2018 (2) TMI 440 - HC - Income Tax

Disallowance made u/s 80IA(4) - captive power plants of the assessee were not separate undertakings, profits from them being notional,and hence, not included in gross total income - Tribunal deleted the disallowance - Held that - Order passed by the Commissioner (Appeals) that denial under section 80IA on the ground that captive power plants of the assessee were not separate undertakings, profits from them being notional,and hence, not included in gross total income, etc., was not tenable in view of the decision in the case of Ahmedabad Manufacturing and Calico Printing Co. Ltd. 1986 (3) TMI 46 - GUJARAT High Court wherein the court in the context of availability of deduction under section 80I, held that deduction under section 80I was available irrespective of the fact whether products were sold in open market or used for consumption by other units. The Tribunal in the impugned order has followed its earlier decision in the case of Banco Aluminium Ltd. in assessment year 2009-10 and has allowed the ground of appeal. It may be germane to refer to the decision of this court in the case of A.C.I.T., Bharuch Circle, Bharuch v. Pragati Glass Works Pvt. Ltd. (2012 (1) TMI 309 - GUJARAT HIGH COURT) wherein the court was dealing with the issue as to whether the Tribunal was right in law in directing to compute deduction under section 80IA by taking the market value of the electricity generated by the assessee at the rate of ₹ 5.00 per unit as against the market value of the electricity ₹ 4.51 per unit actually paid by the eligible business and considered by the AO for computing deduction under section 80IA in conformity with the provisions of section 80IA(8) of the Act, since the eligible unit cannot recover more than the duty paid - Decided against revenue

Summary

Issues:
Challenge to order under section 260A of the Income Tax Act regarding disallowance under section 80IA(4) - Captive Power Generation Plant deduction claim.

Analysis:
1. The appellant-revenue challenged the Income Tax Appellate Tribunal's order dated 6.4.2017 under section 260A of the Income Tax Act, proposing a substantial question of law regarding the deletion of disallowance made under section 80IA(4) of the Act for the assessment year 2009-10.
2. The assessee claimed a deduction of &8377; 37,80,015/- under section 80IA(4) for Captive Power Generation Plants. The Assessing Officer disallowed the claim as the profit from the power generating unit was not included in the income computation, and the plant was not considered a separate industrial undertaking, with abnormal profit margins.
3. The Commissioner (Appeals) allowed the deduction under section 80IA(4) for electricity generated for captive consumption, citing a High Court decision. However, certain grounds of appeal were dismissed, including recomputing profits by adjusting the sale value of power produced.
4. The Tribunal allowed the grounds of appeal based on a previous decision and upheld the method of computing the market value of electricity generated for deduction under section 80IA.
5. Referring to a High Court decision, the Tribunal's order was deemed in line with legal principles, leading to the dismissal of the appeal due to the absence of any substantial question of law warranting interference.