Commissioner Of Income Tax v. M/S. Best Corporation Ltd

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 20.06.2022 CORAM THE HONOURABLE MR. JUSTICE R. MAHADEVANAND THE HONOURABLE MR. JUSTICE MOHAMMED SHAFFIQ Commissioner of Income Tax, No.63, Race Course Road, Coimbatore. .. Appellant Versus M/s. Best Corporation Ltd., No.89/2, Avinashi Road, Padmavathipuram, Tirupur - 641 605.PAN:AAC CR 6828 G Appeal filed under Section 260 (A) of the the Income TaxAct, 1961 against the order dated 20.05.2015 passed by theIncome Tax Appellate Tribunal “C” Bench, Chennai, inI.T.A.No.1958/Mds/2014 preferred against the order dated29.05.2014 made in ITA No.486/13-14 passed by the Commissionerof Income Tax (Appeals)-II, Coimbatore preferred against theorder dated 31.01.2014 passed by the Joint Commissioner ofIncome Tax, Tirupur Range, Tirupur for the Assessment Year 2011-2012. This tax case appeal has been filed by the appellantchallenging the order dated 20.05.2015 passed by the Income Tax https://hcservices.ecourts.gov.in/hcservices/ AppellateTribunal,'C'Bench,Chennai,inI.T.A.No.1958/Mds/2014, relating to the assessment year 2011-12. 2. By order dated 23.03.2016, this court admitted theaforesaid tax case appeal on the following substantial questionsof law: “(i) Whether on the facts and circumstancesof the case, the Tribunal was right in holdingthat the proceeds realized by the assessee on saleof certified emission reduction credit, which theassessee had earned on the clean developmentmechanism in its wind energy operations, is acapital receipt and not taxable? (ii) Whether in the facts and circumstancesof the case and in law, the Appellate Tribunal iscorrect in holding that sale of carbon credits isto be considered as capital receipt and not liablefor tax under any head of income under the IncomeTax Act, 1961? (iii) Whether in the facts and circumstancesof the case and in law, the Income Tax AppellateTribunal is correct in holding that there is nocost of acquisition or cost of production to getentitlement for the carbon credits, withoutappreciating the generation of carbon credits isintricately linked to the machinery and processesemployed in the production process by theassessee? and (iv) Whether in the facts and circumstancesof the case and in law, the Income Tax AppellateTribunal is correct in holding that the TechnologyUpgradation Fund (TUF) subsidy and compensationreceivable on non performance of the energygeneration are capital receipts and not liable fortax under any head of income under the Income TaxAct? " 3. Today, when the matter was taken up for consideration,the learned counsel appearing for both sides, jointly submittedthat the substantial question of law Nos.1 to 3 are covered infavour of the assessee, by a decision of this Court inS.P.Spinning Mills (P) Ltd. v. Assistant Commissioner of IncomeTax [(2021) 433 ITR 61 (Mad)], the relevant passage of which, isusefully extracted hereunder: “28.Insofar as substantial question of lawno.4 is concerned, it deals with carbon credit. Thequestion, as to the manner in which carbon creditreceipt has to be treated, has been considered by https://hcservices.ecourts.gov.in/hcservices/ several High Courts and it has been held that thereceipt should be treated as a capital receipt. Inthis regard, it would be beneficial to refer to thedecision in the case of CIT vs. Subhash KabiniPower Corporation Ltd., [(2016) 385 ITR 0592(Karn.)]. In the said decision, the Karnataka HighCourt approved the view taken by the ITAT,Hyderabad Bench, which decision was upheld by theHigh Court of Andhra Pradesh in the case of CIT vs.My Home Power Ltd. [(2014) 365 ITR 0082 (AP)],which was subsequently followed by the ITAT,Chennai and Jaipur Benches. The operative portionof the judgment reads as follows:- https://hcservices.ecourts.gov.in/hcservices/ several High Courts and it has been held that thereceipt should be treated as a capital receipt. Inthis regard, it would be beneficial to refer to thedecision in the case of CIT vs. Subhash KabiniPower Corporation Ltd., [(2016) 385 ITR 0592(Karn.)]. In the said decision, the Karnataka HighCourt approved the view taken by the ITAT,Hyderabad Bench, which decision was upheld by theHigh Court of Andhra Pradesh in the case of CIT vs.My Home Power Ltd. [(2014) 365 ITR 0082 (AP)],which was subsequently followed by the ITAT,Chennai and Jaipur Benches. The operative portionof the judgment reads as follows:- “11. The decision has been upheld by theHon’ble Andhra Pradesh High Court. This decisionhas been subsequently followed by the ITAT Chennaiand Jaipur Benches. There is no decision eitherfrom the Hon’ble Supreme Court or from the Hon’blejurisdictional High Court. These decisions indicatethat sale of carbon credit would result capitalreceipt which is not taxable. When we