Ita/168/2014 Of M/S.apollo Tyres Ltd v. The Assistant Commissionere Ofincome Tax

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS TUESDAY, THE 3 DAY OF AUGUST 2021 / 12TH SRAVANA, 1943 ITA NO. 168 OF 2014 AGAINST THE ORDER/JUDGMENT IN OTHERS 4/2013 OF I.T.A.TRIBUNAL,COCHIN BENCH, ERNAKULAM APPELLANT/S: M/S.APOLLO TYRES LTD6TH FLOOR, CHERUPUSHPAM BUILDINGS, KOCHI - 31, REP. BY ITS DIRECTOR, MR.U.S.OBEROI (PAN NO.AAACA 6990 Q)BY ADVS.SRI.JOSEPH MARKOSE (SR.)SRI.V.ABRAHAM MARKOSSRI.ABRAHAM JOSEPH MARKOSSRI.ABRAHAM VARGHESE THARAKANSRI.TOM THOMAS KAKKUZHIYIL RESPONDENT/S: THE ASSISTANT COMMISSIONERE OFINCOME TAXCIRCLE 1(1), ERNAKULAM, KOCHI - 682 018. THIS INCOME TAX APPEAL HAVING COME UP FORADMISSION ON 03.08.2021, THE COURT ON THE SAME DAYDELIVERED THE FOLLOWING: JUDGMENT S.V.Bhatti, J. Appolo Tyres Ltd./assessee is the appellant. The Asst.Commissioner of Income Tax/Revenue is the respondent. The assessee challenges the order of ITAT, Kochi Bench, Kochi in IT(TP)ANo.04/Coch/2013 dated 7.3.2014. The appeal raises the followingsubstantial questions of law: 1)Whether on the facts and in the circumstances of the case,the learned Tribunal is justified in law in holding that carboncredit realisations are of the nature of revenue receipts coveredunder Section 2(24) of the Income Tax Act 2)Whether on the facts and in the circumstances of the case,the learned Tribunal is justified in law in not following thedecisionof a co-ordinate bench of the Tribunal on the same issueof carbon credits as being capital receipts in clear violation ofthe binding decision of the jurisdictional High Court in CIT vTravancore Titanium Products Ltd. 265 ITR 526 (Ker) andSupreme Court decision in S.I.Rooplal v Lt.Governor (2000) ISCC 644. 3)If answer to Question No.1 is yes, whether on the factsand in the circumstances of the case, carbon credit realisationsare profits derived from the Gas Turbine undertaking eligible fordeduction u/s 80IA. ITA No.168 of 2014 3 4)Whether on the facts and in the circumstances of the case,the Tribunal is justified in law and on facts in sustaining thedisallowance of part depreciation of Gurgaon office buildingaggregating to Rs.16,29,673/- in relation to let out portion toApollo International Ltd.the Tribunal is justified in law and on facts in sustaining thedisallowance of part depreciation of Gurgaon office buildingaggregating to Rs.16,29,673/- in relation to let out portion toApollo International Ltd. 5)Whether on the facts and in the circumstances of the case,the Tribunal is justified in law and on facts in sustaining thedisallowance of part depreciation ignoring the fact tht concept ofblock of assets had been inserted in the Act and individual itemsincluded int he block are not to be considered separately for thepurposes of granting depreciation."the Tribunal is justified in law and on facts in sustaining thedisallowance of part depreciation ignoring the fact tht concept ofblock of assets had been inserted in the Act and individual itemsincluded int he block are not to be considered separately for thepurposes of granting depreciation." 2. Question Nos.1 and 2 deal with whether the income on sale ofcertified emission reduction/carbon credit would form part of revenue receipts or capital receipts. The Tribunal through the order impugned inthe appeal disallowed the claim of assessee by holding that the incomederived from the sale of carbon credit is a capital receipt and not arevenue receipt. 3. Senior Adv.Mr.Joseph Markose relies on judgments in supportof his argument that the sale of carbon credit by the assessee could be in the nature of acquiring environmental goodwill and realising receiptsfrom sale of such carbon credit cannot be treated as revenue receiptsimplicitor. ITA No.168 of 2014 4 1. Andhra Pradesh – CIT v My Home Power Ltd. - (2014) 365 ITR 82(AP) 1.Karnataka – CIT v Subhash Kabini Power (2016) 385 ITR 592 (Karn) receipts or capital receipts. The Tribunal through the order impugned inthe appeal disallowed the claim of assessee by holding that the incomederived from the sale of carbon credit is a capital receipt and not arevenue receipt. 