2014 (2) TMI 1109 - AT - Income Tax

Denial of deduction u/s 80IA of the Act - Reversal of provision made and written back Held that - Section 80IA is a code by itself and not dependent upon other provisions of the Act - sub-section 5 of S.80IA has an overriding effect and excludes application of any other provision of the Act - the eligible business is generation of electricity - only profits derived from any activity directly linked with generation of electricity would be eligible for deduction u/s 80IA - the amount written back on account of reversal of provision made in financial year 2006-07 cannot be held to be a profit derived from eligible business for computing deduction under S.80IA there is no reason to interfere in the findings of the CIT(A) in the respect Decided against Assessee. Deduction allowed u/s 80IA of the Act on sale of waste oil Held that - There was no infirmity in the order of the CIT(A) - waste oil is bye-product or waste product in the process of generation of power and has direct link with the eligible business of the assessee Thus, the CIT(A) was justified in holding that income from sale of waste oil will be eligible for deduction under S.80-IA of the Act Decided against Revenue. Netting of excess premium paid against refund of premium Exclusion from income the differential amount for computing deduction u/s 80- IA of the Act Held that - The CIT(A) has allowed the netting off following the order passed by his predecessor in assessee s own case for the assessment year 2002-03 and 2006-07 - The Tribunal in M/s GVK INDUSTRIES LTD Versus ASSTT COMMISSIONER OF INCOME TAX 2012 (6) TMI 573 - ITAT HYDERABAD has upheld the order of the CIT(A) the benefit of netting of the excess premium received against the insurance premium amount paid during the year, for taking into account only the differential amount for exclusion from the income eligible for relief under S.80IA of the Act Decided against Revenue.

Issues Involved:
1. Under-reporting of income from the sale of power.
2. Non-offering of incentive income to tax.
3. Exclusion of miscellaneous income while computing relief under Section 80IA.
4. Reversal of provision and its eligibility for deduction under Section 80IA.
5. Deduction under Section 80IA on specific income items.

Detailed Analysis:

1. Under-reporting of income from the sale of power:
The Assessing Officer (AO) noticed a discrepancy between the total gross receipts reported by the assessee and the amount confirmed by Andhra Pradesh Power Corporation Ltd., resulting in an under-reporting of income by Rs.2,88,80,908. Consequently, the AO added this amount to the income returned by the assessee.

2. Non-offering of incentive income to tax:
The AO observed that the assessee received an incentive of Rs.4,31,45,862 based on a Plant Load Factor (PLF) of 71.85%, which was not offered to tax. The AO, following the mercantile system of accounting, believed that the incentive should have been proportionately taxed in the year under appeal, resulting in an addition of Rs.3,23,29,356 to the income returned by the assessee.

3. Exclusion of miscellaneous income while computing relief under Section 80IA:
The AO noted various incomes declared under 'other sources' and excluded these from the profits and gains of the undertaking under Section 80IA, except for miscellaneous income amounting to Rs.70,60,764, which was considered attributable to the business. This led to a recomputation of the relief under Section 80IA, reducing the profits and gains from business to Rs.15,45,29,270 from Rs.16,15,90,034.

4. Reversal of provision and its eligibility for deduction under Section 80IA:
The assessee argued that the reversal of a provision of Rs.14,21,001 made in the financial year 2006-07 and written back in the assessment year 2009-10 should be eligible for deduction under Section 80IA. The CIT(A) and the Tribunal rejected this claim, stating that the reversal of provision does not constitute income derived from the eligible business of generation of electricity and hence, is not eligible for deduction under Section 80IA.

5. Deduction under Section 80IA on specific income items:
The assessee challenged the denial of deduction under Section 80IA on various items, including income from lease of fruit trees, sale of plastic bags, recovery of notice pay from an employee, and credit balance written back. The Tribunal upheld the CIT(A)'s decision, stating that these items do not have a direct nexus with the eligible business of generation of power and hence, are not eligible for deduction under Section 80IA.

Separate Judgments:

Assessee's Appeal:
The Tribunal dismissed the assessee's appeal, agreeing with the CIT(A) that the reversal of provision and other specific income items are not eligible for deduction under Section 80IA.

Revenue's Appeal:
The Tribunal also dismissed the Revenue's appeal, upholding the CIT(A)'s decision that the sale of waste oil is eligible for deduction under Section 80IA and allowing the netting off of excess premium paid during the year against the refund of premium.

Conclusion:
Both the assessee's and the Revenue's appeals were dismissed, and the order pronounced on 19th February 2014, upheld the CIT(A)'s decisions on all contested issues.

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