2019 (7) TMI 1373 - HC - Income Tax

Deduction u/s 80IA(4) - rate of power purchase from captive power plant - rate on GEB supplied power to its customers OR the rate at which the power generating company supplied to the GEB - Tribunal held that the rate at which G.E.B. supplied power to its consumers will be the rate - HELD THAT - The proposed issues are no longer res integra as they are directly covered by the decision of this Court in the case of CIT vs. Gujarat Alkalies and Chemicals Ltd 2016 (10) TMI 1111 - GUJARAT HIGH COURT wherein as Under sub-Section(8) of Section 80IA if it is found that where any goods or services held for the purposes of the eligible business are transferred to any other business carried on by the assessee or where any goods or services held for the purposes of any other business carried on by the assessee are transferred to the eligible business and in either case the consideration for such transfer does not correspond to the market value of such goods as on the date of the transfer then for the purposes of deduction under Section 80IA in case of the eligible business as if the transfer had been made at the market value of such goods or services. It is in this context that the question of substituting the actual consideration by the market value comes into picture. In view of the aforesaid this appeal fails and is hereby dismissed.

Summary

Issues:
1. Interpretation of Section 80IA of the Income Tax Act for deduction on captive power plant.
2. Calculation of deduction based on the rate of power purchase from Gujarat Electricity Board (GEB) versus power generating companies.

Analysis:

Issue 1: Interpretation of Section 80IA of the Income Tax Act for deduction on captive power plant:
The appeal under Section 260A of the Income Tax Act was filed by the Revenue against the order passed by the Income Tax Appellate Tribunal for the assessment year 2006-07. The primary question raised by the Revenue was whether the ITAT erred in allowing the deduction under Section 80IA of the Act for the captive power plant based on the rate of power purchase from GEB. The Court referred to previous judgments, including CIT vs. Gujarat Alkalies and Chemicals Ltd, to establish that the issue was no longer res integra and was directly covered by existing legal precedents. The Court emphasized that the deduction under Section 80IA(4) should be based on the rate at which GEB supplied power to its customers, not the rate at which power generating companies supplied to GEB.

Issue 2: Calculation of deduction based on the rate of power purchase from Gujarat Electricity Board (GEB) versus power generating companies:
The dispute also revolved around the calculation of the deduction under Section 80IA(4) concerning the purchase price of power from GEB. The Revenue argued that the Assessing Officer correctly adopted a specific rate per unit, while the ITAT allowed the deduction based on a different rate. The Court examined the provisions of subSection (8) of Section 80IA, which governs the transfer of goods or services between eligible and other businesses. The Court highlighted the importance of determining the market value of goods or services for such transfers to ensure accurate deductions under Section 80IA. Ultimately, the Court dismissed the appeal, affirming the decision of the ITAT to allow the deduction based on the rate at which GEB supplied power to consumers.

In conclusion, the High Court's judgment clarified the interpretation of Section 80IA of the Income Tax Act regarding deductions for captive power plants and emphasized the significance of considering the rate of power purchase from GEB for calculating deductions. The Court's analysis focused on existing legal precedents and the application of relevant provisions to determine the market value of goods or services for accurate deductions under Section 80IA.