M/S BHORUKA POWER CORPORATION LTD vs. FORMERLY THE DEPUTY COMMISSIONER

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ITA/448/2016HC KarnatakaKAHC01042043201614 June 2022Bench: P.S.DINESH KUMAR,C.M. POONACHA8 pages
AI SummaryAllowed

What did the High Court hold?

The Tribunal erred in allowing the Revenue's appeal. The High Court held that the Revenue's consistent acceptance of deduction on an 'installed capacity' basis for subsequent years, while applying a 'profit generation' basis for the current year, was unsustainable.

What were the facts?

The assessee, a power generation company, claimed deduction under Section 80IA. The Commissioner of Income-Tax reviewed the assessment and directed a reassessment, disallowing a portion of the deduction. The CIT (Appeals) allowed the assessee's appeal, but the ITAT subsequently allowed the Revenue's appeal.

What were the issues?

Whether the Tribunal was justified in disregarding the principle of consistency and the accepted method of expense allocation for previous years when deciding the current year's deduction claim.

Which sections of the Income-tax Act were involved?

Section 80IA,Section 143(3),Section 263

AI-generated summary — verify with the full judgment below

1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 14TH DAY OF JUNE 2022 PRESENT THE HON’BLE MR. JUSTICE P.S.DINESH KUMAR AND THE HON’BLE MR. JUSTICE C.M.POONACHA I.T.A.NO.448 OF 2016 BETWEEN: M/S BHORUKA POWER CORPORATION LTD REPRESENTED BY ITS MANAGING DIRECTOR SRI S CHANDRASEKHAR AGED ABOUT 65 YEARS SON OF SRI SUNDRESHAN NO.48, LAVELLE ROAD, BENGALURU - 560001.

… APPELLANT (BY MS. SHEETAL BORKAR, ADVOCATE FOR SRI. S PARTHASARATHI, ADVOCATE) AND: FORMERLY THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 11(2) AND PRESENTLY THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 1(1) (2) INCOME - TAX OFFICES ROOM NO 242, 2ND FLOOR, BMTC BUILDING 80 FEET ROAD, 6TH BLOCK, KORAMANGALA BENGALURU - 560095.

… RESPONDENT (BY SRI. E.I. SANMATHI, ADVOCATE FOR SRI K.V. ARAVIND, ADVOCATE) - - - THE ADVOCATE FOR THE APPELLANT HAS FILED THE ABOVE ITA / INCOME TAX APPEAL UNDER SECTION 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 27/05/2016 PASSED IN ITA NO.1256/BANG/2013, FOR THE

2 ASSESSMENT YEAR 2007-2008. PRAYING THIS HON'BLE COURT TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE. ALLOW THE APPEAL AND SET ASIDE THE ORDER OF THE ITAT DATED 27/05/2016 IN ITA NO.1256/BANG/2013(ANNEXURE- A). PASS SUCH OTHER SUITABLE ORDERS AS THIS HON'BLE COURT DEEMS FIT TO GRANT ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN THE INTEREST OF JUSTICE AND EQUITY.

THIS I.T.A. COMING ON FOR ADMISSION THIS DAY, P.S.DINESH KUMAR J., DELIVERED THE FOLLOWING:- JUDGMENT

This appeal has been admitted to consider the following questions of law:

1.

Whether the Tribunal was justified in

law in allowing the appeal of the Revenue on

the ground that the principles of res judicata

were not applicable to income-tax

proceedings, even when the facts and the

method of accounting were constant in

various assessment years, as prevailing in the

case of the appellant?

2.

Whether the Tribunal committed an

error in holding that the rule of consistency

and precedence would not apply to the case in

hand, when the appellant's method of

allocation of common expenses on the basis

of installed capacity of the various units were

accepted by the revenue in the assessments

u/s. 143(3) of the Act for assessment years

2008-09, 2009-10 and 2010-11 which were

completed before the date of conclusion of

assessment u/s.143(3) rws 263 of the subject

year?

3.

Whether the Tribunal committed an

error when it uphold that the basis of

allocation of common expenses should be

revenue generation method and not the

universally followed method of allocation of

common expenses on the basis of installed

capacity of power generation units?

