Income Tax Appellate Tribunal - Chandigarh
Acit, Cc-Ii, Ludhiana vs M/S Aqua Power (P) Ltd., Mohali on 21 November, 2019
आयकर अपील य अ धकरण,च डीगढ़ यायपीठ "ए" , च डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH "A", CHANDIGARH ी एन.के.सैनी, उपा य एवं ी संजय गग$, या%यक सद'य BEFORE: SHRI. N.K.SAINI, VP & SHRI , SANJAY GARG, JM आयकर अपील सं./ ITA NO. 1364/Chd/2018 नधा रण वष / Assessment Year : 2009-10 The ACIT बनाम M/s Aqua Power Pvt. Ltd.
CC-II, Ludhiana H.No. 2587,Ph-XI, Mohali
थायी लेखा सं./PAN NO: AADCA7773Q
अपीलाथ /Appellant यथ /Respondent
नधा रती क! ओर से/Assessee by : Shri Sudhir Sehgal, Advocate
राज व क! ओर से/ Revenue by : Shri Arvind Sudarshan, Sr. DR
सन
ु वाई क! तार&ख/Date of Hearing : 21/11/2019
उदघोषणा क! तार&ख/Date of Pronouncement : 21/11/2019 आदे श/Order PER N.K. SAINI, VICE PRESIDENT This is an appeal by the Department against the order dt. 13/08/2018 of Ld. CIT(A)-5, Ludhiana.
2. Following grounds have been raised in this appeal:
1. Whether on the facts and in circumstances of the case, the Ld. CIT (A) has erred in holding that the income of Rs. 2,87,09,980/- accrued to the assessee on account of income from sales of (Certified Emissions Reductions) CERs is eligible income for deduction u/s 80IA of the I.T Act, 1961 while the AO treated it as income from other sources.
2. Whether on the facts and in circumstances of the case, the Ld. CIT (A) has erred in treating the receipt of Rs. 2,87,09,980/- from sales of Certified Emissions Reductions (CERs) as Capital in nature and not liable to tax under any head of income under the I.T Act, 1961.
3. The Appellant craves leave to add or amend the grounds of appeal on or before is heard and disposed off.2
3. From the aforesaid grounds it is gathered that only grievance of the Department relates to the deduction under section 80IA of the Income Tax Act, 1961 (hereinafter referred to as 'Act') amounting to Rs. 2,87,09,980/-.
4. During the course of hearing the Ld. Counsel for the assessee at the very outset stated that this issue is squarely covered in favour of the assessee and against the Department vide order dt. 15/04/2015 passed by this Bench of ITAT in ITA No. 389/Chd/2013 and 390/Chd/ 2013 for the A.Y. 2009-10 in the case of M/s Kotla Hydro Power Private Ltd. and M/s Punjab Hydro Power Private Ltd. respectively i.e; the appeals filed by the Department, copy of the said order was furnished which is placed on record.
5. In his rival submissions the Ld. DR strongly supported the order of the A.O. but could not controvert the aforesaid contention of the Ld. Counsel for the Assessee.
6. After considering the submissions of both the parties and the material available on the record, it is noticed that an identical issue having similar facts has already been decided by this Bench of the ITAT in the aforesaid referred to order dated 15/04/2015 in ITA No. 389/Chd/2013 and 390/Chd/2013 for the assessment year under consideration i.e; 2009-10 and the relevant findings have been given in para 3 to 9 which read as under:
3. Ground Nos. 1 to 3 : After hearing both the parties we find that during assessment proceedings the Assessing Officer noticed that assessee has shown in profit and loss account a sum of Rs. 2,43,40,143/- from sale of Carbon Emission Reduction Units (in short "CER'). In response to queries, the assessee filed detailed reply. It was pointed out that because of the increasing accumulation of green house gases in the atmosphere leading to pollution, United Nations Framework Convention on Climate Change was conducted and an agreement was signed by various nations in Kyoto (in Japan). The same is known a Kyoto Protocol and is effective from 2005. Under this agreement various countries undertook to reduce emission of green house gases. It was also agreed that if some industries were set up which lead to emission of lesser green house gases than the standard prescribed, then they would be credited with Carbon credit units. These Carbon Credit units were tradable and whosoever was enable to generate such CER's could sell them in the international market. The sale of such CER was in the nature of business income which was directly related to the business of the assessee through which assessee has put up a electric generation project which produces lesser amount of green house gases and assessee became entitled to credit of carbon units. The Assessing Officer examined the issue in detail and was of the opinion that generation of such CER has nothing to do with the business of the assessee and it was because of environment protocol, therefore, deduction u/s 80IA was denied of this amount.3
4. On appeal, the assessee raised ground that assessee was entitled to deduction u/s 80IA on such sales. In addition an additional ground was also raised through which it was contended that consideration received on sale of CER's is in fact on account of sale of capital asset and, therefore, the same was not taxable at all and in this regard reliance was placed on the decision of Hyderabad Bench of Tribunal in My Home Power Ltd Vs. DCIT 21 ITR (Trib) 186 (Hyderabad). The Ld. CIT(A) following the decision of My Home Power Ltd Vs. DCIT (supra) held that sale of CER is a capital receipt and not includible in taxable income.