3. Senior Adv.Mr.Joseph Markose relies on judgments in supportof his argument that the sale of carbon credit by the assessee could be in the nature of acquiring environmental goodwill and realising receiptsfrom sale of such carbon credit cannot be treated as revenue receiptsimplicitor. ITA No.168 of 2014 4 1. Andhra Pradesh – CIT v My Home Power Ltd. - (2014) 365 ITR 82(AP) 1.Karnataka – CIT v Subhash Kabini Power (2016) 385 ITR 592 (Karn) 2.Bombay – PCIT v Dodson Lindblom Hydro Power (2019-TIOL-531-HC-MUM) 3.Madras – CIT v Ambika Cotton Mills Ltd. (TCA 986 of 2013) S.P.Spinning Mills v ACIT (TCA No.451 of 2018) 5. Allahabad – PCIT v LH Sugar Factory (2016-TIOL-1942-HC-ALL) 4. Learned Standing Counsel Mr.Christopher Abraham argues thatfrom the nature of the receipt, the finding recorded by the Tribunal thatit is a revenue receipt is justifiable. 5. We would prefer to avoid reproducing important extracts from allthe judgments relied on by the appellant. We have noted the reasoningand the conclusion recorded by the Madras High Court in CIT v AmbikaCotton Mills Ltd. and S.P.Spinning Mills v ACIT; and the considerationof very same issue by the Karnataka High Court in CIT v SubhashKabini Power and finally the judgment of Andhra Pradesh High Court inMy Home Power Ltd. case. After taking note of the preponderance ofview of various High Courts in this behalf and also independentlyappreciating the nature of receipt in the hands of assessee, we are of theview that the Tribunal while dealing with these two questions fell inerror of law and fact and the findings recorded by the Tribunal warrant ITA No.168 of 2014 5 interference, hence are set aside by following the judgments referred to supra. Question Nos.1 and 2 are answered in favour of the assessee andagainst the revenue. 6. Substantial question No.3 is dependent on the outcome of thesubstantial question Nos.1 and 2. The finding on question Nos.1 and 2since is in favour of the assessee, it is stated that in such an eventualitysubstantial question No.3 need not be considered by this Court. Thestatement made in this behalf is noted. 7. Question Nos.4 and 5 deal with the depreciation disallowed inrespect of a portion of a Gurgaon building rented out by the assessee toone of its sister concerns. The very same questions have fallen forconsideration in ITA No.26 of 2013 filed for the assessment year 2003-2004. This Court vide judgment dated 29.7.2021 answered the issue infavour of revenue and against the assessee. By following the sameanalogy, instant question Nos.4 and 5 are answered in favour of revenueand against the assessee. 8. Having regard to the above discussion, the appeal is allowed inpart by answering Question Nos.1 and 2 in favour of the assessee andagainst the revenue. Question Nos.4 and 5 in favour of revenue andagainst the assessee. Question No.3 does not arise for consideration, ITA No.168 of 2014 6 hence not adverted to or decided to. Appeal allowed in part as indicated above. Sd/- S.V.BHATTI Judge css/ Sd/- BECHU KURIAN THOMAS Judge PETITIONER ANNEXUREANNEXURE 1 ANNEXURE 2 ANNEXURE 3 ANNEXURE 4 APPENDIX OF ITA 168/2014 TRUE COPY OF DRAFT ASSESSMENT ORDER DATED 29/12/2011 OF THE RESPONDENT. TRUE COPY OF THE REGULAR ASSESSMENT ORDER DATED 17/12/2012 OF THE RESPONDENT. TRUE COPY OF THE ORDER DATED 26/09/2012 OF THE DISPUTE RESOLUTION PANEL, BANGALORE. CERTIFIED COPY OF IMPUGNED ORDER DATED 07/03/2014 OF THE INCOME TAX APPELLATE TRIBUNAL, KOCHI BENCH IN IT (TP) A NO.04/COCH/2013.