In a recent ruling, the Gujarat High Court allowed an income tax deduction of Rs. 4 crores under Section 80IA for the captive power plant of M/s Alembic Ltd. at Baroda. The court upheld the decision of the Income Tax Appellate Tribunal ( ITAT ) and dismissed the appeal filed by the Principal Commissioner of Income Tax.
The substantial question of law framed in the appeal was whether the Tribunal was justified in allowing the assessee’s claim of deduction under Section 80IA(4) of the Income Tax Act, 1961, based on the rate at which the Gujarat Electricity Board ( GEB ) supplied power to its consumers. This was done while ignoring the rate at which the power-generating company supplied power to the GEB and not considering any rate other than the selling price charged by the assessee.
The assessee filed its return of income, declaring total income as NIL after setting off brought forward losses to the tune of Rs. 4,91,38,131/-. The Assessing Officer finalised the assessment under Section 143(3) of the Act, determining a total income of Rs. 5,35,08,681/-.
This was set off against brought forward losses and business losses of Rs. 2 crores and unabsorbed depreciation of Rs. 3.2 crores under normal provisions. An addition on account of Section 14A read with Rule 8D of Rs. 43,70,550/- and a disallowance of deduction under Section 80IA(4) of Rs. 4,07,76,334/- was made during assessment proceedings.
The Assessing Officer noticed that the assessee claimed a deduction under Section 80IA(4) of the Act of Rs. 4,07,76,334/- in the original return of income from its captive power plant at Baroda. The Assessing Officer rejected the entire deduction under Section 80IA(4) as excessive and unreasonable and added the same to the income of the assessee.
Aggrieved, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)], who directed the Assessing Officer to restrict the disallowance under Section 14A of the Income Tax law to Rs. 77,649/- and ruled in favor of the assessee on the issue of deduction under Section 80IA.
The department, dissatisfied with the CIT(A)’s order, approached the Income Tax Appellate Tribunal. The Tribunal dismissed the appeal filed by the Revenue, confirming the CIT(A)’s decision.
The department further appealed to the Gujarat High Court. During the hearing, the Tribunal noted the decision of the Coordinate Bench of the Court in Tax Appeal No. 1249/2014 and Tax Appeal No. 553 of 2017, which had already addressed the questions of law in favor of the assessee.
The Coordinate Bench of Justices Bhargav. D. Karia and Niral. R. Mehta found no substantial question of law arising for consideration and dismissed the appeal, thereby upholding the ITAT’s decision to allow the income tax deduction of Rs. 4 crores under Section 80IA for the assessee’s captive power plant at Baroda.
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