The Madras High court held that proceeds realized on sale of Certified Emission Reduction Credit, which had been earned on the Clean Development Mechanism in its wind energy operations, is a capital receipt and not taxable.
The revenue has raised the issue that whether on the facts and circumstances of the case, the Tribunal was right in holding that the proceeds realized by the assessee on sale of Certified Emission Reduction Credit, which the assessee, M/s.Ambika Cotton Mills Ltd. had earned on the Clean Development Mechanism in its wind energy operations, is a capital receipt and not taxable.
The division bench consisting of Justice M.Duraiswamy and Justice T.V. Thamilselvi relied on the decision in case of the S.P.Spinning Mills Pvt. Ltd. Vs. Assistant Commissioner of Income Tax.
“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 court said.
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