2016 (9) TMI 1625 - AT - Income Tax

Tribunal denies deduction claim under Section 80IA of Income Tax Act; High Court upholds decision

Atul Limited Versus ITO, Ward-1 (1), Ahmedabad

The Tribunal denied the assessee's claim for deduction under Section 80IA of the Income Tax Act, as the new turbine was considered an expansion of the ... Deduction u/s 80-IA in respect of new power plant - HELD THAT:- Since the finding which has restored ground no.3 for read-judication has already been set aside, therefore, there is nothing for this Bench to decide. This appeal on restitution [2012 (5) TMI 691 - ITAT AHMEDABAD] for ground no.3 has become redundant because Hon’ble High Court 2016 (8) TMI 413 - GUJARAT HIGH COURT has vacated the alleged restitution order. Therefore, we need not to record any finding and the order passed by the Tribunal stands restored. Issues Involved:1. Eligibility for deduction under Section 80IA of the Income Tax Act for a new power plant.2. Validity of the Tribunal's rectification order under Section 254(2) of the Income Tax Act.Detailed Analysis:1. Eligibility for Deduction under Section 80IA of the Income Tax Act for a New Power Plant:The primary issue revolves around whether the new power plant established by the assessee qualifies as a new industrial undertaking eligible for deduction under Section 80IA of the Income Tax Act.- Assessee's Claim: The assessee argued that the installation of a new turbine constitutes a new industrial undertaking capable of generating electricity independently. The turbine could potentially operate by purchasing steam from external sources, though the assessee utilized spare steam capacity from an existing boiler. The assessee contended that the turbine should be treated as an independent power-generating unit and thus eligible for the deduction under Section 80IA.- Assessing Officer's (AO) Stand: The AO disagreed, asserting that the new power plant was established by transferring old machinery (the boiler) and thus did not qualify as a new industrial undertaking. The AO concluded that the new plant was merely an expansion of the existing unit and denied the deduction under Section 80IA.- CIT(A)’s Confirmation: The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's decision, stating that no new industrial undertaking came into existence as per Section 80IA provisions. The CIT(A) emphasized that the new power plant depended on the existing boiler for steam and thus could not operate independently.- Tribunal's Decision: The Tribunal, after considering the submissions, concurred with the AO and CIT(A). The Tribunal noted that the new turbine could not generate power independently without the existing boiler, which was part of the old plant. Therefore, the new turbine was seen as an expansion rather than a new industrial undertaking. The Tribunal dismissed the assessee's claim for deduction under Section 80IA.2. Validity of the Tribunal's Rectification Order under Section 254(2) of the Income Tax Act:The second issue pertains to the Tribunal's power to rectify its order under Section 254(2) of the Income Tax Act.- Miscellaneous Application by Assessee: The assessee filed a Miscellaneous Application (MA) No. 324/Ahd/2008, which was allowed by the Tribunal, leading to the restoration of ground no. 3 for re-adjudication. The Tribunal based its rectification on the judgment in the case of Gujarat Alkalies and Chemicals Ltd., which suggested that dependence on an existing unit does not disqualify a new unit from claiming deductions under Section 80IA.- Revenue's Appeal to High Court: The Revenue challenged this rectification order before the High Court of Gujarat. The High Court reversed the Tribunal's rectification order, stating that the original judgment did not suffer from an apparent mistake that warranted rectification. The High Court emphasized that the Tribunal's initial decision, which denied the deduction, was not inconsistent with the principles laid down in the Gujarat Alkalies case. The High Court highlighted that the Tribunal's rectification power is limited to correcting obvious and patent mistakes, which was not the case here.- High Court's Conclusion: The High Court set aside the Tribunal's rectification orders dated 11.05.2012 and 22.03.2013, reinstating the original Tribunal order dated 16.05.2008. The High Court clarified that the Tribunal's original decision was based on a correct interpretation of the law and facts, and no rectifiable mistake was apparent on record.Final Outcome:Given the High Court's reversal of the Tribunal's rectification order, the Tribunal concluded that there was no need to re-adjudicate ground no. 3. The original Tribunal order dated 16.05.2008, which denied the deduction under Section 80IA, was restored. The file was returned to the Registry for record-keeping.Order Pronounced: The final order was pronounced in the open Court on 20th September 2016.