2013 (5) TMI 357 - HC - Income Tax

Deduction u/s 80IA - AO reduced the profits shown by the assessee for the purpose of computing the deduction allowable u/s 80IA of the Income Tax Act on the basis of the reasons that the assessee company itself has shown the sale to UPPCL and that is to be considered as market rate for the sale of power as it cannot be sold to any other person except the UPPCL - The learned Tribunal allowed the claim for deduction under Section 80IA stating that, AO has taken figures from units of powers sold to UPPCL at 0.89 units @ Rs.24,43,159/- as against the price of assessee i.e. inter-unit transfer @ Rs.43,02,187/- per unit. We are of the view that the figures picked up by the AO from the orders of UPPCL does not represent the open market value of electricity Held that - It would appear that the views adopted by the learned Tribunal, prima facie, are correct. - After hearing both the parties, the appeal does not involve any substantial question of law therefore, not admitted and thus rejected.

Issues:
1. Computation of deduction under Section 80IA of the Income Tax Act based on the market value of goods or services.
2. Dispute regarding the sale value of power for inter-unit transfer.
3. Assessment order ignoring the explanation provided by the assessee.
4. Appeal to the C.I.T. [Appeal] and subsequent approach to the Tribunal.
5. Tribunal's reversal of the Assessing Officer's findings and allowance of deduction under Section 80IA.
6. Comparison with the judgment in the case of CIT Vs. Graphite India Limited.

Analysis:

1. The primary issue in this case revolves around the computation of deduction under Section 80IA of the Income Tax Act, which is based on the market value of goods or services. The Assessing Officer reduced the profits shown by the assessee significantly for this purpose, leading to a substantial difference in the deduction amount.

2. The dispute mainly stems from the sale value of power for inter-unit transfer, with the Assessing Officer restricting the rate per unit sale based on the price at which it was being transferred/sold to a specific entity. This restriction significantly impacted the sale value and, consequently, the profits of the assessee.

3. Despite the explanation provided by the assessee regarding the nature of the transactions and the reasons for the pricing strategy adopted, the assessment order seemingly ignored these crucial details. The explanation highlighted that the pricing was based on specific operational requirements and surplus power considerations.

4. Following an unsuccessful appeal to the C.I.T. [Appeal], the assessee approached the Tribunal seeking a reversal of the Assessing Officer's findings. The Tribunal, in its judgment, disagreed with the Assessing Officer's approach and provided reasoning based on the representative market value of electricity.

5. The Tribunal's decision to reverse the Assessing Officer's findings was supported by the judgment in the case of CIT Vs. Graphite India Limited. The Tribunal emphasized the importance of considering the open market value of electricity for computation purposes, rather than relying solely on specific transactional figures.

6. Ultimately, the High Court upheld the Tribunal's decision, stating that the views adopted by the Tribunal appeared to be correct. The Court found no substantial question of law in the appeal and rejected it, affirming the allowance of deduction under Section 80IA based on the market value considerations and the principles established in relevant case law.

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