GUJARAT GUARDIAN LTD.,NEW DELHI V. ACIT, CIRCLE-10(2), NEW DELHI

ITA 1966/DEL/2018

AI Insights

The case involves Gujarat Guardian Ltd., which appealed against the disallowance of deduction under section 80IA(4)(iv) of the Income Tax Act, 1961, related to power generated from windmills. The Assessing Officer and CIT(A) had rejected the deduction claim on grounds that the power was captively consumed and no sales invoices were issued, and that the assessee did not maintain books of account nor comply with audit requirements under section 80IA(7). The Tribunal, referencing its decisions in earlier years and similar cases, allowed the deduction, directing verification of compliance with section 80IA(7). Additionally, the Tribunal dismissed the Revenue's appeal on the disallowance under section 14A r.w.r. 8D, agreeing with the CIT(A) that the AO had not properly justified the disallowance.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 669324 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2013-2014
• Other Referred Cases: Sesa Goa Ltd. vs. JCIT: 423 ITR 426 (Bom.), DCIT vs. Total Oil India P Ltd. 149 taxmann.com 332 (Mumbai Trib.) (SB)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PRAJNA PARAMITA
• Assessee Lawyers: S NEERAJ JAIN; KUNAL PANDEY; CHARTERED
• Keywords: Earning of tax free income; Rule 8D
• Section: 234B; 14A

Judgement Text

"आयकर अपीलीय अिधकरण िदʟी पीठ “डी”, िदʟी ŵी िवकास अव̾थी, Ɋाियक सद˟ एवं मनीष अŤवाल, लेखाकार सद˟ क े समƗ IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “D”, DELHI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER & SHRI MANISH AGARWAL, ACCOUNTANT MEMBER आअसं.1966 और 1967/िदʟी/2018(िन.व. 2013-14 और 2014-15) ITA No.1966 & 1967/DEL/2018 (A.Y.2013-14 & 2014-15) Gujarat Guardian Ltd., 4-7/C, DDA Shopping Centre, New Friends Colony, New Delhi 110025 PAN: AAACG-1622-K ...... अपीलाथᱮ/Appellant बनाम Vs. Assistant Commissioner of Income Tax, Circle-10(2), CR Building, New Delhi 110002 ..... ᮧितवादी/Respondent आअसं.1819/ िदʟी /2018 (िन.व. 2014-15) ITA No. 1819/Del/2018 (A.Y. 2014-15) Assistant Commissioner of Income Tax, Circle-10(2), CR Building, New Delhi 110002 ...... अपीलाथᱮ/Appellant बनाम Vs. Gujarat Guardian Ltd., 4-7/C, DDA Shopping Centre, New Friends Colony, New Delhi 110025 PAN: AAACG-1622-K ..... ᮧितवादी/Respondent Assessee by : S/Shri Neeraj Jain, Advocate & Kunal Pandey, Chartered Accountant Department by : Ms. Prajna Paramita, CIT-DR सुनवाई कᳱ ितिथ/ Date of hearing : 01/05/2025 घोषणा कᳱ ितिथ/ Date of pronouncement : : /06/2025 2 ITA Nos.1819, 1966 & 1967/DEL/2018 (A.Y.2013-14 & 2014-15) आदेश/ORDER PER VIKAS AWASTHY, JM: These appeals by the assessee for AYs 2013-14 and 2014-15 are taken up together for adjudication as identical issues are involved in both the appeals. The Revenue has filed cross appeal for AY 2014-15. 2. For the sake of convenience, appeal of the assessee for AY 2013-14 is taken up as a lead case, hence, facts are narrated from said appeal. ITA No. 1966/Del/2018 for AY 2013-14 3. This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-35, New Delhi [in short ‘the CIT(A)] dated 08.12.2017, for Assessment Year 2013-14. 4. The assessee in appeal has raised solitary issue assailing disallowance of deduction u/s.80IA(4)(iv) of the Income Tax Act, 1961(hereinafter referred to as 'the Act') on generation of power from windmill. The assessee has also raised additional grounds of appeal vide application dated 10.08.2021 as follows:- \"4. That on the facts and circumstances of the case and in law, education cess paid by the assessee on total income and dividend distribution tax, should be directed to be allowed as deduction, in terms of the law clarified by the Hon'ble Bombay High Court in the case of Sesa Goa Ltd. vs. JCIT: 423 ITR 426 (Bom.) and other decisions. 5. That on the facts and circumstances of the case and in law, the assessing officer ought to have restricted the levy of dividend distribution tax on the dividend distributed/ paid to Guardian International Corporation, to 15 percent in terms of Article 10(2) of the Double Taxation Avoidance Agreement between India and USA instead of 16.995% charged in terms of section 115-0 of the Act.