confrontedthe learned DR with regard to this position, it wascontended that the position as on the day when theassessment order was passed, is to be seen and onthat day these orders were not available.Therefore, the assessee cannot claim the benefit ofthese orders. However, we do not concur with thisproposition of the learned CIT, because the FullBench of the Hon’ble Punjab & Haryana High Court inthe case of Aruna Luthra reported in 254 ITR 76 hasheld that a Court decide a dispute between theparties. The case can involve decision on facts. Itcan also involve a decision on point of law. Bothmay have bearing on the ultimate result of thecase. When a Court interprets a provision, itdecides as to what is the meaning and effect of thewords used by the Legislature, it is thedeclaration regarding the statute. In other wordsthe judgment declares as to what the legislaturehad said at the time of promulgation of the law,the declaration is.........., this was the law,this is the law, this is how the provision shall beconstrued. Therefore, he cannot plead that the viewtaken by the Tribunal and upheld by the Hon’bleAndhra Pradesh High Court could be considered as ifapplicable from the date of the decision. In thedecision only the position of the law as to howreceipts from sale of carbon credits are to betreated, has been explained. One of the argument raised by the DR was that at this stage, theadditional ground ought not to be permitted to beraised. It is pertinent to mention here thatbasically, it is not a separate ground, it is alimb of arguments, which is affecting the ultimatetax liability of the assessee. The Hon’ble SupremeCourt in the case of NTPC Ltd (Supra) has held thatthe Tribunal had jurisdiction to examine a questionof law which arose from the fact as found by theIncome Tax authorities and having a bearing on thetax liability of the assessee. As far as the natureof the receipt from sale of carbon credit isconcerned, it is available from the assessmentstage. It is not disputed even by the learnedCommissioner, the dispute is, whether it has beenderived from the eligible industrial undertakingfor qualifying the grant of deduction u/s 80IA. Thelearned Commissioner felt that this receipt has notbeen derived from the industrial undertaking whichwill be eligible for grant of deduction u/s 80IAand the Assessing Officer committed an error inincluding the receipt in the eligible profit. Thosefacts are already on the record. It is to be seen,whether the receipt is of capital nature or of arevenue nature. Even in case the order of the CITis upheld, then, in law, it will affect thecomputation of income, ultimately because thereceipt will not be taxable, it will not come underthe ambit of computation of income. Simultaneouslyit will be excluded from the deduction u/s 80IA aswell as of the total income. The result will remainas it is. It is a revenue neutral case. Therefore,in view of the ratio laid down by the Hon’blejurisdictional High Court in the case of GopalaGowda (Supra), the second condition for takingaction u/s 263 does not exist. The assessment orderis not prejudicial to the interests of the Revenue.In view of the above discussion, we allow theappeal of the assessee and quash the impugned orderof the learned CIT passed u/s 263 of the Income TaxAct.” The aforesaid shows that, so far as thequestion as to whether, the income by sale ofcarbon credit could be termed as capital receipt orprofit, is concerned, the Tribunal has consideredthe decision of the Hyderabad Bench and it hasfurther taken note of the fact that decision of theTribunal of Hyderabad Bench was carried before theAndhra Pradesh High Court and the said decision was not interfered with. The Tribunal, in its decisionhas also referred to the decision of the ApexCourt with regard to power under Section 263 of theIncome Tax Act, 1961 (hereinafter referred to as“the Act”) of the revisional authority. 4. In our view, the principal question,which may arise is, as to whether by sale of carboncredit capital receipt is generated or a profit outof the business activity of the assessee. More orless, in a similar case, the Apex Court had anoccasion to consider such an issue in the case ofCommissioner of Income Tax v. Maheshwari Devi JuteMills Ltd. [(1965) 57 ITR 36 (SC)], wherein thequestion came up for consideration before the ApexCourt as to whether by sale of loom-hours, theamount received could be termed as capital receiptor the income out of business. In the saiddecision, the Apex Court held that the amountreceived out of sale of loom-hours can be termed ascapital receipt and not income out of business. 