2018 (7) TMI 1842 - HC - Income Tax

Taxpayer prevails in Gujarat HC on Section 14A & 80IA deductions; Book profits not affected.

The Gujarat High Court ruled in favor of the taxpayer on all three substantial questions of law. It held that the deletion of addition under Section 14A ... Appeal admitted for the following substantial questions of law arise for the consideration of this Court; (a) Whether on the facts and in circumstances of the case, the learned ITAT has erred in law and on facts in deleting the addition made under Section 14A r.w.r 8D merely on the basis that the related investments are out of assessee company’s old and own funds, which exceeds tax free investments whereas the assessee did not show that at the relevant point of time the funds were available? (b) Whether on the facts and in circumstances of the case, the learned ITAT has erred in law and on facts in holding that the adjustment made on account of disallowance u/s 14A of the Act, in computation of book profit u/s 115JB of the Income Tax Act, is not as per law without appreciating that the amount disallowable under Section 14A is covered under clause(f) of Explanation to Section 115JB(2) and thus said amount has to be added back while computing amount of book profit? (c) Whether on the facts and in circumstances of the case, the learned ITAT has erred in law and on facts in allowing the assessee’s claim of deduction u/s 80IA(4) of the Income Tax Act, 1961, at the rate on which the GEB supplied power to its customers ignoring the rate on which GSECL (a power generating company) supplied its power to GEB and not considering rate other than the selling price charged by the assessee? The Gujarat High Court admitted the case and identified three substantial questions of law:1. Deletion of addition under Section 14A r.w.r 8D based on old and own funds exceeding tax free investments.2. Disallowance adjustment under Section 14A in computation of book profit u/s 115JB.3. Allowance of deduction u/s 80IA(4) based on rate of power supply.