\" 3 ITA Nos.1819, 1966 & 1967/DEL/2018 (A.Y.2013-14 & 2014-15) 5. Shri Neeraj Jain, appearing on behalf of the assessee submits that the assessee has claimed deduction of Rs.24,42,29,301/- u/.s 80IA(4)(iv) of the Act in respect of generation of power through windmill. The assessee had two windmill projects eligible for deduction u/s. 80IA(4)(iv) of the Act. The windmill started generating power from AY 2004-05 onwards. The assessee claimed deduction u/s. 80IA(4) of the Act for the first time on said windmills in AY 2009-10. The Assessing Officer (AO) rejected assessee's claim of deduction on the ground that the assessee is not deriving any profits or gains within the meaning of section 80IA(4)(iv) of the Act as the powers/electricity generated through windmills was captively consumed and no sale invoices were issued by the assessee to Gujarat Energy Transmission Corporation Ltd. It was further alleged that the assessee neither maintains books of account, nor has complied with the requirement of audit described u/s.80IA(7) of the Act. The CIT(A) upheld the disallowance made by the AO for the similar reason. The ld Counsel submits that in assessee's own case for AY 2009-10, the Tribunal in ITA No. 3554/Del/2014 has allowed the claim of deduction u/s. 80IA(4)(iv) of the Act to the assessee. The ld. Counsel further pointed that in AY 2010-11, the DRP while considering the issue of assessee's claim of deduction u/s80IA(4) of the Act, accepted the fact that the assessee is eligible for deduction u/s.80IA(4) of the Act even if power generated by windmills are used captively. The DRP vide directions dated 21.11.2014 restored the matter back to the AO for verification and ascertaining the facts whether the assessee fulfils requirements of section 80IA(7) of the Act. The AO disallowed assessee's claim of deduction on the ground that the assessee has neither maintained books of account nor has complied with the requirement of audit prescribed u/s.80IA(7) of the Act. The assessee carried the issue in appeal before the Tribunal in ITA 4 ITA Nos.1819, 1966 & 1967/DEL/2018 (A.Y.2013-14 & 2014-15) no.973/Del/2015. The Tribunal after examining the facts for the assessment year 2010-11 held that the assessee has duly complied with the conditions prescribed u/s. 80IA(7) of the Act and directed the AO to grant deduction u/s.80IA(4) of the Act after verifying assessee's claim on examination. Similarly, the assessee's claim of deduction u/s. 80IA of the Act for AY 2012-13 was allowed by the Tribunal in ITA No. 5794/Del/2016. The facts in impugned assessment year are identical. The ld. Counsel, thus prayed for allowing assessee's claim of deduction u/s.80IA of the Act. 6. In respect of additional ground of appeal no. 4, the ld. Counsel submits that the assessee vide application dated 10.08.2021 has raised an additional ground of appeal assailing disallowance of Education Cess. The ld. Counsel statement at Bar that he is not pressing additional ground of appeal no. 4. 7. In respect of additional ground no. 5 relating to dividend distribution tax paid to Guardian International Corporation, the ld. Counsel fairly admitted that this issue is covered against the assessee by the decision of Special Bench in the case of DCIT vs. Total Oil India P Ltd. 149 taxmann.com 332 (Mumbai Trib.) (SB). 8. Per contra, Ms. Prajna Paramita representing the department vehemently defended the findings of CIT(A) with respect to assessee’s claim of deduction u/s. 80IA(4) of the Act. However, the ld. DR fairly stated that the issue of assessee's eligibility to claim deduction in respect of captively consumed power generated through windmills has been considered by the Tribunal in assessee's own case in preceding assessment years. 5 ITA Nos.1819, 1966 & 1967/DEL/2018 (A.Y.2013-14 & 2014-15) 9. Both sides heard, orders of the authorities below examined. The assessee in appeal has assailed disallowance of assessee's claim of deduction u/s. 80IA(4)(iv) of the Act Rs.24,42,29,301/-. The assessee has set up two windmills, the first windmill was set up in Financial Year 2003-04 and the second windmill was set up in Financial Year 2004-05. The assessee claimed deduction u/s. 80IA(4) of the Act in respect of aforesaid windmills for the first time in AY 2009-10. The assessee's claim was rejected by the AO primarily for the reason that the electricity generated through windmills is captively consumed and no sales invoice was issued by the assessee to Gujarat Energy Transmission Corporation Ltd. It was further alleged that the assessee was not maintaining books of accounts nor has complied with the requirement of audit prescribed u/s. 80IA(7) of the Act. We find that for similar reasons assessee's claim of deduction u/s. 80IA of the Act has been rejected in the impugned assessment year. The Coordinate Bench of the Tribunal in appeal by the assessee for AY 2009-10 in ITA No.3544/Del/2014, vide each dated 17.12.2015 in principle held that the assessee is eligible for deduction u/s. 80IA of the Act on power generated through windmills and captively consumed. 