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| The Tax Publishers2021 TaxPub(DT) 4041 (Mad-HC) : (2021) 282 TAXMAN 0350 INCOME TAX ACT, 1961
Section 4
Carbon Credit was not an off-shoot of business, but an off shoot of environmental concerns. No asset was generated in the course of business, but it was generated due to environmental concerns. Carbon credit was not even directly linked with power generation and the income was received by sale of excess carbon credits. Therefore, sale proceeds realized by the assessee on sale of Certified Emission Reduction Credit was capital receipt and therefore, not taxable.
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Income - Capital or revenue receipt - Proceeds realized by assessee on sale of Certified Emission Reduction credit -
Question for consideration was whether proceeds realized by the assessee on sale of Certified Emission Reduction Credit which assessee had earned on the Clean Development Mechanism in its wind energy operations was a revenue receipt chargeable to tax. Held: Carbon Credit was not an off-shoot of business, but an off-shoot of environmental concerns. No asset was generated in the course of business, but it was generated due to environmental concerns. Carbon credit was not even directly linked with power generation and the income was received by sale of excess carbon credits. Therefore, sale proceeds realized by the assessee on sale of Certified Emission Reduction Credit was capital receipt and therefore, not taxable.
Followed:CIT, Chennai v. Ambika Cotton Mills Ltd. (2021) 279 Taxman 405 (Mad-HC) : 2021 TaxPub(DT) 1402 (Mad-HC).
REFERRED :
FAVOUR : In assessee's favour.
A.Y. : 2010-11
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