Rectification, depreciation and income computation issues: ITAT upheld section 14A relief, sustained open-market valuation under section 80IA(8), and remanded depreciation verification.

Rectification under section 154 and the depreciation-related natural justice challenge were rejected because the authorities gave detailed reasons and the matter was within rectification scope. The depreciation disallowance itself was remanded for fresh factual verification, as the claim of retrospective capitalisation of engineering fees and revision of written down value required examination at assessment stage. The deletion of disallowance under section 14A read with Rule 8D was upheld in line with binding precedent, and the section 80IA(8) computation was sustained on the basis that market value means the open-market price payable by an industrial consumer. Consequential interest and later-year depreciation grounds did not warrant interference.

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Issues: (i) Whether the rectification order under section 154 of the Income-tax Act, 1961 and the lower appellate order suffered from any infirmity on the ground of violation of natural justice or want of jurisdiction to rectify the depreciation claim; (ii) whether the depreciation disallowance required fresh factual verification and remand; (iii) whether the disallowance under section 14A read with Rule 8D and the deduction controversy under section 80IA(8) were rightly decided against the Revenue; and (iv) whether the consequential interest and allied computation grounds under sections 234D and 115P, and the depreciation ground for the later year, warranted interference.

Issue (i): Whether the rectification order under section 154 of the Income-tax Act, 1961 and the lower appellate order suffered from any infirmity on the ground of violation of natural justice or want of jurisdiction to rectify the depreciation claim.

Analysis: The challenge to the rectification and the plea of denial of hearing were rejected. The Tribunal recorded that both the Assessing Officer and the first appellate authority had given detailed reasons on the excess depreciation issue. No merit was found in the contention that the matter was outside the scope of rectification or that the appellate order was vitiated for want of opportunity.

Conclusion: The objection to the rectification action and the alleged natural justice breach failed.

Issue (ii): Whether the depreciation disallowance required fresh factual verification and remand.

Analysis: The Tribunal accepted that the assessee's explanation of retrospective capitalization of engineering fees and the resulting revision of written down value involved a factual aspect requiring verification at the assessment stage. It therefore considered it appropriate to restore the matter for fresh factual examination with an opportunity to the assessee to substantiate the claim.

Conclusion: The depreciation issue was remanded for fresh verification in favour of the assessee.

Issue (iii): Whether the disallowance under section 14A read with Rule 8D and the deduction controversy under section 80IA(8) were rightly decided against the Revenue.

Analysis: On section 14A, the Tribunal upheld deletion of the disallowance because the authorities had followed binding precedent and there was no material distinction shown for the relevant years. On section 80IA(8), the Tribunal upheld the adoption of the market value of electricity at the rate prevailing in the open market, following the Supreme Court's exposition that market value is the price an industrial consumer would ordinarily pay in the open market and not the contracted rate at which surplus power is sold to the Electricity Board.

Conclusion: The Revenue's challenge to both the section 14A disallowance and the section 80IA(8) deduction computation failed.

Issue (iv): Whether the consequential interest and allied computation grounds under sections 234D and 115P, and the depreciation ground for the later year, warranted interference.

Analysis: The interest-related grounds were treated as consequential or requiring verification of the underlying figures, and no independent basis for interference was found. The later-year depreciation issue was also held to be settled in the assessee's favour and not open to disturbance in the Revenue's appeals.

Conclusion: These grounds did not succeed and were rejected or allowed only for statistical purposes where verification was directed.

Final Conclusion: The assessee obtained relief on the remanded depreciation issue, while the Revenue failed on its substantive challenges to the section 14A and section 80IA(8) adjustments; the common order thus ended in a partial allowance of the assessee's appeal and dismissal of the Revenue's appeals.

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