10. Similar issue arose in assessee’s appeal for AY 2010-11 in ITA No. 973/Del/2015. The Coordinate Bench in AY 2010-11 again decided this issue in favour of the assessee. 11. This is a fifth year of assessee’s claim of deduction, once assessee’s claim u/s. 80IA of the Act has been allowed in the past, the same cannot be denied to the assessee in subsequent assessment years for similar reason. This issue is squarely covered in favour of the assessee by Tribunal orders in preceding 6 ITA Nos.1819, 1966 & 1967/DEL/2018 (A.Y.2013-14 & 2014-15) assessment years. Hence, findings of the CIT(A) on this issue are reversed and ground no. 1 of the assessee appeal is allowed. 12. In ground no. 2 of appeal, the assessee has assailed levy of interest u/s. 234B of the Act. Charging of interest u/s. 234B of the Act is mandatory and consequential, hence, ground no. 2 of appeal is dismissed. 13. In additional ground no. 4 of appeal, the assessee has assailed disallowance of Education Cess. The ld. Counsel for the assessee made statement at Bar that he is not pressing this ground. Hence, additional ground no. 4 of appeal is dismissed as not pressed. 14. In additional ground no. 5 of appeal, the assessee has assailed levy of dividend distribution tax on dividend distributed/paid to Guardian International Corporation. The ld. Counsel has fairly conceded that the issue is covered against the assessee by the decision of Special Bench of the Tribunal in the case DCIT vs. Total Oil India P. Ltd. (supra). In light of aforesaid decision of the Special Bench, additional ground no. 5 of appeal is dismissed. ITA No. 1967/Del/2018 for AY 2014-15 (Assessee Appeal) ITA No. 1819/Del/2018 for AY 2014-15 (Revenue Appeal) 15. These cross appeals by the assessee and Revenue are directed against the order of Commissioner of Income Tax (Appeals)-35, New Delhi [hereinafter referred to as ’the CIT(A)] dated 08.12.2017, for AY 2014-15. 16. The assessee in ground no. 1 of appeal has assailed disallowance of deduction u/s. 801A(4) of the Act. 7 ITA Nos.1819, 1966 & 1967/DEL/2018 (A.Y.2013-14 & 2014-15) 16.1. In ground no. 2 and 3 of appeal, the assessee has assailed levy of interest u/s. 234A and 234B of the Act, respectively. 16.2. In addition to the above grounds of appeal, the assessee has raised additional ground of appeal with respect to disallowance of Education Cess and Dividend Distribution Tax. 17. The ld. Counsel for the assessee submits that the issues raised by the assessee in appeal are identical to the one raised in appeal for AY 2013-14, therefore, the submissions made while addressing issues in AY 2013-14 would equally apply to the subsequent assessment year. 18. The ld. DR endorsed the statement made by ld. Counsel for the assessee and reiterated the submissions made while addressing the appeal for AY 2013-14. 19. Both sides heard. The ground no. 1 of appeal is with regard to assessee’s claim of disallowance u/s.80IA of the Act. The AO has made disallowance for the similar reasons as was made in AY 2013-14. Therefore, the findings given by us while adjudicating this issue in AY 2013-14 would mutatis mutandis apply to the impugned assessment year as well. The ground no. 1 of the appeal is thus allowed for parity of reasons. 20. In ground no. 2 and 3 of appeal, the assessee has assailed charging of interest u/s. 234A and 234B of the Act. Charging of interest under aforesaid sections is mandatory and consequential; hence, both these grounds are dismissed. 8 ITA Nos.1819, 1966 & 1967/DEL/2018 (A.Y.2013-14 & 2014-15) 21. The assessee has raised additional ground of appeal with regard to disallowance of Education Cess. The ld. Counsel for the assessee made statement at Bat that he has not pressing this additional ground of appeal. In light of the statement made by ld. Counsel, the additional ground of appeal relating to Education Cess is dismissed as not pressed. 