5. Subsequently, in a later decision of theApex Court, a question came up for consideration inthe case of M/s. Empire Jute Co. Ltd. v.Commissioner of Income Tax [(1980) 4 SCC 25] thequestion which arose before the Apex Court was, ifloom-hours are purchased by the manufacturingmills, whether it can be termed as capitalexpenditure or revenue expenditure. In the saiddecision, the earlier decision of the Apex Court inthe case of Maheswari Devi Jute Mills (supra) wasalso relied upon by the Revenue and afterconsidering the same, the Apex Court at paragraphNos. 4 and 5 observed thus: 5. Subsequently, in a later decision of theApex Court, a question came up for consideration inthe case of M/s. Empire Jute Co. Ltd. v.Commissioner of Income Tax [(1980) 4 SCC 25] thequestion which arose before the Apex Court was, ifloom-hours are purchased by the manufacturingmills, whether it can be termed as capitalexpenditure or revenue expenditure. In the saiddecision, the earlier decision of the Apex Court inthe case of Maheswari Devi Jute Mills (supra) wasalso relied upon by the Revenue and afterconsidering the same, the Apex Court at paragraphNos. 4 and 5 observed thus: “4. Now an expenditure incurred by anassessee can qualify for deduction under Section 10(2) (xv) only if it is incurred wholly andexclusively for the purpose of his business, buteven if it fulfils this requirement, it is notenough; it must further be of revenue asdistinguished from capital nature. Here in thepresent case it was not contended on behalf of theRevenue that the sum of Rs. 2,03,255 was not laidout wholly and exclusively for the purpose of theassessee’s business but the only argument was andthis argument found favour with the High Court,that it represented capital expenditure and washence not deductible under Section 10(2) (xv). Thesole question which therefore arises fordetermination in the appeal is whether the sum of Rs. 2,03,255 paid by the assessee representedcapital expenditure or revenue expenditure. Weshall have to examine this question on principlebut before we do so, we must refer to the decisionof this Court in Maheshwari Devi Jute Mills casesince that is the decision which weighed heavilywith the High Court, in fact, compelled it tonegative the claim of the assessee and hold theexpenditure to be on capital account. That was aconverse case where the question was whether anamount received by the assessee for sale of loomhours was in the nature of capital receipt orrevenue receipt. The view taken by this Court wasthat it was in the nature of capital receipt andhence not taxable. It was contended on behalf ofthe Revenue, relying on this decision, that just asthe amount realised for sale of loom hours was heldto be capital receipt, so also the amount paid forpurchase of loom hours must be held to be ofcapital nature. But this argument suffers from adouble fallacy. 5. In the first place it is not auniversally true proposition that what may becapital receipt in the hands of the payee mustnecessarily be capital expenditure in relation tothe payer. The fact that a certain paymentconstitutes income or capital receipt in the handsof the recipient is not material in determiningwhether the payment is revenue or capitaldisbursement qua the prayer. It was felicitouslypointed out by Macnaghten, J. in Racecourse BettingControl Board v. Wildthat a “payment may be arevenue payment from the point of view of the payerand a capital payment from the point of view of thereceiver and vice versa”. Therefore, the decisionin Maheshwari Devi Jute Mills case cannot beregarded as an authority for the proposition thatpayment made by an assessee for purchase of loomhours would be capital expenditure. Whether it iscapital expenditure or revenue expenditure wouldhave to be determined having regard to the natureof the transaction and other relevant factors.” Thereafter, the Apex Court while consideringthe test to find out as to whether a particularexpenditure can be termed as capital or revenueexpenditure observed at paragraph Nos. 8 and 9 asunder: “8. The decided cases have, from time totime, evolved various tests for distinguishing Thereafter, the Apex Court while consideringthe test to find out as to whether a particularexpenditure can be termed as capital or revenueexpenditure observed at paragraph Nos. 8 and 9 asunder: “8. The decided cases have, from time totime, evolved various tests for distinguishing between capital and revenue expenditure but no testis paramount or conclusive. There is no allembracing formula which can provide a readysolution to the problem; no touchstone has beendevised. Every case has to be decided on its ownfacts keeping in mind the broad picture of thewhole operation in respect of which the expenditurehas been incurred. But a few tests formulated bythe courts may be referred to as they might help toarrive at a correct decision of the controversybetween the parties. One celebrated test is thatlaid down by Lord Cave, L.C., in Atherion