Sokke Kaliveerappa Shivaraj Vs ACIT (ITAT Bangalore)
ITAT Bangalore: Power Generation Incentive Eligible for 80-IA Deduction-Direct Nexus with Business Established
In the case of Sokke Kaliveerappa Shivaraj, the Bangalore ITAT held that Generation Based Incentive (GBI) received from the Government is eligible for deduction u/s 80-IA, overturning the AO and CIT(A)’s disallowance.
The key issue was whether ₹25.91 lakh incentive, received based on electricity generation under the GBI scheme, qualifies as “profits derived from” the eligible business.
The AO/CIT(A) had denied deduction relying on SC rulings (Liberty India, Pandian Chemicals, Sterling Foods), arguing that:
- The source of income is the Government scheme,
- Hence it lacks first-degree nexus with business operations.
However, the ITAT held (after detailed analysis of scheme mechanics and case laws across pages 7–9):
- The incentive is directly linked to units of electricity generated and supplied,
- It arises only upon carrying out the core activity of power generation,
- Therefore, it has a direct and inextricable nexus with business operations.
The Tribunal clarified:
- Merely because payment flows through a Government scheme, it does not break the nexus,
- The condition of foregoing accelerated depreciation is only regulatory and does not change the nature of income.
Relying on coordinate bench rulings and principles from Meghalaya Steels, the ITAT concluded that:
