailed the revision on the ground that it was only after due verification of the claim, the deduction was allowed by Ld. AO. Even otherwise, as per the various decisions of Tribunal, the Carbon Credit would be in the nature of an entitlement received to improve world atmosphere and environment reducing carbon, heat and gas emissions. The entitlement so earned would be capital receipts and could not be brought to tax as revenue receipts. The attention was drawn to various decisions of Hon’ble High Courts as well as Tribunal which has already been enumerated in the impugned order. On the basis of the same, it was submitted that CER receipts would otherwise be capital receipts not includible in total income.

However, noting the amendment made by Finance Bill, 2017 in Sec.115BBG, Ld. Pr. CIT opined that the carbon credit would be revenue receipt. Since these receipts could not be held to be derived from eligible business, the same would not be eligible for deduction u/s 80-IA. Accordingly, Ld. AO was directed to redo the assessment afresh after determining the quantum of deduction u/s 80-IA. Aggrieved, the assessee is in further appeal before us.

We find that the issue of taxability of carbon credit receipts for AY 2014-15 is settled in assessee’s favor in the recent decision of Hon’ble High Court of Madras in the case of CIT V/s Tamil Nadu Newsprint & Papers Ltd. (130 Taxmann.com 213; 26/07/2021) which has been rendered after considering its earlier decision in CIT V/s Ambika Cotton Mills Ltd. (125 Taxmann.com 207). The Hon’ble Court has dismissed revenue’s appeal and held that receipts earned from sale of Carbon Credit which has been earned on clean development mechanism in wind energy operation was a capital receipt and not taxable. Similar is the decision of Hon’ble Karnataka High Court in CIT V/s Subhash Kabini Power Corporation Ltd. (385 ITR 592; 29/03/2016) and Hon’ble Andhra Pradesh High Court in CIT V/s My Home Power Ltd. (46 Taxmann.com 314). 7. We further find that the amendment brought-in by way of Sec.115BBG is applicable only from 01/04/2018 and accordingly, the same would apply only in relation to AY 2018-19 and subsequent years. 8. In view of the aforesaid reasons, the assessment order could not be held to be prejudicial to the interest of the revenue which would make revision bad in law. Accordingly, we quash the revision order dated 11/02/2019 and allow the appeal of the assessee.