v.British Insulated and Halsby Cables Ltd. where thelearned law Lord stated: When an expenditure is made, not only onceand for all, but with a view to bringing intoexistence an asset or an advantage for the enduringbenefit of a trade, there is very good reason (inthe absence of special circumstances leading to anopposite conclusion) for treating such anexpenditure as properly attributable not to revenuebut to capital. This test, as the parenthetical clauseshows, must yield where there are specialcircumstances leading to a contrary conclusion and,as pointed out by Lord Radcliffe in Commissioner ofTaxes v. Nchanga Consolidated Copper Mines Ltd., itwould be misleading to suppose that in all cases,securing a benefit for the business would be primafacie capital expenditure “so long as the benefitis not so transitory as to have no endurance atall”. There may be cases where expenditure, even ifincurred for obtaining advantage of enduringbenefit, may, nonetheless, be on revenue accountand the test of enduring benefit may break down. Itis not every advantage of enduring nature, acquiredby an assessee that brings the case within theprinciple laid down in this test. What is materialto consider is the nature of the advantage in acommercial sense and it is only where the advantageis in the capital field that the expenditure wouldbe disallowable on an application of this test. Ifthe advantage consists merely in facilitating theassessee’s trading operations or enabling themanagement and conduct of the assessee’s businessto be carried on more efficiently or moreprofitably while leaving the fixed capitaluntouched, the expenditure would be on revenueaccount, even though the advantage may endure for an indefinite future. The test of enduring benefitis therefore not a certain or conclusive test andit cannot be applied blindly and mechanicallywithout regard to the particular facts andcircumstances of a given case. But even if thistest were applied in the present case, it does notyield a conclusion in favour of the Revenue. Here,by purchase of loom hours no new asset has beencreated. There is no addition to or expansion ofthe profit-making apparatus of the assessee. Theincome-earning machine remains what it was prior tothe purchase of loom hours. The assessee is merelyenabled to operate the profit-making structure fora longer number of hours. And this advantage isclearly not of an enduring nature. It is limited inits duration to six months and, moreover, theadditional working hours per week transferred tothe assessee have to be utilised during the weekand cannot be carried forward to the next week. Itis, therefore, not possible to say that anyadvantage of enduring benefit in the capital fieldwas acquired by the assessee in purchasing loomhours and the test of enduring benefit cannot helpthe Revenue. 9. Another test which is often applied isthe one based on distinction between fixed andcirculating capital. This test was applied by LordHaldane in the leading case of John Smith & Son v.Moore where the learned law Lord drew thedistinction between fixed capital and circulationcapital in words which have almost acquired thestatus of a definition. He said: Fixed capital (is) what the owner turns toprofit by keeping it in his own possession;circulating capital (is) what he makes profit of byparting with it and letting it change masters. Now so long as the expenditure in questioncan be clearly referred to the acquisition of anasset which falls within one or the other of thesetwo categories, such a test would be a criticalone. But this test also sometimes break downbecause there are many forms of expenditure whichdo not fall easily within these two categories andnot infrequently, as pointed out by Lord Radcliffein Commissioner of Taxes v. Nchanga ConsolidatedCopper Mines Ltd., the line of demarcation is difficult to draw and leads to subtle distinctionsbetween profit that is made “out of” assets andprofit that is made “upon” assets or “with” assets.Moreover, there may be cases where expenditure,though referable to or in connection with fixedcapital, is nevertheless allowable as revenueexpenditure. An illustrative example would be ofexpenditure incurred in preserving or maintainingcapital assets. This test is therefore clearly notone of universal application. But even if we wereto apply this test, it would not be possible tocharacterise the amount paid for purchase of loomhours as capital expenditure, because acquisitionof additional loom hours does not add at all to thefixed capital of the assessee. The permanentstructure of which the income is to be the produceor fruit remains the same; it is not enlarged. Weare not sure whether loom hours can be regarded aspart of circulating capital like labour, rawmaterial, power etc., but it is clear beyond