Income Tax Appellate Tribunal (ITAT), Mumbai bench consisting of Kuldip Singh, Judicial Member and Gagan Goyal, Accountant Member held that Sale of Carbon Credit is Capital Receipt.
Brief facts of the case are that the assessee-company, Essel Mining & Industries Limited filed its return of income on 30.09.2015 declaring a total loss of Rs. 229,54,99,761/-. The case was selected for scrutiny under CASS. During the year under consideration, the assessee was engaged in the business of (i) Raising of Ore, (ii) Mfg. Of Nitrogen Gas & Ferro Alloys, (iii) Trading of Iron Ore & Ferro Alloys, (iv) Generation of electricity (Wind Power & Solar Power), & (v) Railway Siding for captive use and (vi) Operating Lease of Solar Energy Equipment. During the scrutiny assessments certain additions were made. Against this order of Assessing Officer (AO), assessee preferred an appeal before the Commissioner of Income Tax (CIT). A substantial relief was given to the assessee.
The appellant is in appeal before the Tribunal for Carbon Credit treated as Revenue income u/s 28 of Rs. 102,05,87/-.
The Tribunal observed “Following the order passed by Co-ordinate Bench of Tribunal in case of M/s Dawarkesh Sugar Industry Ltd. which is based upon the decision rendered by Andhra Pradesh High Court in case of My Home Power Ltd., we are of the considered view that sale of Renewable Energy Certificate (Carbon Credit) of income received by the assessee is a capital receipt and could not be business receipt or income nor it is directly linked with the business of the assessee nor any asset is generated in the course of business but it is generated due to environmental concern. So, the addition of Rs. 10,20,587/- by the AO from the sale of Carbon Credit and confirmed by the CIT(A) is not sustainable, hence, ordered to be deleted.”
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