2017 (5) TMI 424 - AT - Income Tax

Deduction u/s 80IA - captive power generation unit - eligible profit of that unit - Held that - As in assessee s cases itself in A.Y. 2003-04 & 2004-05 deleted the impugned disallowance stating that the assessee was consuming power from two sources i.e GEB and Captive generation plant of its own. The GEB was being paid at the rate of 4.9 per unit while the power procured from Captive Unit installed by the assessee for the purpose of computing eligible profit the assessee has taken the market value of the power produced by Captive plant at the rate of 4.9 per unit. We noted that the similar issue has arisen before the Mumbai Bench of the Tribunal in the case of West Coast Paper Mills Ltd V/s JCIT reported in (2005 (6) TMI 547 - ITAT MUMBAI) in which the Tribunal on this issue what should be the price attributable to the power generated and consumed by the assessee for the purpose of computing the deduction available under section 80IA after availing the provisions of section 80IA (9). The cost of electricity produced by the assessee at Captive Unit may be taken at market value at Rs. 4.9 per unit for the purpose of computation of the eligible profit of that unit - Decided against revenue Addition made on account of provision made for bonus (assessment year wise) - Held that - The above bonus is very much in the nature of an ascertained liability not to be added for the purpose of computing Section 115JB book profits. Shri Shinde fails to point out any distinction on the relevant facts in the two sets of assessment years in question. We thus decline this latter substantive ground as well.- Decided against revenue

Summary

Issues:
1. Disallowance of Section 80IA deduction for assessment years 2008-09 and 2009-10.
2. Disallowance of provision made for bonus under Section 115JB.

Analysis:

*Issue 1: Disallowance of Section 80IA deduction*
The Revenue appealed against the CIT(A)'s order deleting the disallowance of Section 80IA deduction for the assessee's captive power generation unit. The Assessing Officer disallowed a portion of the deduction, which was later deleted by the CIT(A) based on previous tribunal decisions. The tribunal upheld the CIT(A)'s decision, citing the principle of transfer pricing and the market value of power generated by the assessee's captive unit. The tribunal referred to a similar case and directed the AO to compute the deduction by considering the market value of electricity generated by the assessee at a specific rate per unit. The tribunal found no reason to overturn the CIT(A)'s decision, leading to the dismissal of this ground of appeal.

*Issue 2: Disallowance of provision made for bonus under Section 115JB*
The Revenue contested the CIT(A)'s deletion of the disallowance of a provision made for bonus under Section 115JB. The CIT(A) held that the bonus provision was an ascertained liability and not to be added for computing book profits under Section 115JB. The tribunal referred to a previous decision in the assessee's case and upheld the CIT(A)'s decision, emphasizing that the bonus provision was a certain liability. The tribunal found no material distinction in the facts of the two assessment years and dismissed this ground of appeal as well.

In conclusion, both of the Revenue's appeals were dismissed by the tribunal, affirming the CIT(A)'s decisions in both issues. The tribunal's detailed analysis and reliance on previous decisions provided a strong legal basis for upholding the CIT(A)'s orders. The judgments were pronounced on the 5th of May, 2017.