Gujarat High Court
Pr. Commissioner Of Income ... vs Gujarat Alkalies And ... on 12 July, 2016
Author: Akil Kureshi
Bench: Akil Kureshi, A.J. Shastri
O/TAXAP/544/2016 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX APPEAL NO. 544 of 2016
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PR. COMMISSIONER OF INCOME TAX-VADODARA-1....Appellant(s)
Versus
GUJARAT ALKALIES AND CHEMICALSLTD....Opponent(s)
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Appearance:
MR KM PARIKH, ADVOCATE for the Appellant(s) No. 1
MR MANISH J SHAH, CAVEATOR for the Opponent(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI
and
HONOURABLE MR.JUSTICE A.J. SHASTRI
Date : 12/07/2016
ORAL ORDER
(PER : HONOURABLE MR.JUSTICE AKIL KURESHI)
1. The department has filed this appeal suggesting following questions for our consideration:
"(i) Whether on the facts and circumstance of the case, the Tribunal was right in law in deleting the addition of Rs.
14,01,000/- made on account of amortization of lease rent paid as it is a capital expenditure which cannot be allowed as deduction as per Income Tax Act, 1961?
(ii) Whether the Tribunal was right in law in restricting the disallowance made u/s. 14A of the Act to Rs. 1,00,000/- from Rs. 2,26,90,000/- without appreciating that the assessee was maintaining mixed funds and failed to establish that it has its own surplus funds for investment in dividends?
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O/TAXAP/544/2016 ORDER
(iii) Whether on the facts in the circumstances of case and in law, the decision of CIT(a) that deduction u/s. 80IA(4) is allowable to the assessee for generation of power for captive consumption?
Or alternatively
(iii) Whether on the facts and circumstances of case, the Tribunal was right in law in allowing the deduction u/s. 80IA(4) of the Act without appreciating that the assessee had captive power generation plant and therefore the claim u/s. 80IA(4) of the Income Tax Act, 1961 was not allowable as held by the Tribunal Bench A, Chennai vide in the case of Chettinand Cement Corporation Ltd. in ITA No. 1026 (Mds)/2005?
(iv) Whether on the facts and circumstance of case, the Tribunal was right in law in allowing the claim of u/s. 80IA(4) as claimed by the assessee on the basis of purchase price of power from GEB i.e. Rs. 4.55 per unit without appreciating the fact that assessing officer had rightly calculated the amount eligible for deduction u/s. 80IA after applying the rate at Rs. 2.23 per unit which became 'Nil'?"
2. So far as question No. 1 is concerned, learned counsel for the Revenue fairly brought to our notice an order dated 21.10.2013 passed in Tax Appeal No. 778 of 2013 and connected appeals in which such an issue came up for consideration. The issue was decided against the Revenue. Such question is, therefore, not considered.
3. Regarding question No.2, the issue pertains to applicability of Rule 8D of the Income Tax Rules. In the context of disallowance of expenditure under Section 14A of the Income Page 2 of 4 HC-NIC Page 2 of 4 Created On Thu Jul 14 02:06:21 IST 2016 O/TAXAP/544/2016 ORDER Tax Act, 1961, the Tribunal, in the impugned judgement, noted that the assessment year concerned 2009-10 and, therefore, the amendment of Rule 8D was already brought under the statute book by then. However, the Tribunal further noted that the Assessing Officer has not gone specifically through the books of accounts to bring any fact that any expenditure has been incurred for earning exempt income with respect to administrative and establishment expenses. The Tribunal also noted that the assessee had substantial interest free funds far in excess of interest liability incurred by the assessee. Inter alia on such grounds, the Tribunal substantially deleted the additions. These are primarily appreciation of materials on record and no question of law therefore arise.
4. The question No.3 framed in the alternative suggestion and question No.4 relate to the same issue of deduction under Section 80IA(4) of the Act regarding valuation of the electricity generated by the assessee for the captive consumption in relation to the assessee's claim for reduction under Section 80IA(4). We are informed that such an issue in case of the assessee is being examined in other tax appeals. We may, therefore, borrow the questions from such tax appeal for the purpose of this tax appeal also and accordingly, admit the tax appeal for consideration of following substantial questions of law:
Page 3 of 4HC-NIC Page 3 of 4 Created On Thu Jul 14 02:06:21 IST 2016 O/TAXAP/544/2016 ORDER "(i) Whether on the facts and in the circumstances of the case and in law, the ITAT was justified in upholding the decision of CIT(A) that deduction u/s 80IA(4) is allowable to the assessee for generation of power for captive consumption?
(ii) Whether the Tribunal was right in law in allowing the assessee's claim of deduction of Rs.1954 Crores u/s 80IA(4) of the I.T. Act, 1961, when the assessee had adopted rate of power generation at Rs.4.73 per unit, rate on which the GEB supplied power to its consumers, ignoring the rate of Rs.2.36 per unit, the rate on which power generating company supplied its power to GEB?
5. Learned counsel Mr. M.J.Shah appearing on caveat waived notice of admission. Let the tax appeal be notified for final hearing on 26.07.2016 alongwith other connected tax appeals.
(AKIL KURESHI, J.) (A.J. SHASTRI, J.) Jyoti Page 4 of 4 HC-NIC Page 4 of 4 Created On Thu Jul 14 02:06:21 IST 2016