Tribunal decision on deduction under section 80-IA(4) for captive power & provision reduction under 115JB

The Tribunal upheld the CIT(A)'s decision allowing deduction under section 80-IA(4) for power generated for captive consumption, emphasizing the market value should be the rate charged by Gujarat Electricity Board to its customers. Additionally, the Tribunal reversed the CIT(A)'s decision and directed the deletion of the addition, allowing the reduction of the provision written back from the book profit under section 115JB.

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Issues Involved:
1. Deduction under section 80-IA(4) for power generated for captive consumption.
2. Reduction of provision written back from book profit under section 115JB.

Issue-Wise Detailed Analysis:

1. Deduction under section 80-IA(4) for power generated for captive consumption:

The Revenue challenged the CIT(A)'s decision allowing the deduction under section 80-IA(4) of the Income Tax Act, which was disallowed by the Assessing Officer (AO). The AO had restricted the deduction based on the rate at which the Gujarat Electricity Board (GEB) purchases electricity from power generating units, rather than the rate charged by GEB to its customers.

The Tribunal noted that this issue had already been decided in favor of the assessee in previous years (AY 2008-09 and 2009-10) where it was held that for calculating the profit eligible for deduction under section 80IA(4), the market value should be the rate at which the assessee purchased power from GEB. This was supported by various judgments, including CIT v/s. Godavari Power & Ispat Ltd., Shree Cement Ltd. v/s. ACIT, Pr. CIT v/s. Gujarat Alkalies & Chemicals Ltd., ACIT vs. Jindal Steel and Power Ltd., and Sri Velayudhaswamy Spinning Mills (P) Ltd. v. DCIT.

The Tribunal emphasized that the term "market value" refers to the price that goods or services would ordinarily fetch in the open market, which, in this case, is the rate charged by GEB to its customers. The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal.

2. Reduction of provision written back from book profit under section 115JB:

The assessee appealed against the CIT(A)'s decision, which only partially allowed the reduction of the provision written back from the book profit under section 115JB. The assessee argued that the entire provision written back should be reduced from the book profit, as the tax was charged under normal computation of income in the earlier years (AY 2002-03 and 2003-04).

The Tribunal referred to the provision of section 115JB, which allows the reduction of any amount withdrawn from reserves or provisions if such amounts were added to the book profit in earlier years. The Tribunal found that the provisions for AY 2002-03 and 2003-04 were not taxed under MAT but under normal computation, implying that the effect of such provisions had already been given under MAT.

Supporting this view, the Tribunal cited the case of DCIT Vs. Gujarat Industrial Investment Corporation Ltd., where it was held that if the provision was added back under normal computation, it should be presumed to have been taxed under MAT. Therefore, the provision written back should be reduced from the book profit.

The Tribunal reversed the CIT(A)'s decision and directed the AO to delete the addition, thus allowing the assessee's appeal.

Conclusion:

The Tribunal dismissed the Revenue's appeal regarding the deduction under section 80-IA(4) and allowed the assessee's appeal concerning the reduction of the provision written back from the book profit under section 115JB.

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