2019 (7) TMI 1924 - HC - Income Tax

Deduction u/s 80-I-A - income derived by it from unit transfer/self-consumption of power cogenerated from the entitled undertaking and to the extent and principles for determination thereof - HELD THAT - As relying on ALEMBIC LIMITED 2016 (7) TMI 1239 - GUJARAT HIGH COURT there is no difficulty in holding that captive consumption of the power generated by the assessee from its own power plant would enable the respondent-assessee to derive profits and gains by working out the cost of such consumption of power inasmuch as the assessee is able to save to that extent which would certainly be covered by section 80-LA(1). When such will be the outcome out of own consumption of the power generated and gained by the assessee by setting up its own power plant, we do not find any lack of merit in the claim of the respondent-assessee when it claimed by relying upon section 80-IA(1) of the Income-tax Act by way of deduction of the value of such units of power consumed by its own plant by way of profits and gains for the relevant assessment years. Against the aforesaid judgment of Madras High Court, SLP was filed before the Hon ble Supreme Court, being SLP which was dismissed. In that view of the matter, learned Tribunal while considering the matter has not considered the issue in its true perspective. Therefore, only for adjudication on the factual matrix in terms of the aforesaid discussion, the matter is remitted back to the learned Tribunal for fresh adjudication.

Summary

Issues involved:
1. Entitlement to deduction under Section 80-I-A of the Income Tax Act, 1961 for income derived from unit transfer/self-consumption of power cogenerated.
2. Determination of the price of power for inter unit transfer/self-consumption as per Section 80-I-A.
3. Disallowance of peripheral development expenses and garden expenditure.

Entitlement to deduction under Section 80-I-A:
The appellant challenged the order of the Income Tax Appellate Tribunal, Cuttack Bench, which dismissed the appeal regarding the deduction under Section 80-I-A. The substantial questions of law framed by the Court included the entitlement to deduction for income derived from power cogenerated and the determination of the price of power for inter unit transfer/self-consumption. The appellant relied on various decisions, including the Gujarat High Court case of Commissioner of Income Tax-I -v- Alembic Limited, emphasizing the eligibility for deduction based on market value. The Court considered precedents from different High Courts, such as Calcutta, Delhi, and Madras, supporting the eligibility for deduction under Section 80-I-A for captive power plants. The judgment highlighted the importance of compliance with the requirements of Section 80-I-A to avail benefits.

Determination of power price for inter unit transfer:
The appellant's argument was supported by references to cases like A.C.I.T., Bharuch Circle, Bharuch v. Pragati Glass Works Pvt. Ltd., and Commissioner of Income-tax, Raipur v. Godawari Power & Ispat Ltd., which emphasized the computation of market value for power supplied internally. The Court noted the relevance of considering the rate charged by entities like State Electricity Boards for industrial consumers. The judgment highlighted that the profit and gain from captive consumption of electricity could qualify for deduction under Section 80-I-A, as established in various cases, including Cethar Ltd. v. Commissioner of Income-tax and Tamilnadu Petro Products Ltd. v. Assistant Commissioner of Income-tax.

Disallowance of peripheral development expenses and garden expenditure:
The appellant did not press the issue of peripheral development expenses and garden expenditure disallowance. The Court referred to the decision of the Madras High Court in Tamilnadu Petro Products Ltd. -v- Assistant Commissioner of Income-tax, emphasizing the eligibility for deduction under Section 80-I-A for notional profits on power generated from captive power plants. The Court remitted the matter back to the Tribunal for fresh adjudication based on the discussion and precedents cited, ensuring a comprehensive consideration of the factual matrix.

In conclusion, the High Court judgment addressed the issues of entitlement to deduction under Section 80-I-A, determination of power price for inter unit transfer, and the disallowance of specific expenses. The decision relied on various precedents from different High Courts to establish the eligibility for deduction under Section 80-I-A for income derived from captive power plants and internal power consumption. The Court emphasized the importance of compliance with statutory requirements and remitted the matter back to the Tribunal for a fresh adjudication based on the detailed analysis provided.