THE PRINCIPAL COMMISSIONER OF INCOME TAX VADODARA 3 vs. M/S PRAGATI GLASS WORKS PVT LTD

Facts

This Tax Appeal was filed by the Revenue against an order of the Income Tax Appellate Tribunal (ITAT), Surat Bench, for Assessment Year 2009-10. The dispute concerns the deduction allowable under Section 80IA of the Income Tax Act, 1961, for the assessee, M/s Pragati Glass Works Pvt Ltd. The Revenue challenged the ITAT's decision to allow the deduction based on the rate at which Gujarat Electricity Board (GEB) supplied power to its consumers (Rs. 5.56 per unit), instead of the rate at which power generating companies supplied power to GEB (Rs. 3.12 per unit). The assessee had utilized power generated from its captive power plant for its own consumption.

Held

The High Court held that the proposed substantial questions of law were no longer res integra, as they were directly covered by the decision of the same Court in CIT vs. Gujarat Alkalies and Chemicals Ltd. (395 ITR 247). The Court noted that this judgment, along with the Supreme Court's decision in M/s. Alembic Ltd. (Tax Appeal No. 553 & 554 of 2017), addressed similar controversies regarding deductions under Section 80IA for captive power generation plants. In the Gujarat Alkalies and Chemicals Ltd. case, the Court had taken the view that the market value of electricity supplied by a captive power unit to its own general unit should be considered the same as the rate charged by GEB to its consumers. The Court also referred to another judgment where the issue pertained to Section 80IA(8) and the market value of electricity generated by a CPP unit. The Revenue's contention that an electricity duty component should be excluded was also addressed in prior judgments. Therefore, following its own precedents, the High Court dismissed the appeal.

Key Issues

1. Whether, on the facts and in the circumstances of the case, the learned ITAT erred in law and on facts in allowing the assessee's deduction under Section 80IA of the Income Tax Act, 1961, in respect of its captive power plant by considering the rate of power purchase at Rs. 5.56 per unit (the rate at which GEB supplied power to its consumers), instead of the rate adopted by the Assessing Officer at Rs. 3.12 per unit (the rate at which power generating companies supplied power to Gujarat Urja Vikas Nigam Ltd./GEB)? 2. Whether, on the facts and in the circumstances of the case, the learned ITAT erred in law and on facts in allowing the assessee's claim for deduction under Section 80IA(4) of the Income Tax Act on the basis of the purchase price of power from GEB by its customers, without appreciating that the Assessing Officer had correctly adopted the rate of Rs. 3.12 per unit (the rate at which power generating companies sold electricity to Gujarat Urja Vikas Nigam Ltd.), given that the assessee utilized power from its captive power plant for captive consumption and not for sale in the market? Assessee's Contention: Not recorded in the judgment. Revenue's Contention: The Assessing Officer correctly adopted the rate of Rs. 3.12 per unit, which was the rate at which power generating companies supplied electricity to Gujarat Urja Vikas Nigam Ltd., as the assessee had utilized power from its captive power plant for its own consumption and not for sale in the market. The ITAT erred in considering the rate at which GEB supplied power to its customers.