2022 (5) TMI 370 - AT - Income Tax

Deduction u/s.80IA - Denial of deduction as assessee has not maintained and produced the separate books of accounts, more specifically separate sets of P L account and balance sheet in respect of power plant and assessee had failed to furnish the separate sets of audited profit and loss account in respect of power plant - HELD THAT - A perusal of the provision of Section 80IA of the Act does not show the requirement of maintenance of separate sets of books of accounts in respect of the eligible business on which the claim of Section 80IA of the Act is made. What is required is that the profit/loss attributable to the power plant should be ascertainable from the regular books of accounts maintained. In the present case, a perusal of the assessment order itself clearly shows that the same is possible insofar as the assessee filed the revised statement giving the break-up of the income and expenditure in respect of Sponge Iron operation and also the power plant. This bifurcation has not been dislodged by the AO though disregarded as he was of the view that separate books should have been maintained. A perusal of the paper book also clearly shows that the requisite audit report u/s.80IA of the Act being in the Form 10CCB has also been submitted by the assessee before the AO. This being so, we are of the view that the assessee has, on the factual matrix, complied with the requirements which have been objected to by the AO in the assessment order for the purpose of denial of deduction u/s.80IA of the Act. This being so, we are of the view that the assessee is entitled to deduction u/s.80IA of the Act as claimed. - Decided in favour of assessee.

Summary

Issues:
Appeal against CIT(A) order for assessment year 2006-2007, Deduction u/s.80IA of the Act regarding captive power plant, Compliance with maintenance of separate books of accounts, Submission of audit report u/s.80IA, Interpretation of Section 80IA requirements, Ruling of Hon'ble High Court, Adjudication by Tribunal, Appeal before ITAT CUTTACK.

Analysis:

1. Background and Appeal History: The appeal before the Appellate Tribunal ITAT CUTTACK stemmed from the order of the ld. CIT(A), Cuttack, concerning the assessment year 2006-2007. The Tribunal had previously disposed of the appeal, granting relief on certain issues but ruling against the assessee regarding the deduction u/s.80IA related to the captive power plant. Subsequently, the matter was taken to the Hon'ble High Court of Orissa, which provided a detailed ruling on the 80IA issue, referencing a decision of the Hon'ble Gujarat High Court and remitting the matter back to the Tribunal for fresh adjudication.

2. Contentions and Submissions: The assessee, represented by its counsels, argued that the denial of the deduction u/s.80IA was based on two grounds: the alleged failure to maintain separate books of accounts and the non-submission of audited profit and loss account specifically for the power plant. The assessee contended that Section 80IA does not mandate the maintenance of separate books of accounts and highlighted the submission of the requisite audit report in Form 10CCB, meeting the objections raised by the assessing officer.

3. Tribunal's Analysis and Decision: The Tribunal examined the provisions of Section 80IA and emphasized that the key requirement is the ability to ascertain the profit/loss attributable to the power plant from the regular books of accounts. It noted that the assessee had provided a revised statement delineating income and expenditure for both the Sponge Iron operation and the power plant, which was not refuted by the assessing officer. The Tribunal also observed the submission of the audit report in Form 10CCB, concluding that the assessee had fulfilled the necessary requirements objected to by the AO for denying the deduction u/s.80IA.

4. Outcome and Ruling: Considering the factual compliance by the assessee and the legal interpretations, the Tribunal held in favor of the assessee, allowing the deduction u/s.80IA subject to the directions of the Hon'ble High Court and the pending decision of the Hon'ble Supreme Court in the case of Alembic Limited. The Tribunal dismissed certain grounds for adjudication based on the High Court's order, ultimately partially allowing the appeal of the assessee.

5. Conclusion: The Tribunal's decision highlighted the importance of compliance with statutory requirements and the significance of maintaining accurate records for claiming deductions under Section 80IA. The ruling underscored the need for a thorough review of factual and legal aspects in tax matters, ensuring adherence to established legal principles and judicial directives.

This detailed analysis encapsulates the essence of the legal judgment, emphasizing the critical issues, arguments presented, the Tribunal's assessment, and the final ruling, providing a comprehensive understanding of the case's intricacies and implications.