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Issues involved:
The issues involved in this case include the valuation of power generated by the assessee for the purpose of computing profit eligible u/s 80IA, the application of section 80IA(8) in determining the market value of goods transferred, and the interpretation of provisions related to captive consumption of power. Valuation of Power Generated: The appeal concerns the valuation of power generated by the assessee for computing profit eligible u/s 80IA. The Commissioner of Income tax (Appeals) upheld the Assessing Officer's decision to adopt a lower rate of ` 2.70 per unit for selling power, instead of the rate of ` 3.50 per unit claimed by the appellant. The Tribunal referred to a similar case where the market value of power generated was crucial in determining eligible profit u/s 80IA. It was emphasized that the market value should reflect the price that would have been paid if the power was bought from the open market. The Tribunal concluded that the market value of power generated by the assessee should be considered as ` 3.50 per unit, overturning the lower authorities' decision. Application of Section 80IA(8): Section 80IA(8) was invoked by the Assessing Officer to prevent the assessee from inflating the profit of its eligible unit by overstating the price of goods sold. The provision states that if the consideration for transfer of goods does not correspond to the market value, the eligible profit should be computed based on the market value. The Tribunal highlighted that this provision aims to prevent misuse of existing provisions and ensure accurate valuation of goods transferred. In this case, the Assessing Officer used a market value of ` 2.70 per unit for power generated, whereas the appellant claimed ` 3.50 per unit. The Tribunal, following legal precedents and the rationale of market value determination, directed the reassessment of profit based on the higher rate of ` 3.50 per unit. Captive Consumption of Power: The case also involved the interpretation of provisions related to captive consumption of power generated by the assessee. The Tribunal referenced a judgment by the jurisdictional High Court which supported the claim that profit and gains can be derived from captive consumption of power. The Tribunal emphasized that the value of power consumed should be based on the price that would have been paid if the power was bought from the open market. By applying this principle, the Tribunal accepted the appellant's argument that the market value of power consumed should be considered as ` 3.50 per unit. This decision led to the allowance of the appeal filed by the assessee. Conclusion: In conclusion, the Tribunal allowed the appeal filed by the assessee, directing the reassessment of profit based on the market value of power generated at ` 3.50 per unit. The decision was made in consideration of legal provisions, precedents, and the principle of accurate valuation in determining eligible profit u/s 80IA.
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