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Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: Shri Waseem Ahmed & Shri T.R. Senthil Kumar
Kandla Agro & Chemicals The ACIT, Pvt. Ltd. Gandhidham Circle, Plot No. 18, Vs Gandhidham Sector-8, Gandhidham-Kutch (Respondent) Gujarat PAN: AABCK1318G (Appellant) Assessee Represented: Shri K.C. Thaker, A.R. Revenue Represented: Shri Ashish Kumar Pandey, Sr.D.R. Date of hearing : 20-09-2023 Date of pronouncement : 27-09-2023 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:-
This appeal is filed by the Assessee as against the Appellate order dated 06.03.2020 passed by the Commissioner of Income Tax (Appeals), Rajkot arising out of the assessment order passed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year (A.Y) 2015-16.
Page No 2 Kandla Agro & Chemicals Pvt. Ltd. Vs. ACIT
The Registry has noted that there is a delay of 298 days in filing the above appeal. This appeal was filed by the assessee on 09.04.2021. This period falls under COVID-Pandemic situation, thus following Hon’ble Supreme Court judgment dated 23.9.2021 in M. A. No. 665 of 2021 in suo-moto Writ Petition (Civil) No.3 of 2020, the Hon’ble Supreme Court has excluded time limit for filing appeal from 15.3.2020 till 02.10.2021. Thus, there is no delay in filing the above appeal and we take up the assessee appeal for adjudication
The Grounds of Appeal raised by the Assessee are as follows:
The learned CIT (A) has erred in law and on facts in ignoring/not dealing with contention of the appellant to the effect that the learned AO has exceeded his jurisdiction by covering an issue which is unconnected with the issues on which case was selected for scrutiny under the limited scrutiny criteria.
2. The Learned CIT(A) has further erred in law and on facts in not quashing/set- a-side the order as the same is passed without jurisdiction by the Learned A.O. 3. On the facts and in the circumstances of the case and in law the learned CIT(A) ought to have quashed and set aside the order and ought to have deleted the addition of Rs.16,37,990/- being amount received on sale of carbon credit by following the decision of hon'ble Jurisdictional High Court. 4. On the fact and in the circumstances of the case and in law, the learned CIT(A) ought to have dealt with alternate plea of the appellant of allowing the deduction of Rs. 98,117/- being expenditure incurred for earning carbon credit income. 5. On the facts and in the circumstances of the case and in law, the learned CIT(A) ought to have deleted the disallowance of Rs. 2,07,773/- being employee contribution to provident fund deposited beyond the due date as prescribed in the relevant statute. 6. It is therefore prayed that the orders passed by lower authorities may be quashed and set aside and the addition/disallowance of Rs. 18,45,763/- may be deleted.
Page No 3 Kandla Agro & Chemicals Pvt. Ltd. Vs. ACIT
The brief facts of the case is that the assessee is a Private Limited Company engaged in manufacturing of castor oil and it’s derivatives, trading of goods & commodities and generation & transmission of power through solar panels. For the Assessment Year 2015-16, the assessee filed its Return of Income declaring a loss of Rs. 3,50,74,180/-. The return was taken for limited scrutiny assessment and made addition on account of sale of carbon credit of Rs. 16,37,990/- and addition on account of late payment of ESI/PF of Rs. 2,07,773/-. Thus the A.O. determined the loss as Rs.3,32,28,417/-.
Aggrieved against the same, the assessee filed an appeal before Commissioner of Income Tax (Appeals). The Ld. CIT(A) dismissed the assessee appeal observing as follows: “….. The case laws relied by the appellant are clearly distinguishable on facts. It is found that CERS are not granted as subsidy against any capital investment, (i) they are granted as an incentive for use of alternative fuel which is revenue item, (iii) they are not granted against or in lieu of any capital asset, (iv) Section 28(iv) clearly talks about benefits and perquisites arising out of business- which CERS are. Therefore, sale proceeds of CERS are revenue receipts not only from the intrinsic nature of the entitlement but also because these are closely connected with carrying out business. The sale of import entitlement is one of the modes of exploiting the import entitlement and, therefore, will clearly be a revenue receipt [RE: George Maijo & Co. (Vizag.) v. CIT [1986] 157 ITR 475 (Mad.)] Similar view has been taken in 1. Swadeshi Cotton Mills Co. Ltd. v. CIT [1989] 47 Taxman 215 (AIL), 2. Jeewanlal (1929) Ltd. v. CIT [1991] 57 Taxman 123 (Cal.), 3. Gedore Tools Pvt. Ltd. v. CIT [1999] 105 Taxman 3 (Delhi). Further, section 28(iv) clearly brings the receipt from sale of CERS within the ambit of taxability. The subsection (iv) to section 28 brings into the tax net "the value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession." There are following two conditions: (i) assessee receives any benefit or perquisite. (ii) they should arise in the course of business. "Benefit means "advantage; Profit; Gains; Interest, Use: Promotion of welfare or Prosperity; helpful result, A benefaction or deed of Kindness; favour bestowed; privilege. "Benefit" is a word of wide import. It could be express or Page No 4 Kandla Agro & Chemicals Pvt. Ltd. Vs. ACIT
otherwise. The term "perquisite" means that it is an additional benefit and not a complete substitution of one's income. Accordingly, it is held that sale proceeds of CERS are revenue receipts not only from the intrinsic nature of the entitlement but also because these are closely connected with carrying out business. They are taxable under section 28(iv) as benefit arises during the course of carrying on business. The AO has therefore has rightly treated profit from sale of RECS are considered as the income of the assessee and added to the total income. The ground of appeal on this account is therefore dismissed.”
