2019 (4) TMI 624 - HC - Income Tax

Deduction u/s 80IA - inclusion /exclusion of components of price for sale of electricity fixed on basis of tax liability as part of sale price of electricity in computing relief - HELD THAT - As decided in assessee s own case 2013 (1) TMI 136 - MADRAS HIGH COURT no hesitation in accepting the plea of the assessee that the Commissioner committed serious error in dissecting the tariff to come to the conclusion that the tax component specified as part of the tariff is reimbursement of the liability of the assessee and hence it would not form part of the income. As already pointed out, when the Revenue had not questioned the genuineness of the agreement between the parties and liberty is thus available for the parties to arrive at the cost of the energy to be supplied by the assessee as guided by the notifications of the Ministry of Power in this regard, we find no ground to sustain the plea of the Revenue that the relief to be granted under Section 80IA calls for exclusion of the tax component in the sale price of electricity. - Decided in favour of assessee.

Summary

Issues:
- Interpretation of tax liability as part of sale price for electricity in computing relief under Section 80IA of the Income Tax Act.

Analysis:
The Tax Case Appeals before the Madras High Court pertained to assessment years 2003-2004 and 2004-2005. The main issue revolved around whether the components of the price for the sale of electricity, determined based on tax liability, should be considered as part of the sale price of electricity for calculating relief under Section 80IA. The court noted that a similar question had been addressed in a previous case related to the assessment year 2001-2002 involving Neyveli Lignite Corporation Ltd. The court highlighted that the agreement between the parties specified the modalities of arriving at the tariff, which included the tax liability of the corporation. It was clarified that the tax liability formed part of the tariff and was not a reimbursement by the recipient. The court emphasized that the tax component should not be excluded from the sale price of electricity for the purpose of granting relief under Section 80IA.

The court referred to its earlier decision in the Neyveli Lignite Corporation Ltd. case, where it had concluded that the tax component specified as part of the tariff should not be considered a reimbursement of the corporation's liability but rather an integral part of the sale price. The court emphasized that the Revenue had not questioned the genuineness of the agreement between the parties, allowing them to determine the cost of energy supplied guided by relevant notifications. Consequently, the court held that the tax component should not be excluded from the sale price of electricity for calculating relief under Section 80IA. The court set aside the order of the Tribunal, ruling in favor of the assessee.

Furthermore, the court noted that its previous decision had attained finality and had been followed in subsequent assessments. The orders of the appellate authorities for the relevant assessment years had been issued before the court's decision. In light of the foregoing analysis and precedents, the court ruled in favor of the assessee and against the Revenue, allowing the Tax Case Appeals without imposing any costs.