By
Mariya Paliwala - On May 17, 2021 2:11 pm
The Madras High Court while remitting the matter to AO for fresh adjudication ruled that Carbon Credit receipts cannot be considered as business income, it is a capital receipt.
The revenue raised the issue that the Appellate Tribunal is correct in holding that sale of Carbon Credits is to be considered as Capital Receipt and not liable for tax under any head of income under the Income Tax Act, 1961.
The revenue relied on the Ambica Cotton Mills Ltd., vs. DCIT wherein it was held that carbon credit receipts cannot be considered as business income and it is a capital receipt. Hence, the assessee’s claim under Section 80IA of the Act is untenable, as deduction under Section 80IA of the Act is allowable only on profits and gains derived by an undertaking.