LANCO TANJORE POWER COMPANY LIMITED,CHENNAI vs. DCIT, CHENNAI

the Order of the Commissioner of Income Tax (Appeals)-8, Chennai, in dated 22.03.2017 for the AY 2010-11.

Mrs.Vijayalakshmi, CIT, represented on behalf of the Revenue and Mr.R.Vijayaraghavan, Adv., represented on behalf of the assessee.

At the time of hearing, it was submitted by the Ld.AR that the only issue in the assessee’s appeal was against the action of the Ld.CIT(A) in confirming the action of the AO in disallowing the assessee’s claim of deduction u/s.80IA in respect of the profits derived from the sale of Carbon Emission Reduction (CER) also known as Carbon Credits. It was submitted by the Ld.AR that the assessee is in the business of generation of electricity and the assessee had claimed deduction u/s.80IA in respect of the profits derived from the sale of the Carbon Credits. It was a submission that the Ld.CIT(A) had upheld the order of the AO by following the decision of the ITAT Cochin Bench in the case of Apollo Tyres Ltd., reported in 149 ITD 756 (Cochin). It was a submission that now the issue was squarely covered by the decision of the Hon’ble Andhra Pradesh High Court in the case of My Home Power Ltd., reported in 365 ITR 82 (AP). It was a submission that as per the decision of the Hon’ble Andhra Pradesh High Court, the Carbon Credits was not an offshoot of business but offshoot of environmental concerns. Consequently, the sale of the excess Carbon Credits was capital receipt. It was a submission that the AO may be directed to assess the benefit of Carbon Credits as a capital receipt. It was a submission that this is as per Ground No.3 of the assessee’s appeal.

In reply, the Ld.DR vehemently supported the order of the AO and the Ld.CIT(A).

We have considered the rival submissions. As it is noticed that the decision of the Hon’ble Andhra Pradesh High Court in the case of My Home Power Ltd., is only decision on the issue by the Hon’ble High Court and the Revenue has not been able to place before us any other contrary decision. Consequently, respectfully following the decision of the Hon’ble Andhra Pradesh High Court in the case of My Home Power Ltd., referred to supra, the AO is directed to treat the sale of the Carbon Credits as a capital receipt.

In the result, the appeal filed by the assessee stands allowed.