PCIT-2 Vs Jay Chemical Industries Ltd. (Gujarat High Court)
Summary: The Gujarat High Court dismissed the Revenue’s Tax Appeal against the ITAT Ahmedabad order dated 26.03.2019 for AY 2011-12 in the case of Jay Chemical Industries Ltd. The Court considered four questions concerning disallowance under Section 40(a)(ia), interest capitalisation under Section 36(1)(iii), deduction under Section 80IA(4) on sale of steam, and disallowance under Section 14A. On the first issue, the Court noted that the same dispute for AY 2010-11 had already been decided in favour of the assessee and the Revenue’s appeal against that decision had been dismissed on 24.09.2019. The second issue concerned additional interest capitalisation of Rs.17,85,407/-. The Court upheld the concurrent findings that the assessee’s working of interest capitalised at Rs.32,64,147/- was supported by the capital expenditure and work-in-progress, and that the Assessing Officer’s assumption that the entire term loan was utilised towards CWIP was unsupported by cogent material. On Section 80IA(4), the Court held that “Power” should be understood in common parlance as “Energy”, which can include thermal energy, and therefore steam produced by the assessee could be termed as power and qualify for the benefit of Section 80IA(4). On Section 14A, the Court found that the Revenue’s proposed question did not constitute a substantial question of law. The appeal was accordingly dismissed.
Dispute Before the Gujarat High Court
The Revenue challenged the ITAT Ahmedabad order dated 26.03.2019 for AY 2011-12 under Section 260A of the Income Tax Act, 1961. The assessee was engaged in the business of liquefied dyes and had filed its return on 30.09.2011 declaring total income of Rs.9,12,75,000/-. The case was selected for scrutiny and notice under Section 143(2) was issued on 03.08.2012.
