Pune ITAT on Section 80-IA & MAT Credit: Deduction Linked to Tax Profits, Not Book Profits

The Pune Bench of the Income Tax Appellate Tribunal in DCIT Vs Baramati Agro Limited (ITAT Pune) has dismissed the Revenue’s appeal for AY 2021-22 on two key issues:

1. The scope and method of computing deduction under Section 80-IA for power generation units.
2. Adjustment of carried-forward MAT credit in light of a pending appellate outcome for AY 2020-21 and correctness of Section 115JB book profit computation.

The Tribunal upheld the order of the CIT(A) in full, endorsing both the assessee’s method of computing profits for Section 80-IA and the treatment of MAT credit under Section 115JAA.

Background of the Case

Basic Facts

• Case: DCIT Vs Baramati Agro Limited
• Forum: ITAT Pune
• Appeal No.: ITA No. 395/PUN/2026
• Assessment Year: 2021-22
• Order date: 25/08/2026

Baramati Agro Limited is engaged in a diversified business including:

• Poultry operations (hatchery, layer, contract farming),
• Agricultural activities,
• Sugar manufacturing,
• Ethanol production,
• Co-generation and power generation.

For AY 2021-22, the assessee filed its return of income on 14.03.2022 declaring total income of Rs.63,27,52,360/-. The return was initially processed under Section 143(1) on 22.09.2022. Subsequently, the case was selected for scrutiny on issues of refund claim and Specified Domestic Transactions (SDT). The matter was referred to the TPO, who passed an order without making any adjustment.

Two power units, Shetphalgade and Kannad, were claiming deduction under Section 80-IA(4)(iv) as eligible power generation undertakings.

Deduction Claimed vs Book Profits

The assessee claimed the following deduction under Section 80-IA:

• Shetphalgade: Rs.28,31,05,135/-
• Kannad: Rs.19,07,75,889/-
• Total claim: Rs.47,38,81,024/-

As per the separate books for each eligible unit, the book profits were:

The Assessing Officer held that only the book profit of the eligible units (aggregating Rs.40,95,00,569/-) represented “profits and gains derived from” the eligible business and, therefore, restricted the deduction to this figure, disallowing Rs.6,43,80,455/- under Section 80-IA.

In appeal, the CIT(A) reversed this disallowance and allowed the full claim of Rs.47,38,81,024/-. The Revenue brought the matter before the Tribunal.

A second dispute related to MAT credit. The Assessing Officer reduced carried-forward MAT credit of Rs.13,08,21,618/- on the basis of an assessment for AY 2020-21 which determined that normal tax exceeded MAT under Section 115JB, effectively neutralising the brought forward MAT credit. The AY 2020-21 assessment itself was under challenge before the CIT(A).

The CIT(A) directed that this MAT credit should not be reduced in AY 2021-22 until the appeal for AY 2020-21 was finally decided, and also directed correction of book profit under Section 115JB after giving proper amalgamation effect. The Revenue challenged these directions as well.

Issues Raised by the Revenue

The Revenue’s appeal broadly raised the following grounds:

1. Section 80-IA computation: Deduction must be restricted to the commercial/book profits of the eligible undertaking; recomputation by substituting tax depreciation and other tax adjustments is not permissible.
2. Section 80AB vs Section 80-IA: Section 80-IA is a self-contained provision; reference to Section 80AB and Chapter IV-D provisions (Sections 28 to 44) to enhance eligible profits allegedly goes against the phrase “profits and gains derived from” the eligible business.
3. Method of computing eligible profits: The assessee’s method of replacing book depreciation with tax depreciation and including certain other items was said to allow deduction in excess of the profits reflected in the separate books.
4. MAT credit: The CIT(A) was stated to have erred in directing that carried-forward MAT credit of Rs.13,08,21,618/- should not be reduced simply because the AY 2020-21 order was under appeal.