22. The assessee has raised additional ground of appeal assailing Dividend Distribution Tax. The issue is covered against the assessee by the Special Bench of the Tribunal in the case of DCIT vs. Total Oil India P Ltd. (supra). Accordingly, this additional ground of appeal is dismissed. 23. In the result, appeal of the assessee is partly allowed. 24. The solitary issue raised by the Department in its appeal is with respect to deleting of disallowance u/s. 14A r.w.r. 8D amounting to Rs.2,21,54,483/-. During the period relevant to assessment year under appeal, the assessee has earned tax free income of Rs.20,51,20,084/- in the form of dividend. The assessee has made suo moto disallowance of Rs.6,15,154/- for earning exempt income. The AO rejected assessee’s computation of disallowance made u/s. 14A of the Act and invoked the provisions of Rule 8D and made further disallowance of Rs.2,21,54,483/-. The ld. Counsel for the assessee submits that the AO while rejecting assessee’s suo moto disallowance has not recorded his dissatisfaction as mandated u/s. 14A(2) of the Act. He placed reliance on the order of Tribunal in assessee’s own case for AY 2009-10 in ITA No. 3554/Del/2014 and for AY 2011-12 in ITA No.2248/Del2016 to support of his submissions. 9 ITA Nos.1819, 1966 & 1967/DEL/2018 (A.Y.2013-14 & 2014-15) 25. Per contra, the ld. DR vehemently defended findings of the AO while making disallowance u/s. 14A of the Act and prayed for reversing findings of the CIT(A) in deleting disallowance. 26. Both sides heard. The CIT(A) has deleted disallowance made u/s. 14A r.w.r 8D of the Act for the reason that AO has not pointed any discrepancy in the claimed made by the assessee having regard to the accounts. In the absence of any cogent findings, the law does not allow the AO to use provisions of Rule 8D of the Act in a automatic manner. Before proceeding further it would be imperative to refer to the provisions of section 14A(2) of the Act that gives handle to the AO to determine the amount for making disallowance u/s.14A of the Act as under:- “(2)The Assessing Officer shall determine the amount of expenditure incurred in relation to such income which does not form part of the total income under this Act in accordance with such method as may be prescribed, if the Assessing Officer, having regard to the accounts of the assessee, is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to income which does not form part of the total income under this Act.” 27. A bare perusal of aforesaid provision would show that, if the Assessing Officer having regard to the accounts of the assessee is not satisfied with correctness of the claim of assessee, then he shall determine the account of expenditure for earning of exempt income in accordance with the method as prescribed i.e. as per provisions of Rule 8D of the Act. In the instant case, we find that the AO has not recorded his dissatisfaction over the suo moto disallowance made by the assessee with regard to the counts of the assessee. Though, the AO has given his own reasoning for making a disallowance but the said reasoning of 10 ITA Nos.1819, 1966 & 1967/DEL/2018 (A.Y.2013-14 & 2014-15) disallowance fails the test of mandatory requirement as set out in sub section (2) to section 14A of the Act. Hence, we find no infirmity in findings of the CIT(A) in deleting the disallowance made u/s. 14A r.w.r 8D of the Act. The findings of CIT(A) on this issue are upheld and the solitary ground raised by the Revenue in its appeal is dismissed. 28. In the result, appeal of the revenue is dismissed. 29. To sum up, appeal of the assessee in ITA Nos. 1966 & 1967/Del/2018 are partly allowed and appeal of the Revenue in ITA No. 1819/Del/2018 is dismissed. Order pronounced in the open court on Friday the 27th day of June, 2025. Sd/- Sd/- (MANISH AGARWAL) (VIKAS AWASTHY) लेखाकार सद᭭य/ACCOUNTANT MEMBER ᭠याियक सद᭭य/JUDICIAL MEMBER िदʟी/Delhi, ᳰदनांक/Dated 27/06/2025 NV/- ᮧितिलिप अᮕेिषतCopy of the Order forwarded to : 1. अपीलाथᱮ/The Appellant , 2. ᮧितवादी/ The Respondent. 3. The PCIT/CIT(A) 4. िवभागीय ᮧितिनिध, आय.अपी.अिध., िदʟी /DR, ITAT, िदʟी 5. गाडᭅ फाइल/Guard file. 11 ITA Nos.1819, 1966 & 1967/DEL/2018 (A.Y.2013-14 & 2014-15) BY ORDER, //True Copy// (Asstt. Registrar) ITAT, DELHI "