PCIT Vs Gujarat Urja Vikas Nigam Limited (Gujarat High Court)
The Gujarat High Court considered a tax appeal filed by the Revenue under Section 260A of the Income Tax Act, 1961, against the ITAT Ahmedabad order dated 08.08.2024 for AY 2017-18. The assessee, Gujarat Urja Vikas Nigam Limited, is a Public Sector Undertaking engaged, inter alia, in the purchase, sale and distribution of electricity.
The assessee filed its return for AY 2017-18 declaring total income of Rs.90,92,02,810 after setting off brought-forward losses of Rs.75,45,22,135 and showing book profit under Section 115JB of Rs.165,54,21,963. Following scrutiny, the Assessing Officer passed an assessment order under Section 143(3) on 23.12.2019 determining total income at Rs.319,47,55,443 and book profit at Rs.308,27,86,868. Among other adjustments, the AO made a disallowance of Rs.6,97,664 towards interest capitalization of capital work in progress and an adjustment under Section 115JB including the disallowance under Section 14A.
The CIT(A) partly allowed the assessee’s appeal. Thereafter, both the assessee and Revenue preferred appeals before the Tribunal. The ITAT partly allowed both appeals by its order dated 08.08.2024. The Revenue then approached the High Court raising two substantial questions of law.
The first concerned the deletion of the Rs.6,97,664 disallowance of interest expenditure allegedly attributable to capital work in progress and liable to be capitalized. The second concerned whether a disallowance under Section 14A read with Rule 8D was required to be added while computing book profit under Section 115JB.
