The core and common issue raised in all the appeals is the recomputation of deduction under Section 80 IA of the Income Tax Act, 1961 by the assessing officer which was set aside by the Income Tax Appellate Tribunal and upheld by the High Courts by accepting the contention of the assessee. Revenue is aggrieved as it contends that the recomputation of deduction made by the assessing officer was interfered with by the Income Tax Appellate Tribunal and affirmed by the High Courts without appreciating the fact that the profits of eligible business of captive power generation plants of the assessees were inflated by adopting an excessive sale rate per unit for power supply to the assessees own industrial units for captive consumption as opposed to the rate per unit at which power was supplied by the assessees to the power distributing companies i.e. the State Electricity Boards which is contended to be the market rate. (Para 4)
Additionally, there are three other issues which were argued by learned counsel for the appellant at the time of hearing. The first additional issue is whether the Income Tax Appellate Tribunal could ignore compliance to statutory provision relating to exercise of option to adopt Written Down Value (WDV) method in place of straight line method while computing depreciation on the assets used for power generation. This additional issue has been raised by the revenue in Civil Appeal No.13771 of 2015 (Commissioner of Income Tax Vs. M/s Jindal Steel and Power Ltd.). Revenue has also raised the issue of expenditure in Civil Appeal No.7425 of 2019 (Commissioner of Income Tax Vs. M/s Reliance Industries Ltd.). The expenditure claimed by the assessee was disallowed by the assessing officer which was affirmed by the first appellate authority i.e., Commissioner of Income Tax (Appeals). On appeal by the assessee, the Income Tax Appellate Tribunal set aside the order of the Commissioner of Income Tax (Appeals) which decision has been affirmed by the High Court. The third additional issue relates to what is called carbon credit – whether it is a capital or revenue receipt. (Para 4.1)
It is noticeable that though an opportunity was granted by the assessing officer to the assessee to adduce evidence to justify the price of electricity sold by it to its paper unit, the same could not be availed of by the assessee. The electricity generated was sold by the assessee entirely to its paper unit. There was no surplus electricity to be supplied to the State Electricity Board and consequently, there was no contract between the assessee and the State Electricity Board determining the rate of tariff for the electricity supplied by the assessee to the State Electricity Board. On the other hand, it was noticed that the Electricity Act, 2003 had come into force whereby and whereunder, the rate at which electricity could be supplied is determined, notably by Sections 21 and 22 thereof. That apart, there is the tariff regulatory commission which has the mandate for fixing the rates for sale and purchase of electricity by the distribution licensee. Thus it was noted that there is an inbuilt mechanism to ensure permissible profit both to the generating companies and to the distribution licensees. Therefore, it was held by the High Court that the assessee’s generating unit could not claim any benefit under Section 80-IA of the Act computing the profits and gains on the basis of the rate chargeable by the distribution licensee from the consumer and that the benefit could only be claimed on the basis of the rates fixed by the tariff regulatory commission for sale of electricity by the generating company. Facts being clearly distinguishable, this decision can be of no assistance to the revenue. (Para 32)
Applying the aforesaid principle to the facts of the present case, we are in agreement with the view expressed by the Tribunal and the High Court that there is no requirement under the second proviso to sub-rule (1A) of Rule 5 of the Rules that any particular mode of computing the claim of depreciation has to be opted for before the due date of filing of the return. All that is required is that the assessee has to opt before filing of the return or at the time of filing the return that it seeks to avail the depreciation provided in Section 32 (1) under subrule (1) of Rule 5 read with Appendix-I instead of the depreciation specified in Appendix-1A in terms of sub-rule (1A) of Rule 5 which the assessee has done. If that be the position, we find no merit in the question proposed by the revenue. The same is therefore answered in favour of the assessee and against the revenue. (Para 45)
Respondent assessee in this case is M/s Reliance Industries Ltd. and the assessment year under consideration is 2006- 2007. Assessee claimed allowance of expenditure of about Rs. 3.39 crores on account of payments made to one Shri SK Gupta and his group of companies. The assessing officer vide the assessment order dated 19.03.2008 passed under Section 143 (3) of the Act, referred to the statement of Shri S.K. Gupta recorded during the search operations and held that the said person had not rendered any service to the assessee so as to receive such payments. Therefore, the assessing officer disallowed such claim of expenditure of the assessee and added the same to the income of the assessee. (Para 47)
Therefore, we agree with the view taken by the High Court. As noted by the High Court, the entire issue is based on appreciation of the materials on record. Tribunal had scrutinized the materials on record and thereafter had recorded a finding of fact that there were sufficient evidence to justify payment made by the assessee to Shri SK Gupta, a consultant of the assessee, and that the assessing officer had wholly relied upon the statement of Shri Gupta recorded during the search operation which was retracted by him within a reasonable period. In these circumstances, we are of the view that there is no admissible material to deny the claim of expenditure made by the assessee. Accordingly, this issue is answered in favour of the assessee and against the revenue. (Para 52)
In other words, revenue had accepted the decision of the Tribunal as regards carbon credit and did not challenge the said decision before the High Court. In fact, in the proceedings dated 11.09.2009 it was agreed by both the sides (including the revenue) that the only question which arose for consideration of this Court was as regards interpretation of Section 80-IA of the Act. Therefore, the issue relating to carbon credit was not raised or urged by the revenue. If that be the position, revenue would be estopped from raising the said issue before this Court at the stage of final hearing. That apart, there is no decision of the High Court on this issue against which the revenue can be said to be aggrieved and which can be assailed. In the circumstances, we decline to answer this question raised by the revenue and leave the question open to be decided in an appropriate proceeding. (Para 55)
SUPREME COURT OF INDIA
2023 STPL(Web) 464 SC
[2023 INSC 1053]
Commissioner Of Income Tax Vs. M/S Jindal Steel & Power Limited Through Its Managing Director
Civil Appeal No.13771 of 2015 With Civil Appeal No.13773 of 2015 Civil Appeal No.5524 of 2017 Civil Appeal No.7425 of 2019 Civil Appeal No. of 2023 (Arising From Slp (Civil) No.15564 of 2020) Civil Appeal No.13775 of 2015 Civil Appeal No.13774 of 2015 Civil Appeal No.9920 of 2016 Civil Appeal No.6986 of 2016 Civil Appeal Nos.9781-9782 of 2017 Civil Appeal No.9917 of 2017 Civil Appeal No.941 of 2020 Civil Appeal No. Of 2023 (Arising Out Of Slp (Civil) No.5871 Of 2020) Civil Appeal No. Of 2023 (Arising Out Of Slp (Civil) No.792 Of 2021) Civil Appeal No.8983 Of 2017 Civil Appeal No.1805 Of 2020-Decided on 6-12-2023
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