Prabhu Spinning Mills (P) Ltd., Tiruppur v. DCIT, Tiruppur

ITA 651/CHNY/2013 | 2009-2010
Pronouncement Date: 31-07-2014 | Result: Allowed

Appeal Details

RSA Number 65121714 RSA 2013
Assessee PAN AABCP0750E
Bench Chennai
Appeal Number ITA 651/CHNY/2013
Duration Of Justice 1 year(s) 3 month(s) 19 day(s)
Appellant Prabhu Spinning Mills (P) Ltd., Tiruppur
Respondent DCIT, Tiruppur
Appeal Type Income Tax Appeal
Pronouncement Date 31-07-2014
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted C
Tribunal Order Date 31-07-2014
Date Of Final Hearing 30-07-2014
Next Hearing Date 30-07-2014
Assessment Year 2009-2010
Appeal Filed On 11-04-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL C B ENCH CHENNAI . ' $ % & ' BEFORE SHRI A.MOHAN ALANKAMONY ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD JUDICIAL MEMBER ITA NO. ASSESS MENT YEAR APPELLANT RESPONDENT 651/MDS/2013 2009-10 PRABHU SPINNING MILLS (P) LTD. 207/86 MANGALAM ROAD TIRUPUR-641 601. PAN:AABCP0750E DEPUTY COMMISSIONER OF INCOME TAX COMPANY CIRCLE TIRUPUR 652/MDS/2013 2009-10 SIVARAJ SPINNING MILLS (P) LTD. 86 MANGALAM ROAD KARUVAMPALAYAM TIRUPUR-641 601. PAN:AADCS0681H DEPUTY COMMISSIONER OF INCOME TAX COMPANY CIRCLE TIRUPUR / APPELLANT BY : MR. N.VIJAY KUMAR C.A. /RESPONDENT BY : MRS. JAYANTHI KRISHNA CIT & MR. C.V.PAVANA KUMAR JCIT / DATE OF HEARING : 30 TH JULY 2014 /DATE OF PRONOUNCEMENT : 31 ST JULY 2014 / O R D E R PER CHALLA NAGENDRA PRASAD JM: THESE TWO APPEALS ARE FILED BY THE ABOVE ASSESSEE S AGAINST THE ORDERS OF COMMISSIONER OF INCOME TAX (APPEALS)-II COIMBATORE DATED 30.01.2013 FOR THE ASSESSMENT YEAR 2009-10. SINCE THE ISSUE IS COMMON IN BOTH THESE APPEALS THEY ARE HEARD TOGETHER AND DIS POSED OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2 ITA NO. 651 & 652/ MDS/2013 2. THE ONLY ISSUE IN THESE TWO APPEALS IS THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFI RMING THE CLEAN DEVELOPMENT MECHANISM RECEIPTS AS REVENUE RECEIPTS. THE COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO APPRECIATE THAT AMOUNT RECEIVED ON ACCOUNT OF CA RBON CREDITS ARE CAPITAL IN NATURE AND HAS NO PROFIT OR GAIN ELEMENT IN IT. 3. IN THE COURSE OF HEARING COUNSEL FOR THE ASSESS EE SUBMITS THAT THE ISSUE IN APPEALS IS SQUARELY COVER ED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE A NDHRA PRADESH HIGH COURT IN THE CASE OF CIT VS. MY HOME P OWER LTD.(365 ITR 82). COUNSEL FOR THE ASSESSEE REFERRIN G TO THE SAID JUDGEMENT SUBMITS THAT THE HONBLE COURT WHILE AFFIRMING THE ORDER OF THE TRIBUNAL HELD THAT INCOME RECEIVED ON SALE OF EXCESS CARBON CREDITS IS CAPITAL RECEIPT AND IT CAN NOT BE BUSINESS RECEIPT OR INCOME. 4. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTS THE ORDERS OF LOWER AUTHORITIES IN HOLDING THAT RECEIPT S ON ACCOUNT OF CARBON CREDIT IS REVENUE RECEIPTS. 3 ITA NO. 651 & 652/ MDS/2013 5. HEARD BOTH SIDES. ON GOING THROUGH THE ORDERS OF LOWER AUTHORITIES AND THE DECISION OF THE HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF CIT VS. MY HOME POWER LTD.