4.

Whether under the facts and

circumstances of the case, the order of the

Tribunal can be declared perverse in nature?"

2.

Heard Ms. Sheetal Borkar, learned advocate for the appellant-assessee and Sri E.I.Sanmathi, learned Senior standing counsel for the Revenue.

3.

Appellant is a power generation company. For the assessment year 2007-2008, the assessee company returned its income on 29.10.2007. The

4 assessment was completed under Section 143(3) of the Income Tax Act, 1961 (for short ‘Act’) on 2.4.2009. The Commissioner of Income-Tax, Bangalore-I, Bangalore reviewed the assessment under Section 263 of the Act and held that the Assessing Officer had failed to examine the allocation of expenses and the deductions claimed under Section 80IA of the Act and accordingly set aside the assessment order. The Assessing Authority has passed reassessment order on 19.03.2013 under Section 143(3) read with Section 263 of the Act and disallowed a sum of Rs.54,97,000/- as excess claim of deduction under Section 80IA of the Act and brought the same to tax. Assessee challenged the same before the CIT (Appeals)1 in ITA No.216/DC-11(2)/A-I/12-13 and vide order dated 11.06.2013, the appeal was allowed. Feeling aggrieved, the Revenue challenged the said order before ITAT2, Bengaluru. By the impugned order, the ITAT has allowed the Revenue's Appeal. 1 Commissoiner of Income Tax (Appeals) 2 Income Tax Appellate Tribunal

4.

Ms.Sheetal Borkar, learned Advocate for the appellant submitted that the Revenue has permitted deduction under Section 80IA for the years 2008-2009, 2009-2010, 2010-2011, 2011-2012 on 'installed capacity' basis, whereas, for the year 2007-2008, the Assessing Officer has disallowed the deduction claimed by the assessee and the same has been rightly corrected by the CIT (Appeals). It is submitted that the revenue has been consistent in allowing the deductions for the period 2008-2009 to 2011-2012. According to her, the assessment for the year 2008-2009 was completed on 19.04.2010, for 2009-2010 on 09.12.2011, for 2010-2011 on 07.12.2012 and for 2011-2012 on 06.03.2014. The Revenue challenged the order passed by the CIT (Appeals) on 11.06.2013. In substance, learned Advocate for the Assessee submitted having allowed deduction under Section 80IA for the assessment years 2008-09 to 2011-12, the revenue has challenged only for the assessment year 2008-09.

5.

Sri E.I. Sanmathi, learned Senior standing counsel for the Revenue submitted that each year of assessment has to be independently considered. The doctrine of res judicata does not apply in this case. The order passed by the Commissioner under Section 263 has attained finality and the same has not been challenged by the assessee.

6.

We have carefully considered rival submissions and perused the records.

7.

Undisputed facts of the case are, pursuant to order passed by the Commissioner of Income-Tax under Section 263, the Assessing Officer has disallowed the deduction under Section 80IA. The CIT (Appeals) has set it aside on 11.06.2013. By then, assessment for the year 2008-2009, 2009-2010 and 2010-2011 were complete. It is also not in dispute that the Revenue has been allowing deduction on 'installed capacity'. Only for the year 2007-2008, the revenue has applied the 'profit generation' basis.

8.

The CIT (Appeals) in his order at paragraph No.3.4 has recorded that Revenue has been consistently accepting allocation of expenditure based on installed capacity.

9.

Sri E.I. Sanmathi, learned standing counsel also submitted that the CIT (Appeals) has not recorded its satisfaction of having examined the records. To a query made by this Court as to whether the said contention was urged before ITAT, the answer is in the negative.

10.

In view of admitted position that the Revenue has permitted deduction under Section 80IA for the years 2008-2009 to 2011-2012 on the installed capacity basis, the impugned order by the ITAT in our opinion is unsustainable.

11.

In view of the above, the questions raised for consideration are answered in favour of Revenue and in the result, this appeal is allowed.

12.

The order passed by the Income-Tax Appellate Tribunal in ITA No.1256/Bang/2013 dated 27.05.2016 is set aside.

No Costs. Sd/- JUDGE Sd/- JUDGE GBB CT-SG

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