Income Tax Appellate Tribunal

DCIT vs. M/s.Chiripal Industries Ltd.

MANU/IB/0182/2021

15.09.2021

Direct Taxation

Where eligible enterprise has been transferred, the transferee company i.e. amalgamated company will become entitled to deduction under Section 80IA of IT Act

Assessee is engaged in the activity of Power Generation. It has filed return of income on declaring total income at Rs.14,81,15,160/- after claiming deduction of Rs.2,74,36,139/- under section 80IA of the Act. The case of the assessee was selected for scrutiny assessment. AO observed that the assessee has shown total value of the machinery and plant used for its activity at Rs.766.64 lakhs, of which Rs.711.23 lakhs was of old plant & machinery belonged to erstwhile concern i.e. Shanti Processor Ltd. installed prior to 01.04.2005. In other words, according to the AO, the plant set up by the assessee was not new power plant, but it was set up by transfer of old and previously used machinery, value of which was more than 90% of the total value of plant. Therefore, claim of the assessee under section 80IA was not allowable. Accordingly, AO has disallowed claim of deduction of Rs.2,74,36,169/- under section 80IA(4) of the Act and added to the income of the assessee.

Aggrieved, assessee went in appeal before the First appellate authority. CIT(A), after detailed analysis of the issue and after following decisions of his predecessor in the assessee’s own case on identical issue, allowed claim of the assessee and deleted the addition. Dissatisfied with order of the CIT(A), the Revenue has filed present appeal.

In this case, after going through the previous orders of ITAT on similar issues, it can be concluded that when any undertaking of an Indian Company which is entitled to deduction under this Section 80IA of IT Act is transferred before expiry of the period specified in this section to another Indian Company, then as per clause (b) the provision of this sections shall apply to the amalgamated company, as they would have applied to the amalgamating company. In other words, the provision makes it clear that ambit of this section is extended to the cases where eligible enterprise is transferred. In such cases, the transferee company i.e. amalgamated company will become entitled to deduction.

Thus, CIT(A) rightly appreciated the facts both on facts and in law as well as weighed earlier decisions of his predecessor and allowed the claim of deduction under section 80IA. Therefore, order of the CIT(A) upheld and appeal of the Revenue dismissed.

Tags : Deduction

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