sec. 268A of IT Act, comparison with the other issues when same question of law

[satyanveshi]

carbon credits were not taxed in the hands of one assessee. However, the same AO, in next year taxed the same in case of other assessee and reopened the case of first assessee u/s 148. Accordingly reopened assessment was also completed in the case of first assessee bringing to tax the said carbon credits. When an appeal is filed before appellate authorities against the reopened assessment, it was argued that the AO had changed his opinion and it is not permissable u/s 147 as per the Supreme Court decision in the case of Kelvinator India. The appellate authorities have held that no tangible material has come into the possession of the AO and as argued the AO had changed his opinion which is not permissable u/s147. RElying on the decision cited, the assessment was held as bad in law and therefore, the reassessment was cancelled. Accordingly, the carbon credits were not taxed in the hands of the first mentioned person.

              Now the second mentioned person without going into merits, can take the argument that since the same carbon credits were not taxed in the hands of one assessee it cannot be taxed in his hands also. He wanted to place reliance on Sec. 268A of the IT Act which was brought into the statute only to overcome the supreme Courts decision reported in 266 ITR 99. He further wanted to support his argument with the Apex Courts decisions reported in 229 ITR 219, 229 bITR 221, 254 ITR 606, 308 ITR 161. What are the chances of the assessee to win his appeal if he takes this argument without going into merits.

[pawansingla]

I don,t think so.In that case reassessment was annuled. I think there is no provisions in Act to tax carbon credits. That,s why it is being brought in DTC.I will try to paste that news cutting tomorrow if possible.

[prashantmaharishi]

This news papaer report appeared on TOI 25/6/2010
NEW DELHI: The finance ministry has mined data of Indian companies that have not been paying tax on the income earned by selling their carbon credits or certified emission reductions (CER).

These entities are likely to face penal action once a case of tax evasion is established against them. They are like any other company evading taxes and penalties would be imposed, sources in the income tax department said.

Interestingly, some of the entities on the I-T radar which have not paid tax on already redeemed income on carbon credits are listed firms. In the data mining process, the department has prepared a list of all such entities that have accumulated carbon credits and subsequently sold them.

A senior finance ministry official said that scrutiny of the balance sheets of these companies revealed that some were offering the proceeds from sale of carbon credits to the tax department, while many were not.

The department may soon send notices to such companies that have evaded tax. An inventory will be sent across to different formations and field units to keep a close watch on firms which have accumulated CERs and may trade it at a future date.

Companies earn carbon credits by reducing their greenhouse gas emissions. These credits entities can then be sold in the international market to companies in rich countries that require the credits to set off against their reduction targets under the Kyoto Protocol. India, after China, is the biggest generator of certified emission reductions. By 2012, Indian companies are expected to earn more than 600 million CERs through green-tech investments made in at least 1,500 projects, involving capital infusion of more than Rs 1.5 lakh crore.

Many of the cement and steel companies in India are among those which have traded their CERs in the international market. Recently, JSW Steel had sold some of its CERs at a rate of euro 13.50 per tonne. The price is likely to rise to euro 20 a tonne by the end of this year as the demand in Europe is likely to rise with the revival of economic activity.

Entities in China and India account for 70% of the total world carbon credit market, which is estimated to be more than $25 billion at present, and as per World Bank estimates may earn developing countries in excess of $100 billion annually by 2050.

India has generated some 75 million certified emission reductions so far as compared to China's 210 million. It has an advantage as a developing country to install modern technology that emit less of greenhouse gases. Increasingly, many of the municipal bodies in India have installed waste disposal units that earn them carbon credits, besides industrial units using green technology.


I think this ncome is chargeable to tax u/s 28 iteslf always.
So far as issue of 268A is concernbed   subesction 3 has the answer that plae of the assessee is  not getting any support form 268A.

[satyanveshi]

         The information given in the earlier reply is very informative. However, the issue involved is not widely discussed. I think everybody was under the impression that subsection 3 of section 268A was in favour of the department. But to my understanding it is not so. Why that section has been introduced in statute. Because government is losing cases, when it tried to pursue the cases before courts even though it has not filed any further appeal on the same issue earlier. But supreme court struck down the issues stating that department had no locus standi to file appeal now when it has not filed appeal on the same issue on earlier occasions. The meaning of which is on same set of facts there cannot be two different judgements thereby equanimity will not be lost in legal matters. Everybody before the law is equal. If one assessee is benefited earlier on the same issue because of the act of government for not filing appeal, that benefit should be extended to all others on the same issue and therefore, various courts rejected the appeal on the same issue in subsequent cases.
   
       In view of the above position, the legislature in its wisdom wanted to come out of the said situation and incorporated one more section whereby  it saved "only the cases" those cases where appeal is not filed in earlier occasions because of the monetary limits prescribed by it. Which in other way that if appeal is not filed on earlier occasions not because of monetary limits but because the department thinks that there is no legal case to fight, then the Apex Courts decision cited in the question are still applicable and Courts will definitely struck down the same. Had the legislation intention is to affirm that one person cannot take the plea that the same issue was not pursued further in case of one assessee and therefore, it cannot be pursued in his case also, then there would not be any sub section (1) of Sec. 268A. Section 268A saves only the cases where department is prevented because of the monetary limits prescribed in subsection(1) of Sec. 268A. Two or three readings of the section clearly communicates this meaning.  Dont believe this. See Singhania analysis on this subject. He also supported the same. When the courts are knocking down the issues why not the assessee fight that no addition was made in case of other assessee and why should he be only bothered with the demand on the same issue against which the other person could escape tax liability. I think nobody is thinking in this line. What is the wrong in thinking in this line.     

[satyanveshi]

on 02-11-2012, Hyd ITAT has held in the case of My Home Power Ltd that  the proceeds  received by selling CERs i.e. carbon credits are capital receipts and accordingly not taxable. The same is reported in 27 taxman.com 27