Industrial undertaking – Special deduction u/s 80-IA(4) – Industrial undertaking engaged in production of power – Meaning of ‘power’ in section 80-IA(4) – Power would include steam; A.Y. 2011-12

37. Principal CIT vs. Jay Chemical Industries Ltd. [2020] 422 ITR 449 (Guj.) Date of order: 17^th February, 2020 A.Y.: 2011-12

Industrial undertaking – Special deduction
u/s 80-IA(4) – Industrial undertaking engaged in production of power – Meaning
of ‘power’ in section 80-IA(4) – Power would include steam; A.Y. 2011-12

For the A.Y. 2011-12 the assessee had
claimed deduction of Rs. 32,51,080 u/s 80-IA(4) of the ITA, 1961. This claim
was on account of the operation of the captive power plant. The assessee showed
income from sale of power to the tune of Rs. 1,23,10,500 and the sale of vapour
at Rs. 6,59,77,170. The A.O. took the view that ‘vapour’ would not fall within
the meaning of ‘power’.

The Commissioner (Appeals) and the Tribunal
allowed the assessee’s claim.

On appeal by the Revenue, the Gujarat High Court upheld the decision of
the Tribunal and held as under:

‘i) Section 80-IA(4) of the Income-tax Act,
1961 provides for special deduction to industrial undertakings engaged in the
production of power. The word “power” should be understood in common parlance
as “energy”. “Energy” can be in any form, mechanical, electricity, wind or
thermal. In such circumstances, “steam” produced by an assessee can be termed
as power and would qualify for the benefits available u/s 80-IA(4).

ii) Steam had
to be considered as “power” for the purpose of deduction u/s 80-IA(4).’