Valuelabs LLP Vs DCIT (ITAT Hyderabad)
The Income Tax Appellate Tribunal (ITAT), Hyderabad, adjudicated an appeal filed by the assessee firm against the order of the Commissioner of Income Tax (Appeals) [CIT(A)], which had upheld the assessment order passed under Section 143(3) read with Section 144B of the Income Tax Act, 1961 for Assessment Year 2020–21.
The dispute primarily concerned the tax treatment of income amounting to ₹1,78,24,800 earned from the sale of Renewable Energy Certificates (RECs). The assessee had offered this income for taxation under Section 115BBG of the Act at a concessional rate of 10%, contending that RECs are similar in nature to carbon credits and serve the same environmental objective.
The Assessing Officer (AO), however, rejected this claim, holding that Section 115BBG applies exclusively to “carbon credits” as specifically defined in the provision. Since RECs do not fall within that definition, the AO taxed the income at normal rates. This view was affirmed by the CIT(A), leading to the present appeal before the Tribunal.
The Tribunal examined the scope of Section 115BBG, which provides a concessional tax rate of 10% for income arising from the transfer of carbon credits. The provision defines carbon credits as reductions in carbon dioxide emissions or equivalent gases validated under the United Nations Framework on Climate Change (UNFCC) and tradable in the market.
