IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 18 of 2014 With R/TAX APPEAL NO. 149 of 2014 With R/TAX APPEAL NO. 900 of 2018 With R/TAX APPEAL NO. 901 of 2018 With R/TAX APPEAL NO. 902 of 2018 With R/TAX APPEAL NO. 239 of 2022 ==========================================================

COMMISSIONER OF INCOME TAX - I Versus GUJARAT STATE FERTILIZER & CHEMICALS LTD ==========================================================

Appearance:

KARAN G SANGHANI(7945) for the Appellant(s) No. 1 MR MANISH J SHAH(1320) for the Opponent(s) No. 1 RULE SERVED for the Opponent(s) No. 1 ==========================================================

CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA and HONOURABLE MR. JUSTICE PRANAV TRIVEDI Date : 17/09/2025

COMMON ORDER

(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)

1. Heard learned Senior Standing Counsel Mr. Karan Sanghani for the appellants and learned advocate Mr. Manish Shah for the respondent.

2. These appeals are filed under Section 260A of the Income tax Act, 1961 (for short ‘the Act’) and following substantial questions of law are framed while admitting the Appeals:

TAX APPEAL NO. 18 OF 2014:

"[3.1] Whether on the facts and in the circumstances of the case and in law, the ITAT was justified in upholding the decision of CIT (A) that deduction u/s. 80IA(4) is allowable to the assessee for generation of power for captive consumption?

[3.2] Without prejudice to the Revenue's stand that allowance of deduction u/s.80ΙΑ (4) by the CIT (A) ought not to have been upheld by the ITAT, whether the facts and the circumstances of the case and in law, the ITAT was justified in allowing assessee's claim of deduction of Rs.49.78 crores u/s.80IA (4) of the Act, since the assessee had adopted rate of such power of Rs.5.42 per unit for captive consumption as against the market rate of Rs.2.11 per unit being supplied by the Gujarat Electricity Board to is consumers?"

TAX APPEAL NO. 149 OF 2014:

“(i) Whether on the facts and in the circumstances of the case and in law, the ITAT was justified in substituting A.O's working with its own subjective estimate, reducing the disallowance of interest made by the A.O. under Section 14A r.w.s. 36(1) (iii) of the Act, even though the ITAT had itself upheld the said disallowance in principle ?

(ii) Whether on the facts and in the circumstances of the case and in law, the ITAT was justified in reducing the disallowance of interest under Section 14A r.w.s. 36(1) (iii) of the Act, to an ad hoc and arbitrary figure of Rs. 5 lacs, without giving any basis for the same, by ignoring the fact that the disallowance of interest made by the Α.Ο. 10% of exempt income was fair and reasonable ?

(iii) Whether on the facts and in the circumstances of the case and in law, the ITAT was justified in reducing the disallowance of interest made by the A.O. u/s. 14A r.w.s. 36(1) (iii) of the Act, without appreciating that the assessee had failed to furnish evidence to substantiate the allowability of the entire interest expenditure in terms of the provisions of Section 36(10(iii) of the Act ?

(iv) Whether on the facts and in the circumstances of the case and in law, the ITAT was justified in upholding the decision of CIT(A) that deduction u/s 80IA(4) is allowable to the assessee, without appreciating the fact that the deduction u/s. 80IA (4) is not allowable to the assessee for generation of power for captive consumption ? (v) Without prejudice to the Revenue's stand that allowance of deduction u/s 80IA(4) by the CIT(A) ought not to have been upheld by the ITAT, whether on the facts and in the circumstances of the case and in law, the ITAT was justified allowing assessee's claim in of of deduction Rs. 82.53 crores u/s 80IA (4) of the Act, without appreciating the fact that the profits of eligible business of power generation plant have been inflated by the assessee by adopting excessive sale rate of Rs. 5.49 per unit for power supplied to its own units for captive consumption as against the market rate o