6. At the time of hearing of this appeal, Ld. Counsel Mr. K.C. Thaker though the assessee has raised as many as six grounds, but he has ‘Not Pressed’ all the grounds except ground no. 3, which is issue of sale of carbon credit, since it is covered in favour of the assessee by the Jurisdictional High Court Judgment dated 28.08.2017 in the case of PCIT Vs. Alembic Limited in Tax Appeal No. 553 & 554 of 2017. The Ld. Counsel filed copy of the above Judgments in the Paper Book.
Per contra, Ld. D.R. appearing for the Revenue supported the order passed by the Lower Authorities.
We have given our thoughtful consideration and perused the materials available on record. It is seen from record, the assessee has not submitted the above Jurisdictional High Court judgment in the case of Alembic Limited (cited supra) before, any of the Lower Authorities. Para 6 of the above judgment reads as follows: “…..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 Income tax 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.”
Page No 5 Kandla Agro & Chemicals Pvt. Ltd. Vs. ACIT 8.1. As there was a typographical/inadvertent error in the above High Court Judgment, the same was rectified by Judgment dated 09.03.2018 in OJMCA/1/2018 in Tax Appeal No. 553 of 2017, the Hon’ble High Court held as follows: “Through this application, the assessee points out that in our judgment dated 28.08.2017, while dismissing Revenue’s Tax Appeals, we had inadvertently recorded in Paragraph 6 that several High Courts have held “that receipts of carbon credit are in the nature of Revenue receipts”. This is clearly a typographical/ inadvertent error. The above quoted Portion of Paragraph6 would, therefore, be corrected and read as under “that receipts of carbon credit are in the nature of capital receipts”. The application stands disposed of accordingly.” 8.2. Further the Hon’ble High Court of Gujarat followed the above judgment in the case of M/s. Ajanta Private Limited Vs. DCIT in Tax Appeal No. 683 of 2017 dated 07/03/2018 as follows: “Issue pertains to taxability of the income earned by the assessee through trading in surplus carbon credits. The Tribunal by the impugned judgment held that such income is in the nature of revenue receipt and therefore, liable to be taxed. The grievance of the assessee is that the Tribunal in case of this very same assessee in earlier years, had taken a different view, upon which, the department had filed appeal before the High Court. Ignoring such a binding precedent, the Tribunal in the present case had taken a contrary view. Apart from the principle of judicial comity and law of precedence, we notice that this Court has in the past, following the judgments of Karnataka High Court in case of CIT v. Subhash Kabini Power Corporation 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) held the issue against the Revenue. In case of PR Commissioner of Income Tax Vadodara1 v. Alembic Limited (Tax Appeal No. 553/2017 and connected matter, Order dated 28.8.2017), following observations were made : “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 Income tax v. My Home Power Limited reported in (2014) 365 ITR 82 (AP) have held that receipts of carbon credit are Page No 6 Kandla Agro & Chemicals Pvt. Ltd. Vs. ACIT in nature of revenue receipts. Following the decision of said two High Courts, this question is also not considered.” In the result, Tax Appeal is allowed. The question is answered in favour of the assessee. Judgment of the Tribunal to the above extent is reversed. Tax Appeal is disposed of.” 9. Respectfully following the above judgments rendered by the Jurisdictional High Court, the addition made on account of sale of carbon credit is hereby deleted.
In the result, the appeal filed by the Assessee is hereby partly allowed.