doubtthat they are not part of fixed capital and henceeven the application of this test does not compelthe conclusion that the payment for purchase ofloom hours was in the nature of capitalexpenditure.” After making the aforesaid observation, atparagraph No. 10, the Apex Court, on the basis ofthe facts of the said case concluded as under: “Similarly, if payment has to be made forsecuring additional power every week, such paymentwould also be part of the cost of operating theprofit-making structure and hence in the nature ofrevenue expenditure, even though the effect ofacquiring additional power would be to augment theproductivity of the profit-making structure. On thesame analogy payment made for purchase of loomhours which would enable the assessee to operatethe profit-making structure for a longer number ofhours than those permitted under the working timeagreement would also be part of the cost ofperforming the income earning operations and hencerevenue in character.” Accordingly, the payment made for purchaseof loom-hours by Jute Mill Company was held to beRevenue expenditure. 6. At this stage, we may also refer to thedecision of the Andhra Pradesh High Court, whichhas been relied upon by the Tribunal in theimpugned order. More or less, identical question was raised and the Andhra Pradesh High Court in thecase of Commissioner of Income Tax-IV v. My HomePower Ltd. [(2014) 46 Taxmann.com 314 (AndhraPradesh), at paragraph No. 3 observed thus: “3. We have considered the aforesaidsubmission and we are unable to accept the same, asthe learned Tribunal has factually found that“Carbon Credit is not an offshoot of business butan offshoot of environmental concerns. No asset isgenerated in the course of business but it isgenerated due to environmental concerns. 6. At this stage, we may also refer to thedecision of the Andhra Pradesh High Court, whichhas been relied upon by the Tribunal in theimpugned order. More or less, identical question was raised and the Andhra Pradesh High Court in thecase of Commissioner of Income Tax-IV v. My HomePower Ltd. [(2014) 46 Taxmann.com 314 (AndhraPradesh), at paragraph No. 3 observed thus: “3. We have considered the aforesaidsubmission and we are unable to accept the same, asthe learned Tribunal has factually found that“Carbon Credit is not an offshoot of business butan offshoot of environmental concerns. No asset isgenerated in the course of business but it isgenerated due to environmental concerns. “We agree with this factual analysis as theassessee is carrying on the business of powergeneration. The Carbon Credit is not even directlylinked with power generation. On the sale of excessCarbon Credits the income was received and hence ascorrectly held by the Tribunal it is capitalreceipt and it cannot be business receipt orincome. In the circumstances, we do not find anyelement of law in this appeal.” The aforesaid shows that the Andhra PradeshHigh Court has confirmed the view of the Tribunalthat Carbon Credit is not an offshoot of business,but an offshoot of environmental concerns. No assetis generated in the course of business, but it isgenerated due to environmental concerns. It wasalso found that the carbon credit is not evendirectly linked with the power generation and theincome is received by sale of the excess carboncredits. It was found that the Tribunal has rightlyheld that it is capital receipt and not businessincome. 7. As such, in our view, when the issue isalready covered by the decision of the AndhraPradesh High Court, wherein the view taken by theTribunal of Hyderabad Bench has been followed inthe present case, one may say that no substantialquestion of law would arise for consideration.” 29.The Hon'ble Division Bench of this Courtin the case of PCIT vs. Arun Textiles Pvt. Ltd.,[T.C.A.No.606 of 2016, dated 29.8.2016], afterreferring to the decision in My Home Power Ltd.,(supra), dismissed the appeal filed by the Revenueand confirmed the order passed by the ITAT holdingthat sale of carbon credits has to be considered ascapital receipt and accordingly, it is not taxable. 30. The argument of Ms.V.Pushpa, learnedSenior Standing Counsel is by referring to thesubstantial questions of law framed by the assesseeand it is submitted that if the receipts from saleof carbon credit has to be treated as a capitalreceipt, then the assessee could not have claimedit as a deduction under Section 80IA of the Act andif the substantial question of law as framed by theassessee is to be answered, it should be answeredagainst the assessee. 