2021 (9) TMI 803 - AT - Income Tax

Tribunal upholds deduction under Income Tax Act for new plant & machinery transfer in amalgamation

DCIT, Cir. 1 (1) (2) Ahmedabad. Versus M/s. Chiripal Industries Ltd.

The Tribunal upheld the CIT(A)'s decision to allow the deduction claimed under section 80IA(4) of the Income Tax Act, 1961, amounting to Rs. 2,74,36,169. ... Deduction claimed u/s 80IA(4) - Scheme of amalgamation - right of amalgamating company to claim deduction - AO did not accept contentions of the assessee in the absence of complete details with regard to amalgamating company’s entitlement to the claim of deductions under section 80IA qua the specific plant & machinery - plant set up by the assessee was not new power plant, but it was set up by transfer of old and previously used machinery, value of which was more than 90% of the total value of plant, claim of the assessee under section 80IA was not allowable - HELD THAT:- We find ITAT has arrived at a conclusion that when any undertaking of an Indian Company which is entitled to deduction under this section is transferred before expiry of the period specified in this section to another Indian Company, then as per clause (b) the provision of this sections shall apply to the amalgamated company, as they would have applied to the amalgamating company - provision makes it clear that ambit of this section is extended to the cases where eligible enterprise is transferred, then the transferee company i.e. amalgamated company will become entitled to deduction. CIT(A) appreciated the facts both on facts and in law as well as weighed earlier decisions of his predecessor and allowed the claim of deduction under section 80IA. Therefore, basing decisions of the Tribunal on identical issue on the assessee’s own case cited [2018 (12) TMI 1679 - ITAT AHMEDABAD] we uphold order of the ld.CIT(A) and dismiss the ground of appeal of the Revenue. Issues Involved:1. Whether the CIT(A) erred in deleting the addition of Rs. 2,74,36,169/- claimed under section 80IA(4) of the Income Tax Act, 1961.Issue-wise Detailed Analysis:1. Deletion of Addition under Section 80IA(4):The Revenue appealed against the CIT(A)'s order which deleted the addition of Rs. 2,74,36,169/- claimed under section 80IA(4) of the Income Tax Act, 1961. The assessee, engaged in power generation, had filed a return declaring a total income of Rs. 14,81,15,160/- after claiming the deduction. The assessment was completed under section 143(3), determining the total income at Rs. 15,65,84,722/-. The case was selected for scrutiny, and the AO observed that the plant and machinery used were predominantly old, transferred from Shanti Processor Ltd., thus disallowing the deduction.The assessee argued that Shanti Processor Ltd. was amalgamated with the assessee company and had not claimed the deduction under section 80IA, making the assessee eligible for the claim. The CIT(A) allowed the claim following decisions from previous years (2009-10, 2011-12, 2013-14, and 2014-15) on identical issues, leading the Revenue to appeal.The Tribunal considered submissions and material on record, noting that the CIT(A) followed earlier orders in favor of the assessee. The CIT(A) emphasized that the plant and machinery were new when acquired by Shanti Processor Ltd. and transferred to the assessee upon amalgamation, which complied with section 80IA(12). This section stipulates that if an eligible undertaking is transferred to another Indian company, the deduction applies to the amalgamated company as it would have to the amalgamating company.The Tribunal reaffirmed that the issue had been settled in favor of the assessee in previous years, with the plant being new and the amalgamation not affecting the eligibility for deduction. The AO's presumption of the machinery being old was incorrect, as the machinery was new when acquired by Shanti Processor Ltd. and transferred under a court-approved amalgamation scheme.The Tribunal upheld the CIT(A)'s order, confirming that the assessee was entitled to the deduction under section 80IA. The appeal by the Revenue was dismissed, and the decision was pronounced in open court on 15th September 2021.