2016 (7) TMI 1646 - HC - Income Tax

Court Allows Deductions for Captive Power Generation & Liabilities under Section 80-IA(4)

COMMISSIONER OF INCOME TAX-1 Versus M/s ALEMBIC LTD

The court ruled in favor of the assessee in all appeals, allowing deductions under section 80-IA(4) for captive power generation and provisions for ... Deduction u/s 80- IA(4) for generating power for captive consumption - HELD THAT:- This will be governed by the answer in question (C) in Commissioner of Income-tax v. Alembic Limited [2016 (7) TMI 1239 - GUJARAT HIGH COURT] where we decided the issue in favour of the assessee and against the revenue. In that view of the matter, we answer the question in favour of the assessee and against the revenue. Withdrawal from the revaluation reserve from the book profit under section 115JB - HELD THAT:- Since this question is covered by the decision of this court in [2008 (8) TMI 1009 - GUJARAT HIGH COURT] in the case of Commissioner of Income-tax-I v. Alembic Glass Industries Limited decided on 11.8.2008 where following the decision in [2008 (8) TMI 1010 - GUJARAT HIGH COURT], the question is answered in favour of the assessee, we answer this question in favour of the assessee and against the revenue. Deduction of claim of interest payable to ONGC - Whether during the year assessee has not paid any amount towards this liability?” - HELD THAT:- This court in [2011 (5) TMI 816 - GUJARAT HIGH COURT] the case of Commissioner of Income-tax v. Alembic Glass Industries Limited as held a settled law is if a business liability has definitely arisen in the accounting year, the deduction should be allowed although the liability may have to be quantified and discharged at a future date. What should be certain is the incurring of the liability. It should be capable of being estimated with reasonable certainty though the actual quantification may not be possible. If these requirements are satisfied the liability is not a contingent one. The liability is in praesenti though it will be discharged at a future date. It does not make any difference if the future date on which the liability shall have to be discharged is not certain.where this court held in favour of the assessee and against the revenue Issues involved:1. Whether deduction under section 80-IA(4) for generating power for captive consumption is allowable.2. Whether withdrawal from revaluation reserve for book profit under section 115JB is permissible.3. Consideration of additional grounds raised by the Department regarding deduction under section 80-IA(4) for captive power generation.4. Allowance of interest claim payable to ONGC without actual payment.Analysis:1. Tax Appeal No. 1133 of 2011:The issue revolved around the deduction under section 80-IA(4) for generating power for captive consumption. The Assessing Officer disallowed the claim due to lack of income from the plants, but the Commissioner (Appeals) allowed it based on previous decisions. The Tribunal upheld the decision. The court referred to a similar case where the issue was decided in favor of the assessee, relying on various judgments supporting the eligibility of the deduction. Consequently, the court ruled in favor of the assessee against the revenue.2. Tax Appeal No. 912 of 2010:This appeal questioned the non-consideration of additional grounds by the Tribunal regarding the deduction under section 80-IA(4) for captive power generation. Following a previous decision favoring the assessee, the court ruled in favor of the assessee against the revenue.3. Tax Appeal No. 913 of 2010:The first issue in this appeal was similar to the one in Tax Appeal No. 912 of 2010, and the court decided in favor of the assessee based on previous judgments. The second issue concerned the revenue appeal's dismissal due to the assessee's provision for liabilities. The court referred to a relevant Supreme Court judgment and ruled in favor of the assessee against the revenue.4. Tax Appeal No. 914 of 2010:This appeal focused on allowing the deduction of interest payable to ONGC without actual payment. The court cited a Supreme Court judgment regarding the allowance of liabilities arising in the accounting year, even if quantification and payment occur later. Following this precedent, the court ruled in favor of the assessee against the revenue, dismissing all revenue appeals.In conclusion, the court consistently favored the assessee in all appeals, upholding deductions and provisions based on legal precedents and interpretations of relevant tax laws.