31.In our considered view, there is aslightly different approach that needs to beadopted, as this Court exercises power underSection 260A of the Act, while deciding thesubstantial question of law. The assessee isrequired to place all materials before theAssessing Officer and make a full and truedisclosure of their entire financial. If any queryis raised by the Assessing Officer, the assessee isbound to answer. Thereafter, it is the AssessingOfficer, who has to apply the law and complete theassessment. It has been held that it is not for theassessee to assist the Assessing Officer tocomplete the assessment in a particular manner orto supply a draft assessment order to the AssessingOfficer. At this juncture, it is beneficial torefer to the decision in the case of CIT vs. IndiaExpress (Madurai) Pvt. Ltd., [(1983) 104 ITR 705(Madras)]. The reference to the High Court was todecide the scope of the appellate jurisdiction ofthe Income Tax Tribunal. 32.The Hon'ble Division Bench refers tothree decisions of the Hon'ble Supreme Court in thecase of Hukumchand Mills Ltd. vs. CIT [(1967) 63ITR 232 (SC)]; CIT vs. Mahalakshmi Textile MillsLtd., [(1967) 66 ITR 710]; and CIT vs. Nelliappan[(1967) 66 ITR 722 (SC)] wherein, the observationsmade by the Hon'ble Supreme Court were referred to,which are quoted hereunder:- "In hearing an appeal, the Tribunal maygive leave to the assessee to urge grounds not setforth in the memorandum of appeal, and in decidingthe appeal the Tribunal is not restricted to thegrounds set forth in the memorandum of appeal ortaken by leave of the Tribunal. The Tribunal was,therefore, competent to allow the assessees toraise the contention relating to the cash creditswhich was not made the subject-matter of a groundin the memorandum of appeal. It cannot be said that in accepting the contention of the assessee thatthe cash credits represented income from thebusiness withheld from the books, the Tribunal madeout a new case inconsistent with the assessee's ownplea. In any event, the Tribunal is not precludedfrom adjusting the tax liability of the assessee inthe light of its findings merely because thefindings are inconsistent with the case pleaded bythe assessees." 33.In Mahalakshmi Textile Mill's case, itwas held as hereunder:- “Under sub-s. (4) of s. 33of the Indian Income-tax Act, 1922, the AppellateTribunal is competent to pass such orders on theappeal "as it thinks fit". There is nothing in theIncome-tax Act which restricts the Tribunal to thedetermination of questions raised before thedepartmental authorities. All questions whether oflaw or of fact which relate to the assessment ofthe assessee may be raised before the Tribunal. If'for reasons recorded by the departmentalauthorities in rejecting a contention raised by theassessee, grant of relief to him on another groundis justified, it would be open to the departmentalauthorities and the Tribunal, and indeed they wouldbe under a duty to grant that relief. The right ofthe assessee to relief is not restricted to theplea raised by him.” 34.After referring to the above decisions,it was pointed out that the Appellate Tribunal iscompetent to pass such orders on the appeal, as itthinks fit and it would be the duty of the Tribunalto decide all questions on fact and law before it,even though it was not raised by the departmentalauthorities. After referring to the powers of theTribunal and that of this Court and the Hon'bleSupreme Court, it was pointed out that based on thecardinal principle, which has been incorporated asa veritable constitutional provision, that no taxcan be levied or collected save under authority oflaw. 35.It was further pointed out that the taskof an Appellate Authority under the taxing statute,especially a non-departmental authority like theTribunal, is to address its mind to the factual andlegal basis of an assessment for the purpose ofproperly adjusting the taxpayer's liability to makeit accord with the legal provisions governing hisassessment. Since be-all and end-all of thestatutory provisions, especially those relating to the administration and management of income tax isto ascertain the taxpayer's liability correctly tothe last pie, if it were possible, the variousprovisions relating to Appeal, Second Appeal,Reference and the like can hardly be equated to alis or dispute as arises between two parties in acivil litigation. 35.It was further pointed out that the taskof an Appellate Authority under the taxing statute,especially a non-departmental authority like theTribunal, is to address its mind to the factual andlegal basis of an assessment for the purpose ofproperly adjusting the taxpayer's liability to makeit accord with the legal provisions governing hisassessment. Since be-all and end-all of thestatutory provisions, especially those relating to the administration and management of income tax isto ascertain the taxpayer's liability correctly tothe last pie, if it were possible, the variousprovisions relating to Appeal, Second Appeal,Reference and the like can hardly be equated to alis or dispute as arises between two parties in acivil litigation. 