Undertakings which are engaged in the activity of generation steam power from bio-gas, cooling power from cooling towers and cooling power from Ammonia Absorption Refrigeration Plant are eligible for deduction under 80IA of the Income Tax Act, 1961, the Mumbai bench of the ITAT said last day.
Earlier, the AO, while rejecting the claim of the assessee, M/s Saf Yeast Company Private Limited, opined that steam power and cooling power is not power as per Section 80IA(4)(iv) of the Act. This reference is electric power and cannot apply to steam power, refrigeration power or any other form of power. He was of the view that that there is no generation of power in the case of the assessee, and therefore, no deduction is allowable.
The assessee contended that cooling tower generates cooling power/refrigeration power. Hence, the cooling power generated in a cooling tower is entitled for deduction us 80IAof the Act.
On first appeal, the CIT(A) allowed the claim of the assessee and observed that the term ‘Power’ has not been defined to mean electrical power to the exclusion of other forms of power and the term has to be understood in its natural meaning. According to the first appellate authority, the legislature has clearly provided a benefit of a deduction u/s 80IA of the Act for generation of any form of power generated by an undertaking. At each stage of production there is no undertaking that is generating power.
Upholding the order of the first appellate authority, the division bench of the Tribunal held that the very scheme of 80-IA of the Act as also referred and discussed in a catena of judgments was to encourage captively generation of power. There is no bar in the Section on an assessee to produce power at his power division and sell it to its his own manufacturing unit i.e. captive consumption.
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