Commissioner of Income Tax vs My Home Power Ltd.

Kalyan Jyoti Sengupta, C.J.—This appeal is sought to be preferred and admitted against the judgment and order of the learned Tribunal, dated November 2, 2012 2013 (21) ITR (Trib) 186 , on the following substantial questions of law:

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 tax under any head of income under income tax Act, 1961?

Whether, in the facts and in the circumstances of the case and in law, the income tax Appellate Tribunal is correct in holding that there is no cost of acquisition or cost of production to get entitlement for the carbon credits, without appreciating that generation of carbon credits is intricately linked to the machinery and processes employed in the production process by the assessee?

Sri J.V. Prasad, learned counsel appearing for the appellant-Revenue, submits that the consideration received on account of sale of carbon credits should be treated to be business income as the sale has been made in connection with the business.

We have considered the aforesaid submission and we are unable to accept the same, as the learned Tribunal has factually found that "carbon credit is not an offshoot of business but an offshoot of environmental concerns. No asset is generated in the course of business but it is generated due to environmental concerns". We agree with this factual analysis as the assessee is carrying on the business of power generation. The carbon credit is not even directly linked with power generation. On the sale of excess carbon credits the income was received and hence as correctly held by the Tribunal it is capital receipt and it cannot be business receipt or income. In the circumstances, we do not find any element of law in this appeal. The appeal is accordingly dismissed. There will be no order as to costs.