IMPORTANT POINTS
(1) Recomputation of deduction – State Electricity Board’s rate when it supplies power to consumers have to be taken as the market value for computing deduction under Section 80-IA of Income Tax Act.
(2) Any particular mode of computing claim of depreciation has to be opted for before due date of filing of return.

JUDGMENT :

Ujjal Bhuyan, J.

There are three special leave petitions in this batch, viz., SLP (C) No.15564 of 2020, SLP (C) No.5871 of 2020 and SLP (C) No.792 of 2021. Leave in these special leave petitions are therefore granted.

2. Core issue raised in this batch of civil appeals being identical, those were heard together and are being disposed of by this common judgment and order.

3. We have heard Mr. Rupesh Kumar, learned counsel for the revenue representing the appellants; Mr. S. Ganesh and Mr. Percy Pardiwala, learned senior counsel as well as Mr. D. Nageswar Rao, learned counsel for the respondent assessee.

4. All the appeals are by the revenue assailing orders of various high courts dismissing its appeals filed under Section 260A of the Income Tax Act, 1961. 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.

4.1. 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. This additional issue has been raised in Civil Appeal No.9917 of 2017 (Assistant Commissioner of Income Tax Vs. M/s Godawari Power and Ispat Pvt. Ltd.) and also in Civil Appeal No.8983 of 2017 (Assistant Commissioner of Income Tax Chhattisgarh Vs. M/s Godawari Power and Ispat Pvt. Ltd.)

RECOMPUTATION OF DEDUCTION UNDER SECTION 80 IA OF THE INCOME TAX ACT, 1961.

5. At the outset let us deal with the core issue i.e., recomputation of deduction claimed by the assessee under Section 80 IA of the Income Tax Act, 1961 (briefly ‘the Act’ hereinafter).

6. Though this issue has been raised and urged in all the civil appeals, Civil Appeal No.13771 of 2015 was argued and taken up as the lead case. Since the issue raised is common to all the appeals, it is not necessary to refer to the factual details of each of the appeals separately though the price per unit of electricity supplied by the assessee to the power distributing companies/ State Electricity Boards and to their captive plants are different. However, that would not have any material bearing on the analysis as the question of law is identical in all the appe