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

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. The Tribunal found that the plant and machinery transferred to the assessee were new when acquired by the transferor company, and the amalgamation did not affect the eligibility for the deduction. The Revenue's appeal was dismissed, affirming the assessee's entitlement to the deduction.

---

---

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.

---