5. Before us Ld. DR submitted that carbon credit is an incentive given because of the Kyoto Protocol where an international agreement was reached between several countries to reduce the emission of green house gases, therefore, the amount which was received on sale of such CER's has no relation with normal business in respect of generation of power. Alternatively, the sale of such CER should be treated as an incentive given by government because of an international scheme and accordingly the same was not entitled to deduction u/s 80IA. He further submitted that this view has already been confirmed by the Cochin Bench of the Tribunal in the case of Apollo Tyres Ltd v ACIT in 31 ITR (Trib) 477 (Cochin).
6. On the other hand Ld. Counsel for the assessee submitted that issue is squarely covered by the decision of Hyderabad Bench decision in the case of My Home Power Ltd Vs. DCIT (supra). He further pointed out that this decision has been confirmed by Hon'ble Andhra Pradesh High Court in the case of CIT v My Home Power Ltd at 365 ITR 82(A.P). He also pointed out that this decision has been followed by Chennai Bench in the case of Ambika Cotton Mills Ltd v DCIT 27 ITR (Trib) 44 (Chennai) and Sri Velayudhaswamy Spinning Mills P. Ltd v DCIT 27 ITR (Trib) 106 and Jaipur Bench of the Tribunal in the case of Shree Cement Ltd Vs. Addl CIT 31 ITR (Trib) 513.
7. We have considered the rival submissions carefully. The facts of the case are identical to the facts of the case decided by Hyderabad Bench of the Tribunal in the case of My Home Power Ltd Vs. DCIT (supra). In that case it was held as under:-
"Held, that carbon credit was in the nature of "an entitlement" received to improve world atmosphere and environment reducing carbon, heat and gas emissions. It was not an offshoot of business but an offshoot of environmental concerns. No asset was generated in the course of business. Credit for reducing carbon emission or greenhouse effect could be transferred to another party in need of reduction of carbon emission. It does not increase profits in any manner and does not need any expenses. It was in the nature of entitlement to reduce carbon emission, and there was no cost of acquisition or cost of production to get this entitlement. Carbon credit was not in the nature of profit or in the nature of income. The amount realized on transfer of carbon credit was not taxable. "
8. This decision was confirmed by Hon'ble Andhra Pradesh High Court in the decision of CIT Vs. My Home Power Ltd Vs. DCIT 365 ITR 82(A.P.) and it was held as under:-
"Held, dismissing the appeal, that the assessee was carrying on the business of power generation for the assessment year 2007-08. Carbon credit was not an offshoot of business of the assessee but an offshoot of environmental concerns. No asset was generated in the course of business but it was generated due to environmental concerns. There was no cost of acquisition or cost of production to get entitlement for the carbon credits. Therefore, the income from sale of carbon credits was to be considered as capital receipt and not liable to tax under any head of income under the Income-tax Act, 1961."
9. Further, this decision has been followed by Chennai Bench in two cases of Ambika Cotton Mills Ltd v DCIT (supra) and Sri Velayudhaswamy Spinning Mills P. Ltd v DCIT (supra). Even Jaipur Beach has followed this decision in the case of Shree Cement Ltd Vs. Addl CIT (supra). No doubt the DR has been able to point out the contrary decision rendered by Cochin Bench of the Tribunal in the case of Apollo Tyres Ltd v ACIT (supra). Since the 4 decision of Hyderabad Tribunal Bench has already been confirmed by the Hon'ble Andhra Pradesh High Court and there is no contrary decision from any other High Court, in our opinion, we are bound to follow the decision of High Court. Therefore, following this decision we decide this issue against the Revenue.
So respectfully following the aforesaid referred to order dt. 15/04/2015, we do not see any merit in this appeal of the Department and affirmed the view taken by the Ld. CIT(A) in holding that the income earned by the assessee from sales of Certified Emissions Reductions (CERs) was eligible for deduction under section 80IA of the Act.
7. In the result appeal of the Department is dismissed.
(Order pronounced in the open Court on 21/11/2019)
Sd/- Sd/-
संजय गग$ एन.के.सैनी,
(SANJAY GARG ) ( N.K. SAINI)
या%यक सद'य/ Judicial Member उपा य / VICE PRESIDENT
AG
Date: 21/11/2019
आदे श क! त,ल-प अ.े-षत/ Copy of the order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent
3. आयकर आय/
ु त/ CIT
4. आयकर आय/
ु त (अपील)/ The CIT(A)
5. -वभागीय त न4ध, आयकर अपील&य आ4धकरण, च7डीगढ़/ DR, ITAT, CHANDIGARH
6. गाड फाईल/ Guard File आदे शानस ु ार/ By order, सहायक पंजीकार/ Assistant Registrar