2014 (12) TMI 1360 - HC - Income Tax

Deduction u/s 80IA(4) - generation of power for captive consumption - HELD THAT - Appeal ADMITTED to consider the following questions of law; (i) Whether on the facts and in the circumstances of the case and in law the ITAT was justified in upholding the decision of CIT(A) that deduction u/s 80IA(4) is allowable to the assessee for generation of power for captive consumption? (ii) Whether the Tribunal was right in law in allowing the assessee s claim of deduction of 1954 Crores u/s 80IA(4) of the I.T. Act 1961 when the assessee had adopted rate of power generation at 4.73 per unit rate on which the GEB supplied power to its consumers ignoring the rate of 2.36 per unit the rate on which power generating company supplied its power to GEB? (iii) Whether on the facts and in the circumstances of the case and in law the ITAT was justified in holding that adjustment made on account of disallowance u/s 14A of the Act in computation of Book Profit u/s 115JB of the Act is not as per law without appreciating that the amount disallowable under section 14A is covered under clause (f) of Explanation 1 to section 115JB(2) and thus said amount has to be added back while computing amount of book profits? (iv) Whether that ITAT was justified in law in not following the decision of its own division bench on this issue in the case of Gujarat State Fertilizers and Chemicals Ltd. 2013 (1) TMI 135 - ITAT AHMEDABAD which was also confirmed by the Hon ble Gujarat High Court vide order 2013 (6) TMI 776 - GUJARAT HIGH COURT ?

Summary

Issues:
1. Deduction u/s 80IA(4) for power generation
2. Claim of deduction under u/s 80IA(4) of I.T. Act, 1961
3. Disallowance u/s 14A in computation of Book Profit u/s 115JB
4. Adherence to previous judgments by ITAT

Analysis:

Issue 1: Deduction u/s 80IA(4) for power generation
The primary question raised was whether the ITAT was justified in upholding the decision of CIT(A) regarding the allowance of deduction u/s 80IA(4) for power generation for captive consumption. The appellant contested this decision, questioning the legal basis for such allowance. The court admitted Tax Appeal No. 1249 of 2014 for further consideration of this matter, indicating the significance of the issue.

Issue 2: Claim of deduction under u/s 80IA(4) of I.T. Act, 1961
Another crucial issue was the correctness of the Tribunal's decision to allow the assessee's claim of deduction amounting to Rs. 1954 Crores under u/s 80IA(4) of the Income Tax Act, 1961. The appellant challenged this decision based on the disparity between the rates of power generation adopted by the assessee and those applied by the power supplying entities. The court deemed it essential to review this claim further, suggesting potential discrepancies in the deduction calculation.

Issue 3: Disallowance u/s 14A in computation of Book Profit u/s 115JB
The court also deliberated on the adjustment made on account of disallowance u/s 14A in the computation of Book Profit u/s 115JB of the Act. The ITAT's stance on this matter was questioned, particularly regarding the applicability of the disallowable amount under section 14A in the calculation of book profits. The court highlighted the necessity to determine the legality and correctness of the adjustment made in this context.

Issue 4: Adherence to previous judgments by ITAT
Lastly, a significant issue raised was whether the ITAT was justified in not following its own division bench's decision in a previous case involving similar circumstances. The appellant argued that the ITAT should have adhered to the precedent set by its previous judgment, which was also affirmed by the Gujarat High Court. This issue underscored the importance of consistency and precedent in judicial decisions.

In conclusion, the judgment highlighted multiple intricate legal issues concerning deductions under specific sections of the Income Tax Act, computation of book profits, and adherence to previous judicial decisions. The court's decision to admit the appeal for further consideration signified the complexity and importance of the matters at hand, necessitating a detailed review and analysis during the final hearing scheduled for December 17, 2014.