36.It was further pointed out that althoughthe income-tax statute makes the Department or itsofficers figure as parties in the appealproceedings, they are not in the strict sense whatare called by American writers as parties toadversary proceedings. This is so because, the veryobject of the appeal is not to decide a pointraised as a dispute, but any point which goes intothe adjustment of the taxpayer's liability. In thatsense, a view prevails, even in England, that theauthorities sitting in an appeal in tax case,cannot be regarded as deciding a lis, but they areonly engaged in an administrative act of adjustingthe taxpayer's liability. 37.Further, it was pointed out that underour fiscal jurisprudence, we may regard theAppellate Authorities as exercising quasi judicialfunctions in the same sense, as a tax officer does.But, even so, the proceedings before them lack thebasic elements of adversary proceedings. It,therefore, follows that the discussion and thescope of the appellate jurisdiction of the Tribunaland the other authorities under the tax code cannotbe pursued by drawing a parallel to civillitigation with particular reference to appeal fromdecrees, and the like. Further, it was pointed outthat in the case of Mahalakshmi Textile Mills Ltd.,the Hon'ble Supreme Court observed that theTribunal is not precluded from “adjusting the taxliabilities” of the assessee in the light of itsfindings merely because, the findings areinconsistent with the case pleaded by the assessee.The decision of the Hon'ble Full Bench of thisCourt in the case of State of Tamil Nadu vs.Arulmurugan & Co., [(1982) 51 STC 381] was referredto wherein, it was held that the AppellateAuthorities perform precisely the same functions,as the assessing authority. The above decision andthe findings rendered are a clear answer to thearguments raised before us by the Revenuecontending that substantial question of law no.4,as framed has to be decided against the assessee. We, thus, have no hesitation to hold that theTribunal failed to exercise its power in a properprospective as a final fact finding authority andexamining as to whether there is any adjustmentrequired to be made in the assessee's tax liabilityqua the various decisions of the Court, which haveheld that receipt on account of sale of carboncredit is capital in nature. We, thus, have no hesitation to hold that theTribunal failed to exercise its power in a properprospective as a final fact finding authority andexamining as to whether there is any adjustmentrequired to be made in the assessee's tax liabilityqua the various decisions of the Court, which haveheld that receipt on account of sale of carboncredit is capital in nature. 38.In the instant case, the assessee whilepreferring appeal before the CIT(A), hasspecifically raised a contention that the receiptsfrom sale of carbon credit is a capital receipt andcannot be included in the taxable income. Thoughthis ground raised by the assessee before the CIT(A) has been recorded in the order, the CIT(A) didnot take a decision on the same. Similar ground wasraised by the assessee before the Tribunal, whichwas not considered by the Tribunal, though theTribunal refers to all the decisions relied on bythe assessee, but would pin the assessee to hisclaim made under Section 80IA of the Act andaccordingly, negatives it. This finding of theTribunal is wholly erroneous and perverse. TheTribunal was expected to apply the law and take adecision in the matter and if the CIT(A) or theAssessing Officer had failed to apply the law, thenthe Tribunal was bound to apply the law. This isso because, in the light of the decisions referredabove, the receipt by way of sale of carbon credithas been held to be capital receipt. Therefore, itis of a little consequence as to the claim made bythe assessee under Section 80IA of the Act or inother words, the question of taking a decision asto whether the deduction is admissible underSection 80IA of the Act is a non-issue. If thereceipt from the sale of carbon credit is a capitalreceipt, then it will go out of the purview of thegross total income as defined under Section 80B(5)of the Act, which expression is found in Section80IA of the Act. Thus, if the receipts by sale ofcarbon credit will not fall within the definitionof total income, the same cannot be included underSection 80IA of the Act. Therefore, even if theassessee has made such a claim, that cannot be areason for the Tribunal to non-suit the assessee. 