2022 (5) TMI 1012 - AT - Income Tax

Deduction u/s.80-IA on its income derived out of its captive power plant denied - as per assessee independent new industrial undertaking at substantial capital outlay, producing power for consumption in its industrial undertaking entitled for deduction u/s 10B is setup and is approved under various sanctions and permissions - Assessee submitted that the issue relating to the entitlement of deduction u/s 80IA(4) in relation to the subsequent years may be kept open and for the Assessment Year under consideration, since the assessee otherwise is entitled to exemption u/s 10B of the Act, therefore, the issue relating to entitlement of the assessee of deduction u/s 80IA(4) will not have any tax implication for this relevant year HELD THAT - Admission/comment of the assessee should not have any bearing regarding the issue of eligibility of the assessee of claiming deduction u/s 80IA(4) in respect of the said power captive unit in relation to subsequent years, wherein the assessee may be affected by some tax implications. In view of above submissions, for the assessment year under consideration without adjudicating upon the issue of the eligibility of the assessee for claiming deduction u/s 80IA(4) on the power captive unit, the appeal is disposed off with the direction to the Assessing Officer to compute the eligible profits of the assessee by taking the entire unit as single unit including power captive unit and determine eligible profits of the assessee for exemption u/s 10B - At the sake of repetition, it is again reiterated that our directions given above will not have any bearing on the issue of entitlement of the assessee for deduction u/s 80IA(4) in any of the previous or subsequent years. In view of this, the appeal of the assessee is treated as partly allowed.

Summary

Issues:
- Eligibility of the assessee to claim deduction under section 80-IA of the Income Tax Act on income derived from the captive power plant.
- Consideration of the alternate claim regarding the treatment of income and deduction if the captive power plant is not considered a separate undertaking.
- Request for enhancement of deduction allowable under section 10B.
- Authority to add, amend, or modify any grounds of appeal during the hearing.

Analysis:

Eligibility for Deduction under Section 80-IA:
The appeal was filed against the order of the National Faceless Appeal Centre regarding the eligibility of the assessee to claim a deduction under section 80-IA of the Income Tax Act. The assessee argued that the captive power plant, established within an existing chemical manufacturing unit, should be eligible for the deduction. The counsel emphasized that the chemical manufacturing unit was already entitled to exemption under section 10B. The Tribunal directed the Assessing Officer to compute the eligible profits by considering the entire unit as a single entity, including the power captive unit. The decision was made for the current assessment year without delving into the eligibility of claiming the deduction for subsequent years, ensuring no tax implications for the relevant year.

Treatment of Income and Deduction for Captive Power Plant:
The appellant contended that if the Captive Power Plant is not considered a separate undertaking, the income and deduction should be recalculated. The Tribunal acknowledged this argument but primarily focused on the eligibility of the assessee for exemption under section 10B for the current assessment year. The Tribunal directed the Assessing Officer to recompute the eligible profits from the power captive unit as part of the manufacturing unit, eligible for exemption under section 10B, without deciding on the eligibility of claiming deduction under section 80IA(4) for subsequent years.

Enhancement of Deduction under Section 10B:
The appellant also requested the enhancement of deduction allowable under section 10B. However, the Tribunal's decision primarily revolved around the computation of eligible profits for exemption under section 10B by treating the entire unit as a single entity, including the power captive unit, for the current assessment year.

Authority to Amend Grounds of Appeal:
The appellant sought the authority to add, amend, or modify any grounds of appeal during the hearing. This request was standard and did not impact the Tribunal's decision regarding the eligibility of the assessee for deductions under sections 80-IA and 10B, which were the main focus of the judgment.

In conclusion, the Tribunal partially allowed the appeal, directing the Assessing Officer to compute the eligible profits by considering the entire unit as a single entity for exemption under section 10B, without delving into the eligibility of claiming deductions for subsequent years.