Dy. CIT v. Bhoruka Power Corporation Ltd. [ITA No.
1734/Bang/2016, dt. 7-8-2020] : 2020 TaxPub(DT) 3122 (Bang.-Trib.)
Taxability of Sale of carbon credits Certified Emission
Reduction (CER) receipt
Facts:
Assessee was in receipt of consideration by way of sale of
carbon credits/CER. It was the plea of the assessee that the said amounts were
capital receipt thus outside the scope of income tax which was held in favour
of the assessee by the Commissioner (Appeals). Revenue went in appeal against
this to the ITAT -
Held by the ITAT dismissing revenue's appeal that Carbon
credits/CER are capital receipts and are outside the scope of income tax.
Applied:
My Home Power Ltd. (2014) 365 ITR 82 (AP) : 2014 TaxPub(DT) 2672 (AP-HC)
Ambuthirtha Power Pvt. Ltd in ITA No. 465(Bng)/2013
Ambika Cotton Mills Ltd. v. Deputy Commissioner of
Income Tax (2013) 27 ITR(Trib) 44 (Chen) : 2013
TaxPub(DT) 2716 (Chen-Trib)
Shree Cement Ltd. v. ACIT (2014) 31 ITR(Trib) 513 (Jp) : 2014 TaxPub(DT) 1594 (Jp-Trib)
CIT v. Subhash Kabini Power Corporation Ltd. (2016) 385 ITR 592 (Karn.) : 2016 TaxPub(DT) 2164 (Karn-HC)
DCIT v. M/s. Sree Rayalaseema Green Energy Ltd.,
Hyderabad [ITA No.1612/Hyd/2013]
India Dyeing Mills Pvt. Ltd. v. ACIT, [I.T.A. No.
498/Mds/2014] : 2014 TaxPub(DT) 4316 (Chen-Trib)
Sri Velayudhaswamy Spinning Mills (P) Ltd. v. DCIT
[I.T.A. No. 582/Mds/2013] : 2013 TaxPub(DT) 2704 (Chen-Trib)
SLP has been admitted by the Supreme Court against the high
court decision of My Home Power vide SLP (C) No. 20134 of 2014 :
2018 TaxPub(DT) 3256 (SC)
Contrary decision holding that Carbon credits are taxable
as income also exist as in --
DCIT v. Kalpataru Power Transmission Ltd. [I.T.A. No.
538/Ahd/2013/Assessment Year 2009-10] : 2016 TaxPub(DT) 1422 (Ahd-Trib)
Editorial Note: Finance
Act, 2017 with effect from 1-4-2018 (Assessment Year 2018-19) has ushered in
section 115BBG which taxes Carbon credits/CER at a presumptive rate of 10% with
no expenditure being allowed on the same. One can at least safely say that
Carbon credits were not taxable until assessment year 2018-19 until this
amendment.
115BBG. Tax on income from transfer of carbon
credits.--(1) Where the total income of an assessee
includes any income by way of transfer of carbon credits, the income-tax
payable shall be the aggregate of --
(a) the amount of income-tax
calculated on the income by way of transfer of carbon credits, at the rate of
ten per cent; and
(b) the amount of income-tax
with which the assessee would have been chargeable had his total income been
reduced by the amount of income referred to in clause (a).
(2) Notwithstanding anything contained in this Act, no
deduction in respect of any expenditure or allowance shall be allowed to the
assessee under any provision of this Act in computing his income referred to in
clause (a) of sub-section (1).
Explanation.--For the
purposes of this section, "carbon credit" in respect of one unit
shall mean reduction of one tonne of carbon dioxide emissions or emissions of
its equivalent gases which is validated by the United Nations Framework on
Climate Change and which can be traded in market at its prevailing market
price.