39.One more important factor to be noted isthat Section 115BBG of the Act was introduced byFinance Act, 2017 with effect from 01.04.2018,prior to which, there was no such provision and Mr.V.S.Jayakumar, learned counsel for the assesseewould submit that the assessees were under utterconfusion as to under which provision of the Act,they should make a claim for deduction and havingleft with no other option, had been making theclaim under Section 80IA of the Act and merelybecause the assessee due to uncertainty in thelegal position, had made a claim under Section 80IAof the Act that cannot be a reason to deny abenefit granted in favour of the assessee. Thesubmission, made by Mr.V.S.Jayakumar, learnedcounsel for the appellant, in this regard, is wellfound and accepted. 40.For the above reasons, substantialquestion of law no.4 is answered in favour of theassessee.” 4. Following the aforesaid decision, TCA.No. 14 of2022 filed by the Revenue raising the identical question oflaw, was dismissed, by judgment dated 12.01.2022. 5. In addition, the learned counsel for the appellant /Revenue fairly submitted that the fourth substantial question oflaw is covered in favour of the assessee, by the decision ofthe Division Bench of the Punjab and Haryana High Court in thecase of Commissioner of Income Tax v. Sham Lal Bansal [(2011) 11Taxman 369 (Punjab & Haryana)]. For better appreciation, therelevant passage of the said decision is extracted below: 40.For the above reasons, substantialquestion of law no.4 is answered in favour of theassessee.” 4. Following the aforesaid decision, TCA.No. 14 of2022 filed by the Revenue raising the identical question oflaw, was dismissed, by judgment dated 12.01.2022. 5. In addition, the learned counsel for the appellant /Revenue fairly submitted that the fourth substantial question oflaw is covered in favour of the assessee, by the decision ofthe Division Bench of the Punjab and Haryana High Court in thecase of Commissioner of Income Tax v. Sham Lal Bansal [(2011) 11Taxman 369 (Punjab & Haryana)]. For better appreciation, therelevant passage of the said decision is extracted below: "6. The purpose of scheme under which thesubsidy is given, has been discussed by theTribunal. To sustain and prove the competitivenessand overall long term viability of the textileindustry, the concerned Ministry of Textile adoptedthe TUFS scheme, envisaging technology upgradationof the industry. Under the scheme, there were twooptions, either to reimburse the interest chargedon the lending agency on purchase of technologyupgradation or to give capital subsidy on theinvestment in compatible machinery. In the presentcase, the assessee has taken term loans fortechnology upgradation and subsidy was releasedunder agreement dated 12-7-2005 with Small IndustryDevelopment Bank of India. The relevant clause ofthe agreement under which the subsidy was given isas under:- "Para 8, to prevent mis-utilization of capital subsidy and to provide an incentivefor repayment, the capital subsidy will betreated as a non-interest bearing term loan bythe Bank/Fis. The repayment schedule of theterm loan however will be worked out excludingthe subsidy amount and subsidy will beadjusted against the term loan account of thebeneficiary after a lock-in-period of threeyears on a pro-rata basis in terms of releaseof capital subsidy. There is no apparent orreal financial loss to a borrower since thecountervailing concession is extended to theloan amount." 7. In view of above, the view taken inSahney Steel & Press Works Ltd.'s case (supra)could not be applied in the present case, as insaid case the subsidy was given for running thebusiness. For determining whether subsidy paymentwas 'revenue receipt' or 'capital receipt',character of receipt in the hands of the assesseehad to be determined with respect to the purposefor which subsidy is given by applying the purposetest, as held in Sahney Steel & Press Works Ltd.scase (supra) itself and reiterate in later judgmentin CIT v. Ponni Sugars & Chemicals Ltd. [2008] 306ITR 392/174 Taxman 87 (SC), referred to in theimpugned order of the Tribunal. 8. In view of above, since the matter iscovered by judgment of the Hon'ble Supreme Court inPonni Sugars & Chemicals Ltd.'s case (supra)against the revenue, no substantial question of lawarises. The appeal is dismissed. " 6. Following the aforesaid decisions, the substantialquestions of law raised in this appeal are answered in favour ofthe assessee. Accordingly, the present tax case appeal filed bythe Revenue, stands dismissed. No costs. Assistant Registrar(CCC) //True Copy// av Sub Assistant Registrar https://hcservices.ecourts.gov.in/hcservices/ To 1. The Income Tax Appellate Tribunal “C” Bench, Chennai. Chennai. 2. The Commissioner of Income Tax, No.63, Race Course Road, Coimbatore. No.63, Race Course Road, Coimbatore. 3. The Joint Commissioner of Income Tax, Tirupur Range, Tirupur. Tirupur Range, Tirupur. 4. The Commissioner of Income Tax (Appeals)-II, Coimbatore. Coimbatore. +1cc to Mr.M.Swaminathan, Advocate, S.R.No.36997 TCA No.166 of 2016 PM(CO)UMA(05/07/2022)