2022 (11) TMI 1416 - AT - Income Tax

Deduction u/s 80IA - sale/supply of electricity to its own units adopting the rate at which SEB's supply electricity to other consumers - adopting the market price of power supplied to captive unit at the rate of which the State Electricity Board supplies electricity, with regard to deduction - HELD THAT - We note that on this issue the Ld.CIT(A) has decided in favour of assessee by following the decision of the Tribunal in AY 2006-07 and deleted sum as disallowed by AO wherein as ITAT has adopted the selling rate of electricity to SEB's as the market rate rejecting the department's finding that the rate adopted by Power Distribution Agencies is the market rate to be adopted. We note that the Tribunal in AY 2007-08 to AY 2009-10 has allowed assessee s appeal regarding this issue. Since the Ld.DR could not point out any change in facts or law vis a vis that of the earlier years as decided by the Tribunal in assessee s case as noted (supra), we are inclined to uphold the impugned action of CIT(A). Appeal of the Revenue stands dismissed.

Summary

Issues:
- Interpretation of market price of power supplied for captive consumption for deduction u/s 80IA.
- Relevance of government duties and taxes in determining market price.
- Assessment of deduction u/s 80IA based on market value of power generated.

Analysis:
1. The appeal by the Revenue challenged the CIT(A)'s decision regarding the market price of power supplied to the current unit for captive consumption for deduction u/s 80IA. The Revenue argued that the CIT(A) erred in adopting the rate at which the State Electricity Board supplies electricity without considering the sale price shown in the assessee's books. The Tribunal referred to a previous case where a similar issue was adjudicated, and it was held that the market value of electricity sold/supplied can be adopted based on the rate at which the assessee purchases electricity from the State Electricity Board. The Tribunal found no other method to determine market value and upheld the assessee's claim under u/s 80IA, setting aside the CIT(A)'s decision in favor of the assessee.

2. The second issue involved the exclusion of government duties and taxes in determining the market price of power supplied for deduction u/s 80IA. The Revenue contended that the CIT(A) erred in not excluding these duties and taxes. The Tribunal, following the decision in a previous case, upheld the assessee's method of calculating the market value of electricity supplied to captive units based on the rate at which electricity was purchased from State Electricity Boards. The Tribunal found this method rational and reasonable, rejecting the Revenue's argument. The Tribunal concluded that the assessment order was not erroneous and prejudicial to the interest of revenue, quashing the CIT(A)'s order and restoring the assessment order in favor of the assessee.

3. The final issue revolved around the assessment of deduction u/s 80IA based on the market value of power generated by the captive power plants. The CIT(A) had disallowed a certain amount claimed by the assessee, but the Tribunal, following the precedent set in earlier cases, allowed the deduction. The Tribunal emphasized that the adoption of the selling rate of electricity to State Electricity Boards as the market rate was justified, rejecting the department's argument. The Tribunal upheld the CIT(A)'s decision to delete the disallowed amount, as there were no changes in facts or laws compared to previous years' decisions in the assessee's favor. Consequently, the appeal of the Revenue was dismissed by the Tribunal.