(SUPRA) WE FIND THAT THE ISSUE IN THESE TWO AP PEALS IS SQUARELY COVERED BY THE ABOVE DECISION. THE REVENUE COULD NOT POINT OUT ANY CONTRARY DECISION TO THE ABOVE CI TED DECISION. THE HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF MY HOME POWER LTD. (SUPRA) WHILE DECIDING T HE ISSUE IN FAVOUR OF THE ASSESSEE HELD AS UNDER:- THIS APPEAL IS SOUGHT TO BE REFERRED AN D ADMITTED AGAINST THE JUDGMENT AND ORDER OF THE LEAR NED TNBUNAL DATE D NOVEMBER 2 2012 (MY HOME POWER LTD. V. DEPUTY ERR [2013] 21 I T R (TRIB) 186 (H Y D)) O N THE FOLLOWING SUBSTANTIAL QUESTIONS OF LAW: 1. WHETHER IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE INCOME-TAX APPELLATE TRIBUNAL IS CORRECT IN HOLDING THAT THE SALE OF CARBON CREDITS IS TO BE CONSIDERED AS CAPITAL RECEIPT AND NOT LIABLE FOR TA X UNDER ANY HEAD OF INCOME UNDER INCOME-TAX ACT 1961 ? 2. WHETHER IN THE FACTS AND IN THE CIRCUMSTAN CES OF THE CASE AND IN LAW THE INCOME-TAX APPELLATE TRIBUNAL IS CORRECT IN HOLDING THAT THERE IS NO COST OF ACQUISI TION OR COST OF PRODUCTION TO GET ENTITLEMENT FOR THE CARBON CRE DITS WITHOUT APPRECIATING THAT GENERATION OF CARBON CRED ITS IS INTRICATELY LINKED TO THE MACHINERY AND PROCESSES E MPLOYED IN THE PRODUCTION PROCESS BY THE ASSESSEE ? SRI J. V. PRASAD LEARNED COUNSEL APPEARING FOR THE APPELLANT-REVENUE SUBMITS THAT THE CONSIDERATION R ECEIVED ON ACCOUNT OF SALE OF CARBON CREDITS SHOULD BE TREA TED TO BE BUSINESS INCOME AS THE SALE HAS BEEN MADE IN CONNEC TION WITH THE BUSINESS. 4 ITA NO. 651 & 652/ MDS/2013 WE HAVE CONSIDERED THE AFORESAID SUBMISSION AND WE ARE UNABLE TO A CCEPT THE SAME AS THE LEARNED TRIBUNAL HAS FACTUALLY FOUND THAT 'CARBON CREDIT IS NOT AN OFFSH OOT OF BUSINESS BUT AN OFFSHOOT OF ENVIRONMENTAL CONCERNS. NO ASSET IS GENERATED IN THE COURSE OF BUSINESS BUT IT IS GENERATED D UE TO ENVIRONMENTAL CONCERNS'. WE AGREE WITH THIS FACTUAL ANALYSIS AS THE A SSESSEE IS CARRYING ON THE BUSINESS OF POWER GENERATION. THE CARBON CREDIT IS NOT EVEN DIRECTLY LINKED WITH POWER GENERATION. ON THE SALE OF E XCESS CARBON CREDITS THE INCOME WAS RECEIVED AND HE NCE AS CORRECTLY HELD B Y THE TRIBUNAL IT IS CAPITAL RECEIPT AND IT CANNOT BE BUSINESS RECEIPT OR I N COME. IN THE CIRCUMSTANCES WE DO NOT FIND ANY ELEMENT OF LAW IN THIS A PPEAL. 6. RESPECTFULLY FOLLOWING THE SAID DECISION WE HOL D THAT AMOUNT RECEIVED ON SALE OF CARBON CREDIT IS CAPITAL IN NATURE AND THEREFORE WE REVERSE THE ORDERS OF COMMISSIONER OF INCOME TAX (APPEALS) AND THE ASSESSING OFFICER ON T HIS ISSUE. 7. IN THE RESULT BOTH THE APPEALS OF THE ASSESSEES ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THURSDAY TH E 31 ST DAY OF JULY 2014 AT CHENNAI. SD/- SD/- ( A.MOHAN ALANKAMONY ) ( CHALLA NAGENDR A PRASAD ) . ( # %& ) ACCOUNTANT MEMBER / ( JUDICIAL MEMBER/ %) ( % /CHENNAI * /DATED 31 ST JULY 2014 SOMU 5 ITA NO. 651 & 652/ MDS/2013 )-. /. /COPY TO: 1. APPELLANT 2. /RESPONDENT 3. 0 () /CIT(A) 4. 0 /CIT 5. . ))4 /DR 6. 7 /GF .