Issue – In the assessment order, the Assessing Officer has held that (a) Carbon Credit is not a capital receipt, (b) cost of acquisition of Carbon Credit is NIL & (c) entire receipt is taxable as capital gain. However, in the computation, it has been added as Business income. Learned CIT(Appeals) has held that receipt from CER’s is in the nature of benefit arising from the business of the assessee and is taxable as ‘Business Income’ u/s Sec 28(iv) of the Act.
Contention of the Department –Receipt on account of carbon credit is related to the business of the assessee and the assessee has undertaken activities which has resulted in the receipt on account of carbon credits. Hence, the amount so received has to be considered as related to the business of the assessee and should either be considered as revenue receipts chargeable to tax as business income, or the net amount after deduction of expenditure if any, incurred for the same should be considered as chargeable to tax under the head capital gains.
Contention of the Assessee :-
(a) Issue squarely covered in Assessee ’s favour by the decisions of Hon ’ble Tribunal:
The issue under consideration is squarely covered by the decision of Hon’ble Hyderabad Tribunal in favor of assessee in the case of My Home Power Ltd. –vs.- DCIT (2013) 151 TTJ 616 (Hyd) wherein it has been held that receipt on account of carbon credit is not in the nature of profit or in the nature of income and hence has to be considered as capital receipt. After examining the matter in detail the Hon’ble Tribunal in the said case have held as under –
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