INCOME TAX ACT, 1961

Section 4

Income - Capital or revenue receipt - Receipt on account of carbon credit -

Assessee-company was engaged in business of generation of hydro and wind power. It claimed deduction under section 80-IA in respect of business of generation of power. In the claim for deduction under section 80-IA, the assessee also included receipt from sale of carbon credit. AO held that the receipt of sale of carbon credit was not derived from eligible business and denied the benefit under section 80IA, to the extent of receipt on account of sale of carbon credit. Alternatively, the assessee claimed that the receipt on account of carbon credit was a capital receipt not chargeable to tax. AO, however, rejected such alternative claim also and held that it was a revenue receipt chargeable to tax. Held: Carbon credit was not an offshoot of business of assessee but an offshoot of environmental concerns. No asset was generated in the course of business but it was generated due to environmental concerns. Further, 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 not liable to tax.

REFERRED : CIT v. My Home Power Ltd., (2014) 385 ITR 82 (AP) : 2014 TaxPub(DT) 2672 (AP-HC) Ambika Cotton Mills Ltd. v. Dy. CIT (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)

FAVOUR : In assessee's favour

A.Y. : 2010-11

INCOME TAX ACT, 1961

Section 14A Read with rule 8D

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