2017 (1) TMI 513 - HC - Income Tax

High Court affirms deduction for power generation, rules in favor of assessee on deduction claim & disallowance adjustment

The High Court upheld the decision allowing deduction under section 80-IA(4) for power generation for captive consumption, dismissing the revenue's ... Deduction u/s. 80-IA(4) allowable for generation of power for captive consumption - Held that:- The issues in the present appeal require to be answered in favour of the assessee and against the revenue. See Tamilnadu Petro Products Ltd. Versus Assistant Commissioner of Income-tax [2010 (11) TMI 645 - MADRAS HIGH COURT] and Commissioner of Income Tax Versus Cethar Limited [2014 (9) TMI 831 - MADRAS HIGH COURT ] Adjustment made on account of disallowance u/s 14A of the Act in computation of book profit u/s 115JB - Held that:- Taking into consideration the evidence on record and considering the decision of this court in the case of Commissioner of Income-tax-I vs. Gujarat State Fertilizers & Chemicals Ltd. [2013 (7) TMI 701 - GUJARAT HIGH COURT ] we are of the opinion that issue Nos. (iii) and (iv) required to be answered in favour of the assessee and against the revenue. Issues involved:1. Deduction u/s. 80-IA(4) for generation of power for captive consumption.2. Claim of deduction u/s 80-IA(4) based on power generation rates.3. Adjustment on account of disallowance u/s 14A in computation of book profit u/s 115JB.4. Non-following of previous decision by ITAT on the issue.Detailed Analysis:1. Deduction u/s. 80-IA(4) for generation of power for captive consumption:The High Court addressed whether the ITAT was justified in upholding the decision that deduction u/s. 80-IA(4) is allowable to the assessee for power generation for captive consumption. The court analyzed previous decisions and held in favor of the assessee, dismissing the revenue's appeal.2. Claim of deduction u/s 80-IA(4) based on power generation rates:The court examined whether the Tribunal was correct in allowing the deduction of a specific amount under section 80-IA(4) when the assessee adopted a higher rate for power generation compared to the rate at which power was supplied to the GEB. After considering various legal precedents, the court sided with the assessee, ruling against the revenue's appeal.3. Adjustment on account of disallowance u/s 14A in computation of book profit u/s 115JB:The court considered whether the adjustment made on account of disallowance u/s 14A in the computation of book profit u/s 115JB was lawful. Referring to a previous decision and the rationale behind it, the court concluded that the adjustment was not in accordance with the law, favoring the assessee and dismissing the revenue's appeal.4. Non-following of previous decision by ITAT on the issue:The High Court examined whether the ITAT was justified in not following its previous decision in a similar case involving Gujarat State Fertilizers and Chemicals Ltd. The court referred to the decision and upheld that the issues needed to be answered in favor of the assessee based on the evidence and previous legal rulings, ultimately dismissing the revenue's appeal.